Circular No. 06/2001/TT-BLDTBXH guides the calculation of the average labor productivity growth rate and the average wage growth rate in state-owned enterprises.

CIRCULAR

Guidelines for calculating the average labor productivity growth rate

and the average wage growth rate in state-owned enterprises

________________________

Pursuant to Decree No. 03/2001/NĐ-CP dated January 11, 2001 of the Government amending and supplementing certain provisions of Decree No. 28/CP dated March 28, 1997 of the Government on reforming salary and income management in state-owned enterprises; after exchanging opinions with the Ministry of Finance and the Vietnam General Confederation of Labor, the Ministry of Labor, Invalids and Social Affairs provides guidelines for calculating the average labor productivity growth rate and the average wage growth rate to determine the unit price of wages in state-owned enterprises as follows:

I. APPLICABLE OBJECTS.

These are state-owned enterprises, organizations, and units that have been appraised and assigned unit prices of wages by competent authorities according to their management levels, including:

- State-owned enterprises engaged in production and business operations under the Law on State-Owned Enterprises;

- State-owned enterprises engaged in public services under the Law on State-Owned Enterprises (including organizations and units operating in accordance with Decree No. 56/CP dated October 2, 1996 of the Government and Circular No. 01 BKH/DN dated January 29, 1997 of the Ministry of Planning and Investment but without a decision to be classified as state-owned enterprises engaged in public services);

- Organizations and units permitted to engage in production, business, and service activities under administrative agencies, public institutions, the Party, mass organizations, and self-financed people's associations.

The above objects are collectively referred to as state-owned enterprises.

II. DETERMINATION OF AVERAGE LABOR PRODUCTIVITY AND THE RATE OF INCREASE IN AVERAGE LABOR PRODUCTIVITY:

1/ Principles:

- When the unit price of wages is calculated based on physical indicators, labor productivity is measured in physical terms; when the unit price of wages is calculated based on value indicators, labor productivity is measured in value terms;

- For each number of unit prices of wages to be appraised, the corresponding number of labor productivities must be determined.

2/ Indicators for measuring labor productivity:

- Labor productivity measured in physical terms is CLASS MONOCOTYLEDONthe quantity of products, including converted products, produced per person on average in a year;

- Labor productivity measured in value terms is the total revenue (or sales volume) produced per person on average in a year.

Specifically, for commercial banks, the indicator for labor productivity measured in value terms is the total amount of funds raised, outstanding loans, loan disbursement volume, loan recovery volume, foreign currency trading volume, and settlement turnover in a year, averaged per person.

3/ Method for calculating average labor productivity:

a) Average labor productivity measured in physical terms:

a.1. The average labor productivity achieved in the previous year, calculated using the formula:

Article 24_the

- Electronic Information Portal_the = (1)

L_tt

Where:

- W_the: Average labor productivity achieved in the previous year measured in physical terms;

- Q_the: Quantity of products (including converted products) achieved (products sold) in the previous year. Conversion factors for products must be specifically noted in the explanatory section;

-_tt: Total actual average number of workers employed in the previous year, calculated according to the guidance provided in Circular No. 08/TT-BLĐTBXH dated May 7, 1998 of the Ministry of Labor, Invalids, and Social Affairs.

Example 1: The quantity of products achieved in 2000 to calculate the actual wage fund according to the approved unit price of the enterprise is 36,000 tons/year; the actual average number of workers employed in 2000 is 1,200 people. The average labor productivity measured in physical terms achieved in 2000 is:

- Electronic Information Portal_the = 36,000 tons/year ÷ 1,200 people = 30 tons/person-year.

a.2. The planned average labor productivity in the current year, calculated using the formula:

Article 24_kh

- Electronic Information Portal_kh = (2)

L_ttkh

Of which:

- W_kh: Average labor productivity measured in physical terms in the planned year;

- Q_kh: Quantity of products (including converted products) sold in the planned year. Conversion factors for products must be specifically noted in the explanatory section;

-_ttkh: Total actual average number of workers to be employed in the planned year.

