Extent of implementation of labor relations criteria of the textile garment industry in hanoi, vietnam

EXTENT OF IMPLEMENTATION OF LABOR RELATIONS CRITERIA
OF THE TEXTILE - GARMENT INDUSTRY IN HANOI, VIETNAM

___________________________

A DISSERTATION
Presented to the Faculty of the Graduate School
Southern Luzon State University, Lucban, Quezon, Philippines
in Collaboration with
Thai Nguyen University, Socialist Republic of Vietnam

___________________________

In Partial Fulfillment
of the Requirements for the Degree
Doctor of Business Administration

___________________________

By
KHUAT THI THU HIEN (ROSE)
December 2013


APPROVAL SHEET

The Dissertation of

KHUAT THI THU HIEN
entitled
EXTENT OF IMPLEMENTATION OF LABOR RELATIONS CRITERIA OF

THE TEXTILE - GARMENT INDUSTRY IN HANOI, VIETNAM
Submitted in Partial Fulfilment of the Requirements for the Degree
DOCTOR OF BUSINESS ADMINISTRATION
A program offered by Southern Luzon State University,
Republic of the Philippines in collaboration with
Thai Nguyen University, Socialist Republic of Vietnam
has been approved by Oral Examination Committee

WALBERTO A. MACARAAN, EdD
Expert

CONRADO L. ABRAHAM, PhD
Expert

MELCHOR MELO O. PLACINO, PhD
Expert

TRAN DAI NGHIA, PhD
External Panel

CECILIA N. GASCON, PhD
Chairman
Endorsed by:

Recommended by:

JOANNA PAULA A. ELLAGA, DBA
Adviser

APOLONIA A. ESPINOSA, PhD

Dean

Accepted in Partial Fulfilment of the Requirements for the Degree
Doctor of Business Administration

_____________________
Date

WALBERTO A. MACARAAN, EdD
Vice President for Academic Affairs
ii


CERTIFICATE OF ORIGINALITY

iii


ACKNOWLEDGMENT

Iwould like to express mysinceregratitudeandprofound appreciation to
Professor. Dr. Tran Chi Thien, who has instructed me dedicatedly to complete
this Dissertation.
I would like to thank the lecturers of the Southern Luzon State
University in the Philippines and Thai Nguyen University in Vietnam, and staff
of 10 textile - garment companies in Hanoi for helping her during the survey
on labor relations.
Isincerelythank the University of Labor and Social Affairs where the
author has been working for years, her family and all her beloved friends who
have shared, encouraged and supported her unceasingly during her DBA

program, hence made her study feasible.

KhuatThi Thu Hien

iv


DEDICATION

I dedicate my dissertation to my family and my friends. A special
feeling of gratitude to my loving mother, who words of encouragement. My
husband and my children have never left my side and give special support to
me. Both of them have been my best cheerleaders.
I also dedicate this dissertation to my close friends who have supported
me throughout the process. I will always appreciate all they have done,
especially Mr. Ngo AnhCuong for helping me develop my technology skills,
Ms.PhanThi Mai Huong, Ms. Pham Kim Thoa and Ms. Nguyen Minh Trang for
the many hours of proofreading.

KTTH

v


TABLE OF CONTENTS
PAGE
TITLE PAGE ………………………………………………………………..

i

APPROVAL SHEET ……………………………………………………….

ii

CERTIFICATE OF ORIGINALITY ………………………………………..

iii

ACKNOWLEDGMENT ………………………………………………..…..

iv

DEDICATION ………………………………………………………………

v

TABLE OF CONTENTS …………………………………………………..

vi

LIST OF TABLES ………………………………………………………….

viii

LIST OF FIGURES ………………………………………………………...

ix

LIST OF APPENDICES …………………………………………………...

x

ABSTRACT …………………………………………………………………

xi

CHAPTER
I

II

III

INTRODUCTION
Introduction ………………………………………………….

1

Background of the Study …………………………………..

1

Objectives of the Study …………………………………….

2

Significance of the Study …………………………………..

3

Scope and Limitation of the Study ………………………..

3

Definition of Terms ………………………………………….

5

REVIEW OF LITERATURE AND STUDIES
Related Literature and Studies…………....…………….…

8

Conceptual Framework ……………………………………

18

METHODOLOGY
Locale of the Study ………………………………………....

39

Research Design ……………………………………………

39

Population, Sample Size and Sampling Technique…….

40

Research Instrument ……………………………………….

44

Data Gathering Procedure …………………………………

45

Statistical Analysis ………………………………………….

46

vi


IV

RESULTS AND DISCUSSIONS ………………………….

V

SUMMARY OF FINDINGS, CONCLUSIONS AND

48

RECOMMENDATIONS
Summary of Findings ………………………………………

91

Conclusions …………………………………………………

92

Recommendations …………………………………………

94

REFERENCES ……………………………………………………………..

98

APPENDICES ……………………………………………………………...

101

CURRICULUM VITAE …………………………………………………….

