Vietnam Reworks Salary Regulations for State-Owned Enterprises, Effective 10 April

The revisions to compensation regulations within Vietnam's state-owned businesses take effect April 10th.

The changes are outlined in Decree No. 21/2024/ND-CP, issued by the government on February 23rd, 2024. Key modifications will affect managers, controllers, and general workers within single-member limited liability companies held entirely by the state.

Adjustments for Standard Workers

The revisions grant companies more flexibility in setting salary scales, tables, and allowances for employees. While businesses now have greater control, they must ensure their total salary budgets remain within state-mandated planned salary funds.

Additionally, any changes must be developed in consultation with employee representatives and be transparently communicated to staff. This emphasis on consultation hints at a need to balance market-driven reforms with the socialist focus on worker participation.

Restructuring Management Compensation

The decree also reworks compensation frameworks for managers and full-time controllers within state-owned enterprises. These individuals will now have their salaries linked to pre-approved salary tables developed by their company's Board of Members or President.

As with standard workers, there's an emphasis on keeping salary outlays within the government-allocated funds, requiring consultation with the workforce, and transparently announcing changes.

Greater Emphasis on Performance-Based Pay

A key theme of these regulatory shifts is a push towards compensation that's more closely tied to productivity and performance results. This aligns with Vietnam's broader economic trajectory as it seeks to boost competitiveness and attract foreign investment.

In the process, the government seeks to streamline rules governing salary funds. The decree specifically lists objective factors, such as state-mandated price changes, tax incentives, and adjustments to operating policies, that companies must exclude when calculating planned salary funds.

Ministry of Labor to Oversee Implementation

The Ministry of Labor, Invalids and Social Affairs is tasked with overseeing the implementation of these new compensation guidelines. The Ministry is also charged with aligning pay with productivity and operating efficiency within state-owned enterprises, a potentially complex endeavor given these companies' historical role in Vietnam's economy.

Economic Implications

Economists agree the changes impact both worker motivation and the overall efficiency of state-run companies. The reforms could potentially make these enterprises more competitive and responsive within an increasingly market-driven Vietnamese economy.

However, they say questions remain about balancing these reforms with lingering concerns around income inequality as the country's private sector expands.

It's worth noting that further guidance is expected from the Ministry of Labor, Invalids and Social Affairs as businesses navigate the updated regulations. The success or failure of this initiative will likely influence future moves as Vietnam continues its economic transition.