CIRCULAR

GUIDING THE IMPLEMENTATION OF DECREE No.197-CP ON THE 31ST OF DECEMBER 1994 OF THE GOVERNMENT CONCERNING THE WAGES OF VIETNAMESE LABOR IN FOREIGN INVESTED ENTERPRISES, AND FOREIGN OR INTERNATIONAL AGENCIES AND ORGANIZATIONS IN VIETNAM

In execution of Decree No.197-CP on the 31st of December 1994 of the Government which provides details and guides the implementation of a number of articles of the Labor Code concerning wages and salaries, after consulting with the State Committee for Cooperation and Investment, the Vietnam General Confederation of Labor and a number of concerned ministries and branches, the Ministry of Labor, War Invalids and Social Affairs gives the following guidance for the implementation of the system of wages for Vietnamese labor in foreign-invested enterprises, in the export processing zones, industrial parks and foreign or international agencies and organizations in Vietnam:

I. OBJECTS AND SCOPE OF REGULATION

1. Objects and scope of regulation:

The subjects and scope of regulation of this Circular are the same as already defined in Item 5, Item 6 of Article 1 of Decree No. 197-CP. More concretely:

- The foreign-invested enterprises defined in the Law on Foreign Investment in Vietnam issued in 1987 and the Law on Amendments and Supplements to a Number of Articles of the Law on Foreign Investment in Vietnam issued on the 30th of June 1990 and on the 23rd of December 1992;

- The foreign-invested enterprises, the foreign partners to joint ventures set up and operating in the export processing zones under Decree No. 322-HDBT on the 28th of October 1991 of the Council of Ministers (now the Government) and in industrial parks under Decree No.192-CP on the 25th of December 1994 of the Government;

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- Diplomatic representative offices (embassies, general consulates, consulates, representative offices...), international or non-governmental organizations, foreign news, press, radio and television agencies based in Vietnam and employing Vietnamese labor, except otherwise provided for in international treaties which the Socialist Republic of Vietnam has signed or adhered to;

- Foreigners and those of Vietnamese origin living abroad who temporarily reside in Vietnam and who hire Vietnamese labor under Decree No.389-HDBT on the 10th of November 1990 of the Council of Ministers (now the Government).

2. Objects and scope of non-regulation :

The laborers who are Vietnamese working in the organizations of those of Vietnamese origin residing abroad, and foreigners who reside for long periods in Vietnam to invest in economic and social fields under the Law on Promotion of Domestic Investment issued on the 22nd of June 1994.

II. MINIMUM WAGE, SYSTEM OF WAGE SCALES AND BRACKETS

1. Minimum wage :

The minimum wage stipulated in Item 3, Article 3 of Decree No. 197-CP shall be applied as follows :

a/ The minimum wage is the wage paid to the doer of the simplest jobs (untrained labor) in normal labor conditions and environment.

b/ The minimum wage is calculated in US dollars (USD/month).

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The minimum wage can be applied in the payment for the laborers during the probationary period but for not more than 60 days, as stipulated in Article 5 of Decree No.198/CP on the 31st of December 1994 of the Government, in case the probationary wage is lower than the minimum wage.

The minimum wage cannot be paid to professionals or technicians who have been trained.

2. Wage scale, wage brackets and wage subsidies:

The wage scale, wage bracket and wage subsidies, and the statute on wage payment defined in Article 22 of Decree No. 197-CP shall be applied as follows:

a/ The enterprises are allowed to work out and apply their own wage scales and wage brackets, according to their branches and professions or groups of branches and professions, corresponding with the system of wage scales and wage brackets, based on each branch and profession or each group of branches or professions, stipulated by the Government for the businesses inside the country. But they have to comply with the following principles:

- The number of grades in a wage scale and bracket shall depend on the complexity required by the jobs, but the coefficient of each grade shall not be lower than the coefficient of the corresponding grade in the wage scale and bracket applied to the businesses in the country; the multiple of the wage scale shall not be lower that of the wage scale for the same branch or profession or groups of branches or professions applied to the businesses in the country.

- The wage of Grade I in the wage scale and bracket in normal labor conditions must be higher than the minimum wage (30 USD or 35 USD/month depending on each region and each profession, as stipulated in Decision No. 242/LDTBXH-QD on the 5th of May 1992 of the Minister of Labor, War Invalids and Social Affairs).

- The elaboration of the system of wage scales and brackets should be done in consultation with the local trade union organization, or the provisional trade union organization where no official trade union organization has been set up, and must be recorded in the collective labor accord.

b/ With regard to the newly founded enterprises which still meet with difficulties in production and business activities and which cannot apply immediately the system of wage scales and brackets prescribed by the State, the employer can, within no more than six months, apply a pay rate from 10% to 15% lower than the wages based on the coefficient of the corresponding grades of the wage scales and brackets in the branch or professions, or group of branches and professions, prescribed by the State for the businesses in the country. However, in any case the wage of the lowest grade shall not be lower than the minimum wage. Before its application, this wage system must be subjected to comments by the local trade union organization, or the provisional trade union organization where no official trade union organization has been set up, and must be registered with the local labor agency. After the time limit defined above, the enterprise must apply the pay system according to the prescriptions of the State.