Example 2: The planned quantity of products for the year 2001 of the enterprise is 40,000 tons/year; the actual average number of workers to be employed in 2001 is 1,280 people. The average labor productivity measured in physical terms planned for 2001 is:

- Electronic Information Portal_kh = 40,000 tons/year ÷ 1,280 people = 31.25 tons/person-year.

b) Average labor productivity measured in value terms:

b.1. The average labor productivity achieved in the previous year, calculated using the formula:

d.1. Amount of taxable income in Vietnam:_the

- Electronic Information Portal_the = (3)

L_đm

Of which:

- W_the: Average labor productivity achieved in the previous year measured in value terms;

- T_the: Total revenue (or total sales volume) achieved in the previous year. For commercial banks, this is the total amount of funds raised; outstanding loans; loan disbursement volume, loan recovery volume; foreign currency trading volume, and settlement turnover achieved in the previous year;

-_đm: Number of standard workers in the previous year of the enterprise appraised by the competent authority according to the management level when assigning the unit price of wages.

Example 3: The total revenue achieved in 2000 of the enterprise is 24 billion VND; the number of standard workers in 2000 approved by the competent authority according to the management level is 1,200 people. The average labor productivity achieved in value terms in 2000 is:

- Electronic Information Portal_the = 24 billion VND/year ÷ 1,200 people = 0.02 billion VND/person-year.

b.2. The planned average labor productivity in the current year, calculated using the formula:

d.1. Amount of taxable income in Vietnam:_kh

- Electronic Information Portal_kh = (4)

L_đmkh

Of which:

- W_kh: Average labor productivity measured in value terms in the planned year;

: bid price after corrections and adjustments, minus any discount (if applicable) of the lowest bidder among those detailed financial evaluations;_kh: Total revenue (or total sales volume) in the planned year. For commercial banks, this is the total amount of funds raised; outstanding loans; loan disbursement volume, loan recovery volume; foreign currency trading volume, and settlement turnover in the planned year;

-_đmkh: Number of standard workers in the planned year established by the enterprise according to Circular No. 14/LĐTBXH-TT dated April 10, 1997 of the Ministry of Labor, Invalids, and Social Affairs.

Example 4: The total revenue planned for 2001 of the enterprise is 26.8 billion VND; the number of standard workers established by the enterprise in 2001 is 1,280 people. The planned average labor productivity measured in value terms for 2001 is:

- Electronic Information Portal_kh = 26.8 billion VND/year ÷ 1,280 people = 0.0209 billion VND/person-year.

4/ Rate of increase in average labor productivity, calculated using the formula:

- Electronic Information Portal_kh

I_w = ((Wđmkh / Wđm) - 1) × 100% (5)

- Electronic Information Portal_the

Of which:

- I_w: Rate of increase in average labor productivity;

- W_kh: Planned average labor productivity;

- W_the: Actual average labor productivity achieved in the previous year.

Example 5: Combining Examples 1, 2, and Examples 3, 4 mentioned above, the rate of increase in average labor productivity in physical terms or value terms in 2001 of the enterprise is:

- The average labor productivity growth rate measured in physical terms for 2001 compared to 2000 is:

31,25 tons/person-year

I_w = (-------------------------------- x 100%) - 100% = 4,17%

30 tons/person-year

- The average labor productivity growth rate measured in value terms for 2001 compared to 2000 is:

0,0209 billion VND/person-year

I_w = (-------------------------------- x 100%) - 100% = 4,5%

0,02 billion VND/person-year

III. DETERMINATION OF AVERAGE WAGE AND THE RATE OF INCREASE IN AVERAGE WAGE.

1/ Determination of the average wage realized in the preceding year adjacent to the planning year:

The average wage realized in the preceding year adjacent to the planning year is determined according to the following formula:

V_the

TL_the = ----------- (6)

L_đm

Of which:

- TL_the: Average wage realized in the preceding year adjacent to the planning year (VND/person-month);

- V (VND/year): is the total investment capital allocated annually for the usable area of social housing for rent, ensuring the preservation of capital, calculated according to the following formula:_the: The wage fund realized in the preceding year adjacent to the planning year of the enterprise according to the assigned unit price as prescribed in Circular No. 05/2001/TT-BLDTBXH dated January 29, 2001 of the Ministry of Labor, Invalids and Social Affairs, Circular No. 18/1998/TTLT-BLDTBXH-BTC dated December 31, 1998, and Circular No. 19/1998/TTLT-BLDTBXH-BTC dated August 14, 1999 of the Joint Circular of the Ministry of Labor, Invalids and Social Affairs - Ministry of Finance;

-_đm: Number of standard workers in the previous year of the enterprise appraised by the competent authority according to the management level when assigning the unit price of wages.