115

vii


LIST OF TABLES
TABLE

PAGE

1

Strategy on Labor Relations and Corresponding Policies

16

2

The Results of the Stratified Classification of the Labor
Relation Criteria………………………………………………..

40

Total Textile - Garment Companies in Hanoi and Number
of Samples ……………………………………………………..

40

4

Total Number of 10 Companies Employees Surveyed ……

41

5

Divide Employees Join in 10 Enterprises’ Survey ………….

43

6

The Criteria of Signing Employment Contracts …………….

49

3

viii


LIST OF FIGURES
FIGURE

PAGE

1

Dunlop’s Classical Labor Model……………………………….

15

2

Kochan’s Strategy Selection Model in Labor Relations ……

15

3

The Interaction in Petit’sLabor Relations System …………

17

4

Labor Relations, the Interface of the Relations ……………

19

5

Subjects of the Labor Relations …………………………….

24

6

Main Items of Labor Relations in Enterprise ………………….

38

7

Procedure to Apply Labor Relation Criteria to Evaluate the
Harmony of the Working Environment at an Enterprise ……

62

8

Enterprises Structure of the Surveyed ………………………

66

9

Age Structure of the Surveyed Employees …………………

75

10

Working Experience Structure of the Surveyed Employees...

76

11

Evaluation, Synthetization of the Result of Labor Relations
Evaluation in Vietnam …………………………………………..

95

ix


LIST OF APPENDICES
APPENDIX

PAGE

A.1

Letter to the Manager of Small and Medium Enterprises
in Thai Nguyen Province

95

A.2

Survey of Financial Management Practices of SMEs in
Thai Nguyen City

96

B.1

Regression

105

x


ABSTRACT
Title of Research

: EXTENT OF IMPLEMENTATION OF LABOR
RELATIONS CRITERIA OF THE TEXTILE GARMENT INDUSTRY IN HANOI, VIETNAM

Researcher

: KHUAT THI THU HIEN (ROSE)

Degree Conferred

: DOCTOR OF BUSINESS ADMINISTRATION

Name and Address
of Institution

: Southern Luzon State University Lucban, Quezon,
Philippines and Thai Nguyen University,
Socialist Republic of Vietnam

Adviser

: Dr.Tran Chi Thien

Year Written
: 2013
______________________________________________________________

The government and enterprises always expect to build harmonious
and stable labor relations to increase productivity and to create employee’s
commitment to business. However, so far, in Vietnam in general and Hanoi in
particular, there has been no criteria system available as a basis for
evaluating the labor relations at enterprises since it takes a long time (many
years) for a Decree of the Government, and then Circulars of Ministry of
Labor, Invalids and Social Affairs to be launched that concretize The National
Assembly’s Labor Code 2012.

The development of criteria system for evaluating the labor relations at
enterprises is very necessary. It will serve as an important basis on which
both the employers and employees can evaluate the level of the employees’
satisfaction; hence they can make better employment planning which
enhance both the benefits of the employees and the efficiency of the
business.

xi


Based on studies of international labor standards and related legal
document of Vietnam, this Dissertation composes and proposes a set of
criteria to evaluate thelabor relations at enterprises in Vietnam. Then, the
Dissertation applies the set of proposed criteria to evaluate the labor relations
at textile - garment industryin Hanoi, as an example case study of the way to
apply the criteria in the reality of an enterprise.
Finally, recommendations are suggested to the State, the
employer, the trade union and the employees to introduce and implement the
Criteria of Labor Relations in the reality of a specific enterprise. The important
implication of the criteria application is to evaluate the existing labor relations
at the enterprise, and to find out solutions to improve the labor relations to
ensure the rights and responsibilities of the relating parties so as to enhance
the working environment at the company.

xii


1

Chapter I

INTRODUCTION
Background of the Study
Labor relations at enterprises are the factor that largely influences
business

operation,

economic

development,

social

safety,

working

environment, and motivation for employees to enhance their labor
productivity.
Since Vietnam has been shifting to market economy, labor relations
have had many significant changes. Employees have right to seek a job freely
and employers have right to choose, recruit workers to suit business
requirements. Both the parties have their own rights and interests in
compliance with the provisions of the Labor Code through labor contracts,
collective labor agreements and other arrangements.
The Labor Code and other laws have played an important role in the
above mentioned changes. However, the labor relations in some regions are
sometimes not as expected as it should be. The phenomenon of contravening
labor discipline which does not guarantee the legitimate rights and interests of
workers still occurs and sometimes is very disturbing. Labor disputes, strikes

adversely affect the labor market. There are many reasons for these
problems, but mostly they are the sense of law respect not highly enough and
lacks of full cooperation in goodwill from the both sides. Only when a conflict
has broken out in a labor dispute or strike, drawing intervention of the
authority, the labor relations are then put back in peace again. Experiences of
some cases prove that, if both the parties took the initiative of good will to
meet and have dialogues, negotiate each other in order to try to resolve the


