Vietnamese firms balance wage disparity with ample bonuses

According to the latest survey by Mercer and Talentnet, the annual base salary at foreign companies in Vietnam tends to be 29 per cent higher than at domestic firms. This gap is the most pronounced at management positions, where multinational businesses are willing to pay 41 per cent more to top executives.

At low-level jobs, the difference is less obvious—employees at Vietnamese businesses only earn 15 per cent less. The survey also pointed out that the pay gap between managers and low-level workers in Vietnam is the highest in the Asia-Pacific.

However, it does not look like Vietnamese businesses lack competitive advantages in salary payment. In fact, statistics show that the 7-per-cent annual wage increases at Vietnamese businesses were slightly higher than international firms last year.

Moreover, Vietnamese businesses understand that their base salary tends to be lower than multinational firms, thus they choose to be more flexible about bonuses and incentives to attract the best talents and motivate workers. In 2016, almost 21 per cent of the wages paid out by Vietnamese firms consisted of a variety of bonuses, while this figure at international firms stood only at 16.1 per cent.

The banking and financial services sector is the most generous when it comes to variable bonuses. This can compensate for the slight decline in base salary, as financial institutions worldwide are wading through a period of sluggish growth.

Similarly, the survey pointed out that sales incentives are also more popular at Vietnamese firms. Specifically, 65 per cent of domestic firms offer sales incentives, while only 46 per cent of multinationals do.

About half of the Vietnamese companies offer both bonuses and sales incentives to reward good performance. On the contrary, only 22 per cent of international entities offer both.

Hoa Nguyen, senior director at Talentnet, expected foreign firms to narrow this gap next year and dedicate a much larger budget to bonuses and incentives.

“Multinational businesses and their Vietnamese counterparts will continue to compete for top-level executives in 2018. This is going to be a stiff battle as demand for senior managers in Vietnam now overrides supply,” said Nguyen.

A total of 592 international and Vietnamese firms across 16 industries participated in the Mercer-Talentnet survey this year. Data of 292,000 employees have been collected for the survey.