CIRCULAR NO. 11/LD TBXH-TT DATED 3 MAY 1995

OF THE MINISTRY OF LABOUR - WAR INVALIDS AND SOCIAL AFFAIRS

Guiding the implementation of decree No.197/CP of the Government

concerning the wages of Vietnamese labour 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 Labour Code concerning wages and salaries, after consulting with the State Committee for Cooperation and Investment, the Vietnam General Confederation of Labour and a number of concerned ministries and branches, the Ministry of Labour, War Invalids and Social Affairs gives, the following guidance for the implementation of the system of wages for Vietnamese labour in foreign invested enterprises, in the export provessing 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 I 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 ta a Number of Articles of the Law on Foreign Investment in Vietnam issued on the 30^th 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 ;

- The foreign economic and trade representative offices set up and operating in Vietnam under permits issued by the Ministry of Trade, and employing or hiring Vietnamese labour ;

- Diplomatic representative offices (embassies, general consulates, consulates, representavie offices...), international or non-governmental organizations; foreign news, press; radio and television agencies based in Vietnam and employing Viet- namese labour, 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 temprarily reside in Vietnam and who hire Viet- namese labour 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 labourers 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 Invesment 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 labour) in normal labour conditions and environment.

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

The present minimum wage is 35 USD/month applied to foreign-invested enterprises based in Hanoi and Ho Chi Minh City ; 30 USD/month applied to foreign-invested enterprises based in provinces and other cities, towns and townships; or businesses employing a large number of simple labour in agriculture, forestry and aquaculture. With regard to a number of branches and professions whet-e the minimum wage has been set at a higher rate by mutual consent, that minimum wage shall be applied until a new decision. The minimum wage can be applied in the payment for the labourers 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 profes(ions, corresponding with the system of wage scales and wage brackes, 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 requied 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 labour 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 stir of May 1992 of the Minister of Labour, War Invalids and Social Affairs).

- The elaboration of the system of wage scales and brackets shoud 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 labour 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 correponding 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 labour agency. After the time limit defined above, the enterprise must apply the pay system according to the precriptions of the State.

c) Wage subsidies :

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 labourers The concrete wage and allowance rate shall be mutually

agreed upon between the employer and the labourers, 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 labour accord.

d) The employer has the responsibility Lo 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 fur General Director) and Vice Director (or Vice General Director) and other key posts in the enterprise shall he determined on the following principles :

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

- The Managing Boat-d of the enterprise; or the owner of the enterprise with loo'] of foreign capital, shall decide the salaries of the above-mentioned posts ;

- A Vietnamese and a foreigner holding equivalent posts shall receive the saute salary. For a joint venture with a foreign partner; if the enterprise hires a foreign Director (or General Direct-or) or a number of foreigners to assume same 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 spceial branches and professions such as oil and gas...; the wage scales, wage bracket, wage rates, wage allowances and payment statute shall be publicized after the authorized managing agency submits them to the Ministry of Labour, War Invalids and Social Affairs for consideration and approval.

g) The employer at the representative offices, or the fureigners or those of Vietnamese origin living aboard who temporarily reside in Vietnam and hire Vietnamese labourers 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 pasts for different professions and jobs, and reach agreement with the labourers during the negotiations on the labour 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 pay-ment, in a way suited ta the conditions and character of the job, and production organization of the enterprise. This choice must be written down in the collective labour accord, or the labour contract. The wage of a Vietnamese labourers shall he paid in the currency of the Vietnamese State Batik at the exchange rate of the US dolars announced by the Vietnam State Bank at the time of the payment.

2. Payment for overtime work under Items 1 and 2 of Article 8 of Decree No.197-CP shall be effected as follows : al 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 Ťad (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 :

- For time work labour :

Wage for overtime work hours = (Hourly wage (under Item 1, Article 5,

Decree 197-CP)) * (Number of overtime work hours) * 150% or 200%

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

+ 2001 of hourly wage in a normal work-day applied to the overtime workhours during the weekly rest day or on holidays.

In case the labourers takes an equivalent. time off ta 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 labourer 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 labourer ta work extrahours, the unit wage 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 labourer 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 pal, for overtime work at night :

- For timework labour :

Extra pay = Hourly wage (under Item 1, Article 5, Decree 197-CP) *

Number of x night-time work hours)* Al least 30%

- With regard to the piecework or packpage pay system; the unit wage for overtime work at night 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 labourer 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 ta 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 labour 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.

- The wage increase is provided for in the labour contract or the collective labour accord.

- The lenghts of service for entitlement for wage rise :

+ In case the enterprise applies the system of wage scales and brackets prescribed by the State, the labourer 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 coenfficient (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 brakets, a labourer 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 labour contract ; a labourer who has gone 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 labour contract.

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

c) Upgrading :

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

- The test for worker 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 labourers. This is to be done in consultation with the local trade union organization or the representative of the collective of the labourers where no trade union organization has been set up.

d) The size of the wage rise through upgrading shall conform with the system of wage scales and brackets set up by the enterprise itself. The new wage level shall be effective from the date of the singning of the decision to raise the wage grade.

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 pay, rise 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 elected as follows :

a) Eligible for bonuses :

- Ail labourers who have at least one year's service at the enterprise.

- Having contributed ta 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 labour contract.

c). Bonus statute : The enterprise shall have to work out its bonus statute on the following principles :

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

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

- Bonused labourer must have strictly observed the regulations and labour discipline of the enterprise.

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 labour 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 he form of timework wage stipulated in Item I, 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 Labour, 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 labour and finance agencies the real incomes, including wages, bonuses and other incomes (if any) according to the wage records of the labourers at the enterprise.

3. The Labour, War Invalids and Social Affairs Service in the -province or city shall coordinate with the Federation of Labour in the province or city, the External Economic Rela-tions 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 elect 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 Labour, War Invalids and Social Affairs for consideration and settlement.

THE MINISITER

OF LABOUR, WAR INVALIDS AND SOCIAL AFFAIRS

TRAN DINH HOAN