Spotlight on HR in Vietnam

In this update, we look at the uniqueness of the HR market in Vietnam. Vietnam represents one of the fastest growing high-potential markets for multinationals conducting business in Asia. However the country is still in a relatively early phase of market liberalisation and, as this article illustrates, there exists a number of singularities that need to be navigated.

Of all the key considerations that need to be taken into account when assessing HR in Vietnam, below are what some would say are the key factors.

Training Technical Know-How

Sometimes even international MBA graduates with previous experience at other MNCs may not have all the necessary skills that you’re looking for in Vietnam. Learning & Development must therefore be an early priority in any HR role. In the context of Financial Services organisations for example, it may be difficult to find external agencies that can manage training in specialist skills such as investment advisory, asset allocation, or high net worth relationship management. However on the plus side, the Vietnamese are in general very responsive to training, and the investment made in skills development can also help to maintain a high engagement level of key operating and managerial staff.

Prioritisation of Language Skills

Expatriates in Vietnam should also ideally develop an understanding of the Vietnamese language. Overseas Vietnamese (‘Viet Kiêu’) have the advantage of speaking both Vietnamese and English, but the downside is that there can be problems with local acceptance if companies hire these returnees in large numbers. Besides, Viet Kiêu will come in at the top end of in-country salary bands.

Local Compensation Packages

Besides the inevitable poaching that has driven up salaries in Vietnam just like everywhere else in the region in recent years, the inflation rate in the larger Vietnamese cities has also been very high. Since 2006 and until the recent economic downturn, salaries have been rising at double-digit rates. Extra salary components such as annual ‘Tet Bonuses’, social insurance, and transportation charges can raise payroll costs further, with these add-on benefits accounting for as much as 30% of salary rates.

Moreover, there is also a new legal requirement which states that employment contracts must state gross salaries, and tax laws have just changed again this year. Together with the afor-mentioned large salary increase expectations, these new rules have meant a total revamp of local and expatriate compensation packages, and a large-scale re-education of existing staff.

The Local Recruitment Market

In Vietnam, local recruitment agencies tend not to be as specialised as in the more developed economies. So some HR practitioners have experienced problems with both volume recruitment and with specialist functional or industry recruitment needs alike. Local Vietnamese talent who have experience in foreign companies and can speak English remain hot commodities. These people can get poached very easily, so care must be taken to evaluate how they can be retained and engaged by your organisation in the face of stiff competition from outside. These problems are fairly ‘standard’ in rapidly developing markets, so similar strategies can be applied here that might also be used to markets such as India and China.

Legalities

There are many legalities and regulations to keep on top of, and not all laws are available in English. So if you’re an HR Head who can’t speak Vietnamese, you will miss some of the nuances of these laws – the English version of the Labour Code is much thinner than the Vietnamese version.

For an outsider covering the Vietnam HR market with limited support on the ground, it pays to concentrate energy on the high value consultative side of HR and to outsource key operational functions to trusted companies or individuals. One example of the latter would be in payroll, which can be problematic to keep in an ongoing state of legal compliance.

In conclusion, the above factors are just some of the examples of the issues that can both test and develop the capabilities of HR Business Leaders in Vietnam. When assessing HR talent on the ground, it is useful to discuss their views on the above factors, and work out how successful they can be in forming a natural bridge between the situation in Vietnam versus the expectations put upon them by regional and global stakeholders.

Many thanks to Jeanette Tan, previously of Vincom Securities in Vietnam, for her help with this article.