Policy issues

Viet Nam’s wage reform should be fundamental: Deputy Prime Minister

The high-level Government official appreciated ILO’s advice for wage reform, including the better alignment between grade, position and salary in the public sector and the role of collective bargaining in wage setting in the private sector.

News | 14 December 2017

HANOI (ILO News) – The reform of Viet Nam’s public sector wages should correctly align grade, position and salaries whereas improved minimum wage setting and better development of collective bargaining could strengthen the country’s wage system for the private sector. These are some of the ILO’s recommendations to the Central Steering Committee for the reform of wage and social insurance policies at a high-level workshop organized on 13 December in Hanoi.

The reform plan is expected to be submitted to the seventh session of the 12th Party Central Committee in May 2018 for endorsement.

Addressing the event entitled “Reform of wage policies: International experience and Viet Nam”, Deputy Prime Minister Vuong Dinh Hue, head of the steering committee, said that this reform should be “more fundamental”.

“It is important to carefully assess the current situation, what are the achievements and shortcomings, to learn important lessons,” he said. “It’s also important to consider international experience to come up with policy recommendations that fit Viet Nam’s context and at the same time meet the rules of wage policies.”

The reform includes both wages for the public sector which has 2.6 million permanent posts and employs other 300,000 contract-based workers, and the private sector.

In the public sector wage reform, ILO Viet Nam Director Chang-Hee Lee suggested the country move from coefficient system to grade-based basic salary system which is expressed in absolute amount.

“The grade, position and salary should be correctly aligned with each other, together with streamlined allowances and with regional variations of living cost taken into consideration,” he said.

He also advised Viet Nam to develop uniform and consistent grade/position/salary schemes with a limited variations for specific occupational groups.

Other recommendations from the ILO include the development and implementation of a coherent nation-wide public sector wage system managed by a central authority, formal consultation mechanism involving stakeholders, a comprehensive human resource management system (including recruitment, promotion, training and wage determination), and a long term plan for private-public sector wage parity.

Meanwhile, both public and private sectors need to improve wage statistics for better decision-making.

“International lessons show that reforming a civil service salary system takes longer than everybody may think. Therefore it should be done step by step within a long-term vision,” said Lee who emphasized that getting the basics right is critical at the start of the reform.

“The reform process is equally important as the reform results. Civil service wage system in other countries has established a process of evidence-based decision making and also a process of engaging all key stakeholders, including representatives of civil servants themselves, to play roles, which the ILO calls social dialogue in decision-making,” he added.

According to the head of ILO Viet Nam, the core problems of the country’s current public wage sector are the complicated multipliers (coefficients) system; high proportion of various allowances; the mixture of job requirements and personal attributes (such as academic degrees); and the lack of a coherent and transparent human resource management system across the entire civil service.

Minimum wage and collective bargaining

In the private sector wage reform, he emphasized the importance of having an agreed formula of minimum wage fixing, the possibility of introducing hourly minimum wage and the need to improve the analytical capacity of the secretariat for the National Wage Council for measuring impacts of minimum wage adjustments on wages and employment.

He also highlighted the important role of collective bargaining as a main wage fixing mechanism in market economies, which remains underdeveloped in Viet Nam. In the context of the country’s deepening economic integration, he said Viet Nam should give a priority to the ratification and application of the ILO Convention on Right to Organize and Collective Bargaining (Convention 98), among others, which is required for the ratification of the EU – Viet Nam Free Trade Agreement.

Deputy Prime Minister agreed on the importance of collective bargaining, saying that the State has a role to create favourable conditions for it and trade unions should enhance their responsibilities in negotiating collective agreements.

He also well noted other recommendations from the ILO for both public and private sectors and suggested the Government’s specialized agencies to soon finalize the draft reform plans.

The “Reform of wage policies: International experience and Viet Nam” workshop was co-organized by the Central Steering Committee for the reform of wage and social insurance policies and the ILO in Viet Nam.

* This story is a product of the European Union-funded project on Promoting ILO fundamental conventions towards ratification of Conventions 87, 98, 105, and actions to eliminate discrimination and forced labour in Viet Nam. Its contents do not necessarily reflect the views of the European Union.