How Base Salary Has Risen in Vietnam

Key takeaways

• Vietnam’s base salary has undergone four distinct development phases over the past 20 years, from rapid growth to freezing and now to a historic surge with a 30% increase.
• This record salary increase directly impacts wage expectations across the entire market, creating pressure for talent competition and inflation risks for businesses.
• Companies must proactively review and rebuild their compensation strategies to maintain competitive advantage in a fundamentally changed labor market landscape.

Base salary is the foundational wage level the government uses to calculate salaries, allowances, and benefits for civil servants, public officials, and state employees. For business leaders, tracking base salary evolution serves as an important macroeconomic indicator, reflecting national development priorities and directly impacting inflation, employee wage expectations, and the war for talent.

Major phases in base salary adjustment history

Analyzing the timeline of base salary increases over the past 20 years reveals four distinct development phases, each reflecting different policy priorities and economic challenges. Understanding these phases helps business leaders predict trends and prepare appropriate strategies.

Phase of rapid growth (2004 – 2012)

From 2004 to 2012, base salary increases consistently reached double digits, with the “record” increase on October 1, 2006, jumping 28.57% (from 350,000 to 450,000 VND). During this phase, the base salary (then called minimum common wage) increased from 290,000 VND in 2004 to 1,050,000 VND in 2012.

The salary increase on May 1, 2012, had the second-highest rate, rising 26.5% from the previous level, from 830,000 to 1.05 million VND. This period demonstrated the government’s aggressive efforts to achieve the goal of making wages the primary income source, ensuring the livelihood of wage earners. For businesses, this was a period requiring significant compensation strategy adjustments to keep pace with rising market expectations.

Phase of slow growth, “wages chasing prices” (2013 – 2019)

On July 1, 2013, base salary increased to 1.15 million VND, up 9.52%, but remained unchanged for nearly three years afterward. From May 2016 to July 2019, base salary grew from 1.21 million to 1.49 million VND. Annual increases were modest, only 90-100,000 VND (5.2-7.4%).

In reality, these increases provided little meaningful benefit to wage earners. They primarily compensated for price inflation due to rising commodity costs, leading many to say wages were “chasing prices.” During this phase, starting in 2013, the concept of “base salary” was officially adopted, replacing the minimum common wage.

Phase of “freezing” due to pandemic (2020 – 2022)

With no base salary adjustments for three consecutive years, the lives of those receiving wages and allowances from the state budget faced significant difficulties, leading to increasing numbers of civil servants and public employees leaving or transferring from the public to private sector.

Base salary remained “stuck in place” at 1.49 million VND for three years (2020, 2021, and 2022), while the consumer price index from July 2019 to the end of 2022 increased by approximately 10%. This created opportunities for the private sector to attract talent from the public sector, but also served as a warning sign of labor market imbalance.

Phase of recovery and historic surge (2023 – 2024)

From July 1, 2023, public sector base salary increased to 1.8 million VND, up 20.8%, approaching salary reform levels. Subsequently, from July 1, 2024, base salary was set at 2.34 million VND per month, creating the highest increase in the nation’s history.

The base salary increase to 2.34 million VND from July 1st brings expectations not only for public sector workers but also joy to tens of millions of people benefiting from policies and benefits tied to base salary. This represents a strong signal of the government’s determination to improve workers’ livelihoods and attract talent back to the public sector.

Strategic impact of the salary increase on businesses

This historic salary increase affects not only the public sector but also creates structural changes throughout the entire labor ecosystem. Business leaders need to identify and prepare responses to three main impacts while developing effective payroll management methods.

The significant salary increase in the public sector creates a new compensation standard, changing wage and benefit expectations across the entire market. According to the Ministry of Home Affairs, preliminary estimates show that salary, pension, and allowance adjustments impact approximately 18 million social insurance beneficiaries and about 50 million people supported by state budget health insurance contributions. This large-scale impact will directly pressure corporate compensation policies, especially for factory worker wages and positions that can transition between public and private sectors.

The talent war becomes more intense as the public sector suddenly becomes an attractive income option. Salary increases also motivate improved productivity and work efficiency, contributing to social stability. This requires companies to develop more effective talent retention and attraction strategies, relying not only on compensation factors but also creating superior value and employee benefits.

Despite the government’s commitment to strict control, inflation risks remain. To ensure salary increases are truly meaningful, Resolution 93/NQ-CP on key tasks and solutions to promote growth, control inflation, and stabilize the macroeconomy must be implemented effectively. Deputy Prime Minister Le Minh Khai emphasized “not letting salary increases lead to unreasonable price increases, becoming a habit, and losing the meaning of salary increases.” Companies need to closely monitor operating costs and prepare response scenarios while ensuring payroll compliance so that salary increases truly benefit employees.

The history of base salary evolution through four distinct phases shows that Vietnam’s labor market has entered a new era with a record 30% increase. Leaders cannot be passive in the face of these changes but must proactively review and rebuild compensation strategies creatively. Investing in professional payroll services helps businesses maintain competitive advantage and ensure sustainable development in this new landscape.