Vietnam’s Regional Labor Market: Labor Cost, Workforce Optimization and HR Strategy
Vietnam has a population of over 97 million people spread over 330,000 square kilometers. The country is still predominately rural, with urban centers providing a home for just 35 percent of the population. Companies entering Vietnam for the first time often fail to account for regional variation in the labor market and invest in locations ill-suited to their industry.
nvestors that take the time to explore Vietnam’s provinces will find opportunities to manage costs while maintaining productivity. Executives will benefit from understanding the cost differential between different provinces in Vietnam, but the real beneficiaries of a regional approach will be human resource (HR) departments and hiring managers. HR departments that understand what Vietnam has to offer will be much better positioned to recruit, onboard, and, where necessary, train new workers.
Vietnam’s investment landscape is broken into three main zones in the north, center, and south of the country. Out of these three provinces, investors typically end up investing in the north and south of the country.
Northern provinces
Vietnam’s northern provinces are well-positioned as a destination for China+1 manufacturing and is well known for heavy manufacturing, oil and gas, and more recently for high-end manufacturing processes, such as auto manufacturing. Investors focus a significant portion of their spending within the north of Vietnam in two provinces – Hanoi and Bac Ninh.
Hanoi
HR departments hiring in Hanoi will benefit from the provinces discounted wages and large workforce but may be required to spend more on training.
Workforce specialization and availability
Hanoi has a population of 8 million, while the labor force (age of 15 years and above) is around 3.8 million. The city is one of the most populated in the country and provides an ample workforce for a variety of industries. Companies operating in Hanoi report slightly lower levels of spending on recruitment than other northern provinces such as Bac Ninh. Key industries in Hanoi include textiles and garments, chemicals, agricultural products and food processing, mechanical manufacturing, and electronics.
Labor cost
Hanoi’s labor force is on the cheaper side with the average salary standing at just over US$400 a month. The city’s labor cost comes in below neighboring provinces, such as Bac Ninh, as well as Ho Chi Minh City in the south. Investors should assess the specific needs of their operations and the ability of Hanoi’s workforce to meet them to ensure that cost savings are realized.
Companies in Hanoi must also factor in the cost of operating in Hanoi and allocate a higher percentage of spending to training than in other areas of the country.
Optimizing HR Strategy in Hanoi
Investors setting up in Hanoi should assess their needs and conduct HR due diligence to better understand the ability of a local labor force to meet their needs. Companies that are unable to find skillsets that match their requirements must factor in the cost to train employees into their operating models. Investors that seek to outsource their training to vocational institutions should vet these institutions closely and situate operations within close proximity to ensure that training meets the company’s needs.
Bac Ninh
Bac Ninh was rated as the fourth-best province in this year’s Provincial Competitive Index. HR departments will benefit from Bac Ninh’s pools of skilled labor but may find labor to be more expensive than in neighboring Hanoi.
Workforce specialization and availability
Bac Ninh is located adjacent to Hanoi and is known as a hub for manufacturing. Firms in the electronics, information technology (IT), infrastructure development, chemical, and industrial automation industries will find Bac Ninh an attractive location. In addition, due to the presence of major manufacturers, supporting industries are also well established than in other areas.
Labor cost
Bac Ninh’s labor costs are slightly higher than those in Hanoi with an average salary of US$421 a month. As one of the leading FDI destinations in Vietnam, foreign investment has helped transform the region into an industrial hub making it one of the most competitive hiring markets in the country, along with Ho Chi Minh City.
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This article is produced by Vietnam Briefing, a premium source of information for investors looking to set up and conduct business in Vietnam. The site is a publishing arm of Dezan Shira & Associates, a leading foreign investment consultancy in Asia with over 27 years of experience assisting businesses with market entry, site selection, legal, tax, accounting, HR and payroll services throughout the region.