Regional minimum wage increase: What should businesses pay attention to?

Regional minimum wage increases will directly impact the operating costs of businesses, especially expenses related to employees. Businesses need to grasp changes in the law to comply with regulations and ensure benefits for employees. This article will analyze in detail important notes when the regional minimum wage increases.

Increase wages for workers receiving the regional minimum wage

Article 90 Labor Code 2019 regulates regional minimum wages is the lowest salary that the employer must pay to the employee. Accordingly, from July 1, 2024, when the regional minimum wage increases Decree 74/2024/ND-CP, businesses must adjust the salary increase for employees receiving this salary.

The regional minimum wage applicable from July 1, 2024 is as follows:

• Region I: 4,960,000 VND/month.
• Region II: 4,410,000 VND/month.
• Region III: 3,860,000 VND/month.
• Region IV: 3,450,000 VND/month.

>>> See more: Instructions for Building the Latest Salary Scale for Companies

Increase social insurance, health insurance, and unemployment insurance contributions

According to Decision 595/QD-BHXH, every month, employers must pay social insurance (SI), health insurance (HI), unemployment insurance (UI) based on the employee’s social insurance salary fund. The monthly salary for compulsory social insurance must not be lower than the regional minimum wage.

The increase in the regional minimum wage entails an adjustment to increase the minimum wage as a basis for social insurance payment. Therefore, businesses need to calculate and prepare financially to pay the increased insurance amount.

In case you have paid social insurance, health insurance, and unemployment insurance for employees at a salary higher than the regional minimum wage, the amount of compulsory insurance paid by the enterprise does not need to be adjusted to increase.

>>> See more: Salary in Labor Contract: Calculation & Allowances.

Increased salary for termination of work

According to Article 99 Labor Code 2019, severance pay in some cases is calculated based on the regional minimum wage. Specifically:

• If it is the employer’s fault, the employee is paid the full salary according to the labor contract;
• If it is the employee’s fault, he or she will not be paid; Other employees in the same unit who have to stop working will be paid at a rate agreed upon by both parties but not lower than the minimum wage;
• If due to electricity or water problems that are not due to the employer’s fault or due to natural disasters, fires, dangerous epidemics, enemy sabotage, relocation of the operating location at the request of a competent state agency or for economic reasons, the two parties shall agree on the salary for termination of work as follows:
• In case of stopping work for 14 working days or less, the agreed salary for stopping work is not lower than the minimum wage;
• In case of stopping work for more than 14 working days, the salary for stopping work will be agreed upon by both parties but must ensure that the salary for stopping work for the first 14 days is not lower than the minimum wage.

Thus, with an increase in the regional minimum wage, these work stoppage wages will also increase correspondingly.

Increase the minimum wage for job transfer workers

Article 29 Labor Code 2019 allows businesses to temporarily transfer workers to other jobs in some cases. Salaries during this period are determined as follows:

• Employees are paid according to their new job.
• If the new job salary is lower than the old salary, the old salary will be kept for 30 working days.
• The new job salary is at least 85% of the old salary, but not lower than the minimum salary.

Thus, when the regional minimum wage increases, it means that businesses have to pay higher wages to workers who are transferred to jobs that are receiving low wages.

Long Phan’s consulting service on notes when the regional minimum wage increases

Long Phan Consulting Company provides in-depth consulting services on issues related to labor and wages. Our services include:

• Review and advise on adjusting the minimum wage for employees according to new regulations.
• Consulting on calculating and adjusting social insurance, health insurance, and unemployment insurance contributions.
• Consulting on payment of severance pay and salaries for employees transferring jobs.
• Draft and review documents and contracts related to wages and labor.
• Update the latest changes in labor and salary laws.
• Answering businesses’ questions about issues related to regional minimum wages.

Frequently asked questions

Below are frequently asked questions about regional minimum wage increases:

If an enterprise pays a salary higher than the regional minimum wage, does it have to be adjusted?

No adjustment required. The increase in the regional minimum wage only applies to employees whose salary is lower than the regional minimum wage according to the new regulations.

How does the increase in social insurance (social insurance) affect businesses?

The increase in social insurance increases the operating costs of businesses, so businesses need to calculate and prepare financially to pay the increased insurance amount.

How is severance pay calculated when the regional minimum wage increases?

In some cases, severance pay is calculated based on the regional minimum wage. Therefore, when the regional minimum wage increases, the unemployment wage will also increase correspondingly.

What types of documents do businesses need to keep related to salary adjustments?

Enterprises need to keep documents such as salary adjustment decisions, new payroll, and salary-related agreements with employees.

What if businesses do not comply with the new regional minimum wage?

Enterprises may be subject to administrative sanctions according to the provisions of labor law.

Does increasing the regional minimum wage impact workers’ employment?

The impact may vary depending on industry and business size. Businesses with rising labor costs can adjust staff size or apply production optimization measures.

Do businesses need to notify employees about salary adjustments?

Yes, businesses need to clearly notify employees about salary adjustments and related benefits.

How does regional minimum wage affect overtime pay?

Because overtime pay is usually calculated based on base salary, and base salary is now calculated based on the regional minimum wage, increasing the regional minimum wage has the effect of increasing overtime pay.

Conclude

The regional minimum wage increase is an important change that businesses need to understand to comply with the law and ensure workers’ rights. If you have any questions, please contact Long Phan Consulting Company immediately via the hotline: 0906735386 for timely advice and support.