Vietnam is being swept along by the tide of economic growth in the Far East, and employee benefits are playing an increasingly important role in the development of its workforce, says Alison Coleman
Like many of its neighbours in the Far East, Vietnam is experiencing an economic boom, fuelled largely by huge economic growth in China and aided by a growing number of major new infrastructure projects and investments.
Economic growth has also been spurred by progressive efforts by the Vietnamese government to provide incentives for private businesses and attract more investment from international organisations looking to get a foothold in this region. According to the Vietnam Trade Office in the US, the country’s workforce is estimated to be about 42 million people, of which 45 percent are aged under 35 years. The labour force is growing at an average of 3.5 percent to 4 percent a year, which is faster than the average population growth of 1.4 percent, with up to 1.5 million new workers entering the market each year.
Skills are key to business growth and employers are developing recruitment and retention strategies, a crucial part of which is the provision of employee benefits. According to the Vietnam survey published by Watson Wyatt, which works in partnership with Smart HR in Vietnam, the most widespread employee benefits are medical insurance, medical cost reimbursement, company health facilities and hospital memberships, offered by 91.34 percent of employers. Then come mobile phone expenses (77.17 percent); commuting assistance, including helmets, parking, fuel, car pool and company buses (77.17 percent); accident insurance (76.38 percent); education and training assistance (62.99 percent); and uniforms and workwear (55.12 percent)
The five benefits showing the fastest growth, meanwhile, are private retirement schemes (350 percent), children’s education assistance (162 percent), life insurance (150 percent), travel insurance (118 percent) and healthcare benefits (114 percent). Jessica Lu, chief executive officer (CEO) of Smart HR, says: “Vietnam is a young and relatively under-populated country, so until recently, retirement schemes have never been considered a desired benefit by the majority of employees, but that situation is changing rapidly.”
There is also increasing interest in healthcare and insurance cover. These typically include group personal accident cover, group hospital and surgical cover, followed by group life perks.
Marsh & McLennan, parent company of Mercer, operates a network of health and benefits services throughout Asia. Gary Leong, CEO of Marsh in Vietnam, says: “Group personal accident cover and group hospital and surgical cover are the most popular. But there are some health cover issues that need to be addressed by employers in Vietnam. Disability or injury encountered during work that needs long-term care and treatment are not adequately covered by insurers there, even though, under current employment legislation, employers are liable for this.”
Along with economic growth and prosperity, Vietnam is also experiencing rising inflation. Mercer’s Vietnam flash inflation survey into the effects of inflation on operational costs showed a number of organisations had implemented, or were planning to implement, counter-inflation measures to support staff. More than half (56 percent) were offering higher-than-forecast salary increases to help staff cope with higher inflation, and 28 percent were offering additional allowances, mostly for petrol or meals.
According to Watson Wyatt’s aforementioned Vietnam survey, 80 percent of companies reported salary rises of 19 percent during the six-month period between August 2007 and March 2008, which was nearly double the original forecast for August 2007 of 10 percent.
Employers in Vietnam are also assessing the potential impact of a number of issues that may affect their benefits strategies. “Volunteer retirement social insurance will be introduced in 2009, as well as the new personal income tax law. These will encourage employers to consider the total remuneration cost, the distribution of compensation versus benefits, and the various options of benefits provision,” says Lu.
Like many professionals in the benefits market, Lu expects a major shift in attitudes to long-term workforce development. “It is time for companies to start building and developing their own talent, and there are urgent calls to start implementing management retention plans,” she says.
If you read nothing else, read this…
- As an emerging market, it is expected that Vietnam will experience changes to benefits strategies to meet the needs of an increasingly sophisticated and discerning workforce, and to complement and support developing talent management and succession planning.
- Insurance and healthcare benefits are valued by staff and offered by nearly all employers, but questions have been raised over whether the level of cover provided is adequate.
- Economic growth has been accompanied by increased inflation and rising costs, which many employers are trying to counter by offering higher-than-planned pay rises and expense allowances.