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The enterprise shall have to pay the following wage subsidies:

- Area allowance: this must not be lower than the rate prescribed by the State for the businesses in the country located in the same area;

- Dearness allowance : this must not be lower than the rate prescribed by the Government for the businesses in the country located in the same area;

- Noxiousness and risk allowance: this applies to the professions or jobs not yet defined in the wage scales and brackets of the enterprise;

Besides, the enterprise may devise other wage allowances and subsidies for the laborers.

The concrete wage and allowance rate shall be mutually agreed upon between the employer and the laborers, but they must be decided in consultation with the local trade union organization, or the provisional trade union organization where no official trade union organization has been set up, and must be recorded in the collective labor accord.

d/ The employer has the responsibility to work out the statute of wage payment. Before applying this statute, he must consult the local trade union organization, or the provisional trade union organization where no official trade union organization has been set up.

e/ The salaries of the holders of the posts of Director (or General Director) and Vice Director (or Vice General Director) and other key posts in the enterprise shall be determined on the following principles:

- The persons in the leading posts shall have higher salaries than those who hold non-leading posts;

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- A Vietnamese and a foreigner holding equivalent posts shall receive the same salary.

For a joint venture with a foreign partner, if the enterprise hires a foreign Director (or General Director) or a number of foreigners to assume some professional or technical posts which cannot yet be assumed by Vietnamese, the salaries shall be mutually agreed upon. Besides, the enterprise may pay them a number of subsidies such as necessitated by their living far from their families and their countries. The concrete rates shall be mutually agreed upon.

f/ With regard to some special branches and professions such as oil and gas..., the wage scales, wage brackets, wage rates, wage allowances and payment statute shall be publicized after the authorized managing agency submits them to the Ministry of Labor, War Invalids and Social Affairs for consideration and approval.

g/ The employer at the representative offices, or the foreigners or those of Vietnamese origin living abroad who temporarily reside in Vietnam and hire Vietnamese laborers, shall base themselves on the above regulations to work out the wage scales, brackets and rate as well as the wage allowances for the different posts for different professions and jobs, and reach agreement with the laborers during the negotiations on the labor contract.

III. REGIME OF PAYMENT OF WAGES AND BONUSES

1/ Basing himself on the forms of wage payment stipulated in Article 5 of Decree No.197-CP, the employer shall choose the form of payment, or change the form of wage payment, in a way suited to the conditions and character of the job, and production organization of the enterprise. This choice must be written down in the collective labor accord, or the labor contract. The wage of a Vietnamese laborer shall be paid in the currency of the Vietnamese State Bank at the exchange rate of the US dollars announced by the Vietnam State Bank at the time of the payment.

2/ Payment for overtime work under Items I and 2 of Article 8 of Decree No.197-CP shall be effected as follows:

a/ Objects: This payment applies to all objects, except those who receive their wages by piecework, by package deal, or by time-work with regard to jobs without fixed schedules, such as the drivers of transport means on the road (including cars), or workers operating on rivers, sea and air routes or those assigned with the purchase of sea products, farm products and foods...

b/ Method of calculating wages for overtime work:

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+ 150% of hourly wage in a normal work-day applied to the overtime work hours of week-days.

+ 200% of hourly wage in a normal work-day applied to the overtime workhours during the weekly rest day or on holidays.

In case the laborer takes an equivalent time off to make up for his overtime hours, the employer shall have only to pay an extra wage of 50% of the hourly wage of a normal day if the overtime work takes place on a normal workday, and an extra wage of 100 % of the hourly wage of a normal workday if the overtime work takes place on the weekly rest day or on holidays.

- In case of piecework, after the laborer has fulfilled his quota in terms of quantity or volume of products according to the standard time (under Article 3 of Decree No.195-CP on the 31st December 1994 of the Government), if the employer requests the laborer to work extra hours, the unit prices of the products made outside the quota of standard time shall increase by 50% if the extra hours take place on normal days, and by 100% if they take place on the weekly rest day or on holidays.

3/ Night-time work under Item 3, Article 8 of Decree No.197-CP shall be paid as follows:

a/ Payment rate :

- The lowest rate for overtime work at night shall be 35%, if the laborer works continously for eight days and more during a month, irrespective of the form of wage payment.

- The lowest rate for overtime work at night shall be 30% applicable to all the other cases, irrespective of the form of wage payment.

b/ Method of calculating extra pay for overtime work at night:

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- With regard to the piecework or packpage pay system, the unit wage for night-time shall be increased by at least 30% or 35% over the unit wage for day-time work.

For the laborer under the piecework or package pay system, if he/she works overtime at night, the unit wage shall be increased by at least 30% or 35% over the unit wage for day-time work.

If the product is made during the overtime work at night, the hourly wage of this overtime shall be the overtime pay in daytime plus the extra pay for night time work.

