Managing Labor Shortages in Hai Duong: Insights for Foreign Firms

Foreign firms in Hai Duong, a key industrial province in north Vietnam, are reporting that labor shortages have become common. We discuss how foreign firms can optimize hiring decisions and lower their attrition rates.

Foreign-invested enterprises in Vietnam’s Hai Duong province are struggling to find workers for the myriad garment factories located in the city. This is despite a 300,000-strong workforce in the province, Vietnam’s Business Forum magazine reported earlier this week.

It’s not just workers to sew shirts and glue the soles to shoes either. Information technology (IT) workers, foreign language experts, and workers skilled in automation are becoming increasingly hard to come by, Mr Kurihara, Director of Sumidenso Vietnam Company, told the magazine.

Such shortages are to be expected alongside rapid economic development. As the number of factories and manufacturing plants around Vietnam has multiplied, it has given rise to fierce competition among firms for good quality labor.

Luring and retaining workers, however, can be better managed through the right strategy. There are a number of incentives and benefits when applied correctly, can give foreign firms an edge over competitors during the hiring process.

Wages

It goes without saying that wages are probably the most important factor Vietnamese workers look at when applying for a job. Whereas the comparatively low wages in Vietnam have been an attractive incentive for foreign firms looking to reduce their manufacturing costs, the domestically relatively high wages paid to factory workers have proven attractive to workers.

Most notably, since Vietnam’s ascension to the World Trade Organisation (WTO), when the country really started to seriously open up to foreign investment, wages have climbed considerably.

In its most recent report on labor and employment, Vietnam’s General Office of Statistics (GSO) found that manufacturing workers earned an average wage of 7.9 million VND (US$336) a month. In contrast, in agriculture, fisheries, and forestry, the GSO found the average wage to be barely half that of a factory worker at 4.1 million VND (US$174.65).

These higher-than-average wages have led to a shift of workers from rural farming communities to manufacturing hubs that have sprung up around the country. Thai Nguyen and Bac Ninh in the north, for example, Binh Duong and Dong Nai in the south.

But financial benefits are about more than just wages. The option and structure of overtime pay is also increasingly important.

See also: Salary and Wages in Vietnam

Overtime work

The payment of overtime wages is a key motivator for Vietnamese workers. It can help them earn substantial financial gains during peak seasons and is why the manufacturing sector is able to stay competitive.

This is particularly true of employees that work away from home. These workers often send money back to their parents or spouses in rural areas that offer few opportunities to make additional income. In this sense, overtime for a Vietnamese worker can mean a significant boost in the quality of life for the people that depend on them; it is an essential component of their financial planning.

That said, Vietnam has codified limits to the amount of overtime one person can work. Thus, overtime hours cannot exceed 40 hours per month and cannot exceed 300 hours per year.

Firms should note that these hours were temporarily expanded in 2022 to help clear the backlog of orders from during the pandemic. Following the economy stabilizing, this overtime extension has now ended, and overtime limits have returned to those outlined in the Labour Code, 2019.

See also: Overtime Regulations and Compensation in Vietnam

Benefits

Beyond the standard health and unemployment insurance, workers seek additional benefits, such as flexible shifts and the ability to work from home. Notably, this is difficult for factory line workers, but when it comes to back office staff and administrators, they may be easier to implement. Any flexibility in employment conditions will be an incentive that can attract and help retain high-quality talents.

Furthermore, most Vietnamese value family above all else. Workers with young families may be enticed to work for and stay with an enterprise through additional benefits like childcare or healthcare benefits that extend to their family.

It’s also quite common for employers to provide their staff with free meals. Not only does this mean that employees can use what would ordinarily be spent on lunch for other purposes, but it also ensures they have at least one balanced, nutritious meal each day – a healthy employee is a happy employee.

Location

During the pandemic, the manufacturing labor force underwent considerable change.

When COVID-19 was at its worst in Vietnam, many workers left key manufacturing hubs for the relative safety of their hometowns. Though many have since returned, many have not. In light of this, firms can overcome some human resourcing challenges by establishing themselves in areas where there are fewer transient populations yet high demand for jobs.

This could mean looking beyond the traditional manufacturing centers of Hanoi and Ho Chi Minh City. Central Vietnam, for example, is becoming increasingly popular. It has an abundance of low-cost labor, its infrastructure is developing (a new US$137 million port is being built in Danang), and the local government is investing heavily in skills training.

Overcoming labor shortages: Tricky but it can be done

As Vietnam’s economy continues to expand rapidly, provinces improve their investment incentives and remove investment barriers, labor shortages may occur more frequently in some locations.

But this can be overcome by understanding what it is that employees want. That means establishing an optimized strategy that offers flexibility, overtime, and a good work-life balance. In doing so, workers should be easier to find, and may want to stay with firms for longer.

For more information, the Vietnam-Briefing’s Vietnam HR Landscape, Compliance, & Recruitment Magazine is available for free from the Asia Briefing Publication Store.

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