who were working in the public sector) is considered a financial burden for
enterprises. Thus individual firms seek ways to minimise welfare costs. In order
to speed up the reform process and reduce the burden of SOEs, the government
issued a new policy introducing a social insurance system to replace the old
welfare system. According to the government regulation (Decision No. 12/CP,
26/1/1995), firms have to contribute social insurance and health insurance for
their workers. Social insurance comprises 20% of total wages, to which firms
contribute 15% and individual employees contribute 5%. Social insurance
would cover unemployment benefits, retirement benefits, sickness benefit,
maternity allowance and accident allowance as well as compensation for death.
In addition, health insurance comprises 3% of total wages which firms have to
pay entirely. At the present, not only do the majority of SOEs set up this insur-
ance system, but a large number of foreign-owned and domestic private enter-
prises follow the government regulations to set up these insurance funds.
The fourth issue of reforming employment relations is in the area of man-
agement–labour relations. Certainly, the central aim of economic reform is
increasing the autonomy of enterprise management. The results are varied, but
it seems that managers have enjoyed an increase in power. In addition, infor-
mal bargaining remains important to the success of the enterprise and this pro-
ceeds most smoothly through personal connections. Though economic reform
is premised on a reduction of party influence in the enterprise, political net-
works form a readily accessible structure for informal bargaining and personal
connections, which lead to problems ranging from unpredictability to corrup-
tion (Zhu and Fahey, 2000).
Trade unions have constituted one element – though a distinctly subordi-
nate element – in the power relations within the enterprise. The official trade
union movement, the Vietnam Federation of Trade Unions (VFTU), enjoys a
strong position because of its high level of membership (3 million in 1995)
amongst the workforce of urban industrial regions (Zhu and Fahey, 1999).
However, the major challenge that faces the trade union movement is one of
credibility in its representation of labour, especially if the union is to depend
on the voluntary contributions of workers for financial support. The official
unions are under pressure to change.
Managing human resources
In recent years, many Vietnamese enterprises have developed more flexible
work relations. However, there is a mixed pattern of HRM in Vietnamese enter-
prises. The influences of cultural traditions as well as political, economic and
historical factors are reflected in several dimensions, such as adherence to rules,
common values and norms, less individual-oriented pay, and harmony. Even
FOEs adopt certain localised strategies in order to fit into the social/cultural
environment (Zhu, 2002).
A recent survey by one of the authors shows that the realisation of flexi-
bility and competitiveness of enterprises depends on the type of employment
214 International Human Resource Management