4/ Regime of wage increase:

a/ The raising of the wage grade of the laborer shall be decided by the employer after consulting the local trade union organization, or the provisional trade union organization where the official trade union organization has not been set up. This upgrading has to comply with the following principles:

- The number of persons receiving pay rise in the enterprise in a year depends on the requirements of the work and the time of their work at the enterprise.

- Pay rise must be based on the technical qualifications, and specialization and professional entitlement.

b/ Conditions for wage increase:

- The persons who have signed labor contracts with indefinite terms or contracts for more than one year, and the persons holding posts hired by the Managing Board to run the enterprise.

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- The lengths of service for entitlement for wage rise:

+ In case the enterprise applies the system of wage scales and brackets prescribed by the State, the laborer must have at lease two years (24 months) of service with regard to the entitlement having a start-up wage coefficient (Grade I) lower than 1.78, and at least three years (36 months) with regard to the entitlement having the start-up wage coefficient (grade 1) from 1.78 upward after the latest wage classification or rise.

+ In case the enterprise has not yet elaborated its own system of wage scales and brackets, a laborer who has gone through a job training period of less than 24 months and who has two years (24 months) of service at the enterprise, shall be entitled to pay rise at least by 10% of the wage level recorded in the labor contract; a laborer who has through a period of job training of 24 months and more, and have three years (36 months) of service at the enterprise, is entitled to pay rise at least by 7% of the wage level recorded in the labor contract.

+ With regard to the laborer who works with devotion and high efficiency, the employer may raise his wage earlier than defined above.

c/ Upgrading:

The enterprise shall have to organize tests for those who are entitled to upgrading on the wage scale.

- The test for workers shall be based on the technical standard and norms corresponding with the work which they are assuming.

- The test for professionalism, specialization, performance, and services is based on the professional and specialization entitlement.

In case the enterprise has not elaborated its technical gradation standards or specialization and professional standard, the employer shall have to set forth temporarily a number of economic, technical and professional norms closely associated with the contents of the work or responsibility assigned to the laborers. This is to be done in consultation with the local trade union organization or the representative of the collective of the laborers where no trade union organization has been set up.

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e/ From now on, the enterprises shall base themselves on this Circular to work out their plans for annual wage increase in their production and business plans, in order to organize the test, and decide the upgrading of the wages for those eligible for payrise under the management of each enterprise.

5/ Deduction of bonuses from remaining profits under Item 2, Article 9 of Decree No.197/CP shall be effected as follows:

a/ Eligible for bonuses:

- All laborers who have at least one year's service at the enterprise.

- Having contributed to the results of production and business of the enterprise.

b/ Size of bonuses: The annual bonus shall not be lower than one month's wage recorded in the labor contract.

c/ Bonus statute: The enterprise shall have to work out its bonus statute on the following principle:

- The bonus must be based on the contributions of the laborer to the enterprise as reflected in his productivily and the quality of his work;

- The bonus shall be based on the duration of the laborer's service at the enterprise, those with a longer service are entitled to bigger bonuses.

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The bonus statute must be worked out in consultation with the local trade union organization, or the provisional trade union organization where no official trade union organization has been set up.

6/ The wage payment during work stoppage under Item 3 of Article 12 of Decree No.197-CP shall be effected as follows:

During a work shift, if work is suspended for more than two hours, the laborer shall be paid for every hour of the work stoppage. If the stoppage lasts until the end of the shift, he/she shall be paid the wage of the full shift. If the stoppage lasts for a whole week or a whole month, he/she shall be paid all the wages of that week or month. The wage level to be paid for the period of work stoppage is the level of the immediate previous month, and is calculated correspondingly with the form of timework wage stipulated in Item 1, Article 5 of Decree No.197-CP.

IV. ORGANIZATION OF IMPLEMENTATION:

1. The foreign-invested enterprise, the enterprises in the export processing zones and industrial parks, the foreign agencies and organizations in Vietnam should base themselves on the guidance in this Circular to publicize at an early date their system of wage scales and brackets and levels, and register them with the Labor, War Invalids and Social Affairs Service, and report them to the State Committee for Cooperation and Investment.

2. Every month, the employer shall have to report to the local labor and finance agencies the real incomes, including wages, bonuses and other incomes (if any) according to the wage records of the laborers at the enterprise.

3. The Labor, War Invalids and Social Affairs Service in the province or city shall coordinate with the Federation of Labor in the province or city, the External Economic Relations Service, the managing boards of the export processing zones or industrial parks, and the authorized State agency to inspect the implementation of this Circular.

This Circular takes effect on the 1st of January 1995. All the earlier regulations contrary to this circular are now annulled.

Should any difficulties arise in the process of implementation, the concerned agencies are requested to report them in time to the Ministry of Labor, War Invalids and Social Affairs for consideration and settlement.

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THE MINISTER OF LABOR,
WAR INVALIDS AND SOCIAL AFFAIRS




Tran Dinh Hoan