December 12, 2019 20:46

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Draft amended Labour Code: Enterprises worry about increasing costs

12:32 | 01/09/2019

VCN - Besides the issue of increasing retirement age, increasing working overtime, calculating overtime pay, normal working hours, and licenses for foreign workers are issues of concern for many businesses, leading to many conflicting opinions in the draft amended Labour Code.

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In fact, with the progressive payroll regulation for overtime work, enterprises will face many difficulties, pushing up their labour costs. Photo: Huong Diu

Common concerns

The Vietnam Chamber of Commerce and Industry (VCCI) and six associations including the Vietnam Association of Seafood Exporters and Producers (VASEP), the Vietnam Textile and Apparel Association (VITAS), the Vietnam Leather, Footwear and Handbags Association (LEFASO), the Japan Business Association in Vietnam (JCCI), the Vietnam Electronic Industries Association (VEIA) and the American Chamber of Commerce in Vietnam (AmCham) have proposed together a number of provisions in the Draft Law. They are also concerned that if these regulations are applied, it will greatly affect enterprises’ production activities.

VCCI and the associations that represent the business community proposed increasing the maximum annual working time from 200 hours to 300 hours (for normal industries). For some special cases prescribed by the Government, employers can increase overtime hours from 400 to 500 hours as long as they have legitimate business need such as export and order service industries; and they obtain the employees' approval of overtime work. In terms of overtime pay, enterprises recommend it should not apply the progressive payroll regulation for overtime work to ensure competitiveness with other countries.

Regarding the regulation of working hours in a week, businesses proposed not cutting the working time to 44 hours/week and keeping the current standard working hours as 48 hours/week.

Regarding the term of the Work Permit for a maximum of two years, which is extended only once for a maximum period of two years, enterprises proposed maintaining the same regulations as the current code, not limiting the number of extensions of work permits of foreign workers as in the draft and increasing the time limit for granting work permits to foreigners from two years to three years simultaneously.

Enterprises also proposed keeping the definition of wages as stipulated in the current code, which is the "amount" that employers pay to employees to perform the work according to their agreement. At the same time, they want to abandon the provision that "enterprises arrange for all employees to take one or two days-off to implement their union rights" in the draft law.

Pushing up costs by billions of VND

Commenting on overtime work and overtime pay, Truong Van Cam - Vice President and Secretary General of Vietnam Textile and Apparel Association, said with the provisions of progressive overtime pay as proposed in the draft, businesses would face a lot of difficulties, pushing up their labour and product costs. The reason is that if the progressive overtime pay is calculated, small and medium enterprises (accounting for 90 percent of the total number of enterprises today) will be directly affected, making the capacity and competitiveness of domestic enterprises fall sharply. In particular, the impact on labour-intensive enterprises such as textiles, footwear, and electronics will be the most. Therefore, it is recommended to keep current regulations on overtime pay.

Agreeing with the representative of the Vietnam Textile and Apparel Association, Nguyen Hoai Nam - Deputy Secretary General of the Vietnam Association of Seafood Exporters and Producers (VASEP) said according to VASEP’s calculations, if current working hours were reduced from 48 hours/week to 44 hours/week, businesses would have to increase the cost for four hours/week from normal working time to overtime pay. With the overtime pay of 150 percent on working day, 200 percent on day-off and 300 percent on holiday, it is estimated a seafood enterprise of 2,000 workers would have to pay an additional five billion VND/year. Meanwhile, working hours of about 40-44 hours/week are mostly in developed countries like the US, Japan, Singapore and 48 hours/week are in developing countries and most emerging ones.

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"The operation nature of a seafood enterprise is that its production depends on the resources exploited from fishermen, it is seasonal and its products must be processed immediately upon arrival at the factory. Some businesses even violate regulations on overtime hours to be able to deliver goods on time, avoid contract penalties or deliver by plane. Therefore, it is not possible to apply normal working hour of 44 hours/week, monthly overtime of 40 hours/month, and overtime frame of 400 hours/year (for special industries). Thus, the fact that the draft law provided three ceiling levels of overtime work made it difficult for many businesses, especially labour-intensive ones, making Vietnamese businesses suffer from “putting two ropes around their neck,” said VASEP’s representative.

By Xuan Thao/ Ha Thanh