The Vietnamese government has officially approved a new decree mandating an average 7.2% increase in the regional minimum wage for employees working under labor contracts, effective January 1, 2026.

This decision, formalized under Decree No. 293/2025/ND-CP, marks a significant adjustment aimed at balancing economic recovery, mitigating inflation, and ensuring a stable living standard for workers across the country. For foreign enterprises and domestic businesses operating in Vietnam, this change requires immediate attention, as it affects not only direct salaries but also mandatory social and health insurance contributions. Monitoring and implementing the new Minimum wage structure is a critical compliance priority for the new year.

The New Minimum wage Rates

The new decree adjusts the monthly and hourly minimum wages across Vietnam’s four distinct regions. These regions are classified based on socio-economic development levels, with Region I covering the most developed areas, such as Hanoi and Ho Chi Minh City.

The 7.2% average increase translates to a cash raise ranging from VND 250,000 to VND 350,000 per month, depending on the region.

The official monthly and hourly rates effective January 1, 2026, are as follows:

(Source: Decree No. 293/2025/ND-CP replacing Decree 74/2024/ND-CP)

The introduction of new hourly minimum wage rates provides a definitive legal floor for part-time workers, ensuring stronger protection for employees in flexible or casual working arrangements.

Rationale: Balancing Workers’ Needs and Economic Growth

The decision to raise the  Minimum wage  was the result of extensive negotiation and consensus reached by the National Wage Council, an advisory body consisting of representatives from the government, employers (VCCI), and workers (VGCL).

The primary motivations driving the 7.2% hike are rooted in social and economic stability:

1. Ensuring Minimum Living Standards: The new minimum wage is calculated to meet the estimated minimum living standard of a worker and their family through the end of 2026, plus a margin. This is essential for protecting the purchasing power of low-income employees against inflation.
2. Inflation and CPI Adjustment: The increase proactively factors in a portion of the projected 2026 Consumer Price Index (CPI) increase, ensuring that workers benefit from the adjustment immediately at the start of the year rather than playing catch-up later.
3. Promoting Labor Market Stability: By raising wages, the government seeks to foster harmonious labor relations, reduce labor turnover, and improve worker productivity, thereby contributing to the overall recovery and stability of the post-pandemic labor market.

The government emphasized that the adjustment aims for a delicate balance, supporting workers’ quality of life while maintaining the competitive environment necessary to sustain business operations and attract foreign direct investment.

Business Impact: Focus on Social Insurance Contributions

For many foreign-invested enterprises (FIEs) in Vietnam, particularly those in high-value manufacturing or service sectors, the direct impact on salaries may be minimal, as most companies already pay wages significantly above the required minimum. However, the increase in the Minimum wage has two critical financial and compliance repercussions for all employers:

Increased Production Costs

While marginal for most, the wage hike is projected to raise overall production costs across the economy. The Ministry of Home Affairs’ impact assessment estimates that production costs will rise by an average of 0.5% to 0.6%. This impact will be more pronounced in labor-intensive industries, such as textiles, footwear, and apparel, where labor costs could see an increase of around 1.1% to 1.2%. Businesses in these sectors must factor the new minimum into their 2026 operational budgets and pricing strategies.

Mandatory Social and Health Insurance Contribution Base

The most significant financial impact is the ripple effect on mandatory insurance contributions. In Vietnam, social insurance (SI), health insurance (HI), and unemployment insurance (UI) contributions are often linked to the minimum wage floor, particularly the lowest salary paid to employees.

Specifically, the calculation base for social insurance payments, including compulsory social insurance, unemployment insurance, and health insurance (SHUI), is often tied to the regional minimum wage for employees whose contract salaries are low. When the Minimum wage increases, the contribution floor for these mandatory employer payments also rises. This affects the total employer burden—the non-salary cost of labor—for every employee.

Companies must review their total compensation packages to ensure compliance with the new floor for both direct wages and subsequent insurance payments. Failure to adjust these contributions accurately and on time can result in fines and significant back payment obligations.

Compliance and Application for Multi-Location Businesses

The new decree reaffirms that employers must apply the minimum wage prescribed for the area in which their operating unit or branch is located. Key compliance rules include:

• Regional Determination: Employers must use the official list of administrative units to determine which of the four regions applies to each operational location.
• Industrial Zones: For employers operating in industrial parks, export processing zones, high-tech zones, or concentrated digital technology zones that span areas classified under different regional minimum wages (e.g., Region II and Region III), the employer must apply the highest minimum wage of the area they cover. This is a crucial rule designed to protect workers in concentrated business hubs.
• Penalty for Non-Compliance: The government has established clear penalties for non-compliance with the minimum wage requirements. Fines range from VND 20,000,000 to VND 75,000,000, with the severity of the fine dependent on the number of employees affected by the violation.

As the  Minimum wage  takes effect on January 1, businesses are strongly advised to proactively review employment contracts, payroll systems, and SHUI declarations in Q4 2025 to ensure seamless and compliant transition to the new standards.

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NetViet offers comprehensive HR solutions for businesses entering or expanding in the Vietnamese market. Established in 2000, NetViet provides expert, seamless, and compliant HR solutions.

Legal Disclaimer: The information provided is for general informational purposes only and does not constitute legal advice. For specific legal advice on compliance in Vietnam, schedule a consultation with NetViet or consult legal counsel.

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