Example 6: The wage fund realized in 2000 of the enterprise settled according to the assigned unit price is 18,000 million VND/year; the number of employees corresponding to the wage unit price in 2000 approved by the competent authority according to the management hierarchy is 1,000 people. The average wage realized in 2000 according to the plan is:

TL_the = 18,000 million VND/year ÷ 1,000 people ÷ 12 months

= 1.5 million VND/person-month.

2/ The average wage in the planning year is determined according to the following formula:

V_kh

TL_kh = ------------ (7)

L_đmkh

Of which:

- TL_kh: Average wage in the planning year (VND/person-month);

- V (VND/year): is the total investment capital allocated annually for the usable area of social housing for rent, ensuring the preservation of capital, calculated according to the following formula:_kh : The wage fund in the planning year to determine the unit wage price established by the enterprise as prescribed in Circular No. 05/2001/TT-BLDTBXH dated January 29, 2001 of the Ministry of Labor, Invalids and Social Affairs;

-_đmkh: Number of standard workers in the planned year established by the enterprise according to Circular No. 14/LĐTBXH-TT dated April 10, 1997 of the Ministry of Labor, Invalids, and Social Affairs.

Example 7: The wage fund in the planning year to determine the wage unit price in 2001 of the enterprise is 20,500 million VND/year; the number of employees established by the enterprise corresponding to this is 1,120 people. The average wage planned for 2001 is:

TL_kh = 20,500 million VND/year ÷ 1,120 people ÷ 12 months

= 1.5253 million VND/person-month.

3/ The rate of increase in average wage is calculated according to the following formula:

TL_kh

I_tl = (------- x 100%) - 100% (8)

TL_the

Of which:

- I_tl : Rate of increase in average wage;

- TL_kh : Average wage in the planning year;

- TL_the : Average wage realized in the preceding year adjacent to the planning year.

Example 8: Combining the above examples 6 and 7, the rate of increase in average wage of the enterprise in 2001 is:

1,5253 million VND/person-month

I_tl = (----------------------------------------- x 100%) - 100% = 1,69%

1,500 million VND/person-month

IV. DETERMINATION OF THE RATE OF INCREASE IN AVERAGE WAGE LINKED TO THE RATE OF INCREASE IN AVERAGE LABOR PRODUCTIVITY

When establishing the wage unit price for the planning year, to ensure the principle that the rate of increase in average wage must be lower than the rate of increase in average labor productivity, the enterprise shall implement as follows:

1/ For enterprises with planned labor productivity lower than the realized labor productivity in the preceding year adjacent then the maximum average wage in the planning year to determine the wage unit price is equal to the average wage realized in the preceding year adjacent multiplied by the rate of increase in labor productivity. The calculation formula is as follows:

I_w + 100%

TL_{kh max} = TL_the x (------------------)

100%

Of which:

- TL_{kh max}: Maximum average wage in the planning year to determine the wage unit price;

- TL_the : Average wage realized in the preceding year adjacent to the planning year;

- I_w : Rate of increase in labor productivity.

Example 9: The average labor productivity realized in 2000 of the enterprise is 18.5 million VND/person-year; the average wage realized is 500,000 VND/person-month. The plan for 2001 is an average labor productivity of 17.5 million VND/person-year, the maximum average wage in the planning year 2001 to determine the wage unit price is:

I_w = (17.5 : 18.5) x 100% - 100% = -5.4054%

- 5,4054% + 100%

TL_{kh max} = 500,000 VND/person-month x (---------------------- )

100%

= 472,973 VND/person-month

2/ For enterprises with planned labor productivity equal to the realized labor productivity in the preceding year adjacent then the maximum average wage in the planning year 2001 to determine the wage unit price is equal to the average wage realized in the preceding year adjacent.

