FDI enterprises proactively increase minimum wage After the adjustments to the regional minimum wage in 2016 were decided (12.4% increase), instead of […]
After the adjustments to the regional minimum wage in 2016 were decided (12.4% increase), instead of complaining,complaining, many enterprises with foreign direct investment (FDI) have proactively proposed solutions to stabilize production and retain workers.
Talking with a reporter from Investment Newspaper, Mr. Nguyen Chi Thanh, Director of financeScavi Joint Stock Company (enterprise 100% French capital, headquartered in Bien Hoa City, Dong Nai) did not appear too surprised by the news of the regional minimum wage increase in 2016. According to Mr. Thanh, as a business operating in the textile and garment sector, in order to accommodate the growth of the business and retain highly skilled workers, for many years, Scavi has proactively increased wages every year and at times higher than the prescribed minimum wage.
However, with the 2016 minimum wage increase, the total salary fund will increase by more than 1 billion VND plus a corresponding increase in social insurance payments. "Scavi has the advantage of not selling domestically so it is not affected by the recent exchange rate increase, but increasing the minimum wage next year will have certain impacts," Mr. Thanh said.
Ms. Phan Le Diem Trang, Vice President of Binh Duong Textile and Garment Association, said that there are currently about 500 FDI enterprises operating in the textile and garment field in Binh Duong province. According to Ms. Trang, increasing the minimum wage will directly affect textile and garment enterprises because the wage fund accounts for a very large proportion of the enterprise's expenses. The minimum wage increase has been decided to be much higher than the proposal of the textile and garment enterprises, but according to Ms. Trang, businesses will comply with the law, but in this game, FDI enterprises suffer less disadvantages than domestic enterprises. The reason is that FDI enterprises, especially those from Korea, China, Taiwan... often import raw materials from their own country's enterprises. Besides, all payments are usually converted to USD prices so they are less affected by exchange rate differences.
Looking from the perspective of state management of labor, Mr. Pham Van Cuong, Deputy Head of the Management Board of Dong Nai Industrial Parks, said that, under the same impact of the minimum wage increase, domestic enterprises are "weaker" than FDI enterprises. According to Mr. Cuong, most FDI enterprises have better financial potential, have a ready market before deciding to invest, and the problems of financial management, corporate governance and human resources... are also better than domestic enterprises. "The minimum wage increase will not greatly affect the production and investment expansion plans of FDI enterprises," Mr. Cuong said, adding that although information about the minimum wage increase has been circulating for many months, businesses operating in this sectorThe textile and garment sector is still proactively implementing investment plans and expanding production to welcome opportunities when the Trans-Pacific Partnership Agreement (TPP) is signed.
This does not mean that FDI enterprises do not suffer negative impacts. According to Mr. Cuong, there will be at least two problems that FDI enterprises will have to face, which are reduced profits and worries about labor changing jobs. In fact, in Dong Nai, labor competition has been going on for many years, so businesses also have more experience. Therefore, even though FDI enterprises have many advantages, the solution to labor stability will still be to have a reasonable salary policy compared to enterprises operating in the same field in the area and improve the lives of workers.
Regarding this issue, Scavi's representative said that along with increasing wages, increasing labor productivity by 1 to 2% compared to today is necessary, but more importantly, it is necessary to improve working conditions and care for the lives of workers. "Scavi has spent billions of dong to invest in modern cooling systems in factories over the past few years and will soon take care of accommodation for workers," Mr. Thanh said, adding that immediately after the site is arranged, Scavi will invest in an apartment complex for the Company's workers and that will be a factor for workers to feel secure in sticking with the business.
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