Example 10: The labor productivity realized in 2000 of the enterprise is 24.6 million VND/person-year; the average wage realized is 550,000 VND/person-month. The plan for 2001 is a labor productivity of 24.6 million VND/person-year, the maximum average wage in the planning year 2001 to determine the wage unit price is:

I_w = (24.6 : 24.6) x 100% - 100% = 0%

0% + 100%

TL_{kh max} = 550,000 VND/person-month x (------------------ )

100%

= 550,000 VND/person-month

3/ For enterprises with planned labor productivity higher than the realized labor productivity in the preceding year adjacent then the maximum average wage in the planning year to determine the wage unit price is calculated according to the principle: for every 1% increase in average labor productivity, the maximum increase in average wage is 0.8%. The calculation formula is as follows:

I_w

TL_{kh max} = TL_the + TL_the x --------- x 0.8

100%

Of which:

- TL_{kh max}: Maximum average wage in the planning year to calculate the wage unit price;

- TL_the : Average wage realized in the preceding year adjacent;

- I_w : Rate of increase in labor productivity;

Example 11: The average labor productivity realized in 2000 of the enterprise is 24.6 million VND/person-year; the average wage realized is 550,000 VND/person-month. The plan for 2001 is an average labor productivity of 26.8 million VND/person-year, the maximum average wage in the planning year 2001 to determine the wage unit price is:

I_w = (26.8 : 24.6) x 100% - 100% = 8.94%

8,94%

TL_{kh max} = 550,000 VND + 550,000 VND x ---------- x 0.8

100%

= 589,336 VND/person-month.

When the State adjusts the general minimum wage upward, the additional difference in the minimum wage multiplied by the average job grade salary coefficient (including any allowances if applicable) is added to the maximum average wage in the planning year of the enterprise to establish the wage unit price.

Example 12In 2001, the State adjusted the general minimum wage from VND 180,000/month to VND 210,000/month (an increase of VND 30,000/month). If the average salary grade coefficient (including all salary supplements included in the unit price of wages) of enterprises was 2.5, then in 2001, enterprises would be entitled to an additional VND 30,000/month x 2.5 = VND 75,000/month in the maximum planned average wage for establishing the unit price of wages.

According to the examples 9, 10, and 11 mentioned above, the maximum planned average wage for establishing the unit price of wages of enterprises in 2001 is:

VND 472,973 + VND 75,000 = VND 547,973/month (example 9)

VND 550,000 + VND 75,000 = VND 625,000/month (example 10)

VND 589,336 + VND 75,000 = VND 664,336/month (example 11)

IV. IMPLEMENTATION.

1. The determination of the average labor productivity growth rate and the average wage growth rate according to the guidance provided in this Circular is solely for determining the maximum planned average wage of enterprises when establishing the unit price of wages to be submitted to the competent authority for approval based on the management hierarchy.

After the unit price of wages has been reviewed and determined, at the end of the year, the settlement of the actual wage fund of the enterprise does not require reconsideration of the relationship between the actual average labor productivity achieved and the average wage, meaning that the actual average labor productivity may be higher or lower than the planned average labor productivity without adjusting the unit price of wages, and the actual wage fund will be settled according to the established unit price of wages.

2. Based on the contents of the guidance provided in this Circular, the Ministries managing sectors and fields, the People's Committees of provinces and centrally-run cities, and the Chairmen of the Management Councils of State-owned Corporations 91/TTg and 90/TTg instruct enterprises to comply with the regulations.

3. The Director (General Director) of the enterprise directs specialized departments annually when establishing the unit price of wages and the planned wage fund must be linked to the determination of the average labor productivity growth rate, the average wage growth rate, and other conditions as stipulated, to be submitted to the competent authority for approval based on the management hierarchy, and to assign the unit price of wages.

4. This Circular takes effect from January 1, 2001.

During implementation, if there are any difficulties, the Ministries managing sectors and fields, the People's Committees of provinces and centrally-run cities, and state-owned enterprises shall report to the Ministry of Labor, Invalids, and Social Affairs for study and resolution./.