2

dispute soon, the strike would be much likely not to happen and potential
damages would be smartly avoided. Labor disputes and strikes are a natural
phenomenon of employment relationship which occurs as the consequence of
the adaptation of the labor relations in a new context of such a huge range of
new requirements for the development of the country. Thus, responses to this
issue, the whole society, including the legislature, the government, concerned
organizations and individuals, are called for. Labor disputes in Vietnam often
arise from the workers’ claims for higher wages, better working conditions
while employers want to seek profits, reduce costs and increase competition
capability. In almost cases, both the sides have their own reasons. Therefore,
the problem is how to reconcile these conflicts in a satisfactory way for them
to be able to continue the work. This is a big challenge for the employment
relationship in Vietnam.
The government and enterprises always expect to build harmonious
and stable labor relations to increase productivity and create employee’s
commitment with business. However, so far, in Vietnam in general and Hanoi
in particular, there has been no criteria system served as a basis for evaluate
labor relations at enterprises.
Thus, the theme of "Extent of Implementation of Labor Relations

Criteria of the Textile - Garment Industry in Hanoi, Vietnam".

Objectives of the Study
This study tries to construct a set of criteria to evaluate the labor
relations at enterprises that can be used to evaluate the level of employees’
satisfaction of the labor relation at enterprises. Based on that evaluation


3

results, stakeholders would consider, adjust, modify the existing labor
relations to have better labor relations. It also helps improve government
policies and measures, mechanism relating to labor relations.
After the formulation of the labor relation criteria, the Dissertation
introduces a procedure to apply the criteria in the reality of enterprises.
Specifically, this study sought to:
1. Determine the degree of Employer’s Compliance to Labor Relations
Criteria;
2. Determine the level of Employees Satisfaction on the implementation
of Labor Relations Criteria; and
3. Formulate policy recommendations on the implementation of Labor
Relations Criteria to the garment industry in Hanoi, Vietnam.

Significance of the Study
This study will be primarily significant to the laborers of the textile
industry of Vietnam because through the result of this study, their working
status and benefits may be evaluated based on certain standards.

Scope and Delimitation of the Study
The related literatures on labor relations at enterprises in Hanoi in

particular, and in Vietnam in general are reviewed. The set of labor relation
criteria and the procedure for its application are formulated for all types of
enterprises in Hanoi, Vietnam. An example application of the criteria in the
reality of 30% textile was done in garment companies in the industry in Hanoi.


4

Hanoi & textile - garment industry was chosen in this study because
Hanoi is the capital of the Socialist Republic of Vietnam which is located in the
center of North Delta. Its location has many advantages, being the focal point
of the roads, waterways, rails and airs which connect to provinces and locality
in Vietnam and other countries. Thanks to being the national political center,
Hanoi has its stable political platform, an opened and flexibly foreign
economic co-operation policies and guaranteed political security and social
order. Hanoi is a place which is in a geographically advantageous position,
being the center of economic transactions and an importantly international
exchange center. Hanoi is also a city which gathers plentiful human resources
and intellectuals with high-qualified scientists and management executives of
the country. With these advantages, Hanoi is a place with a large business
community. Employment relationship in enterprises in Hanoi is diverse and
complex. The construction of harmonious, stable and advanced employment
relationship in business in Hanoi helps minimize labor disputes, strikes and
has a tremendous significance to stabilize and develop society and
enterprises, diminish conflicts, ensure the employees’ rights and benefits. It is
considered as an important target for the employers, the employees in Hanoi
to implement good labor relations in both short term and long term.
Textile - Garment industry is a key export industry, labor–intensive
industry of Vietnam. Traditionally, the textile industry is still considered an
area which has lots of volatility in labor relations because of low wages and

longer time of work. In many cases, companies had the goods orders but
could not produce and sell the products in time because of lacking in labor
forces. The potential risk of employment relationship is unavoidable with a


5

branch requiring a lot of workers and always having such volatility in labors.
Therefore, the biggest challenge is to build harmonious employment
relationships. An application of a good labor relation criteria will help to
measure how harmonious the labor relations at the company are. Which
specific labor relation should be improved to satisfy the need of employees for
a better working environment?

Definition of Terms
In this study, the most frequently used terms are criterion, enterprise,
labor relations, employee, employer, and extent.
Criterion. The standard of judgment or criticism, a rule or a principle used to
test or to evaluate an object, including requirements for the quality,
level, efficiency, capacity, compliance with rules and regulations, the
final results and the sustainability of these results.
Enterprise. An economic organization having its own name, having assets
and a stable transaction office, and having business registration in
accordance with law for the purpose of conducting business
operations. (Article 4, Vietnam Enterprise Code 2005)
Employee. A person who works in the service of another person under an
express or implied contract of hire, under which the employer has the
right to control the details of work performance. (Black's Law
Dictionary).
An employee is hired for a specific job or to provide labor and

who works in the service of someone else (the employer). The IRS
classifies a worker as an employee as follows:


6

In general, anyone who performs services for an organization is
an employee if the organization can control what will be done and how
it will be done.
The control question is used to determine whether a worker is
an employee or an independent contractor.
The factors designating someone as an employee include: A
specific wage or salary; An implied or written contract; Control of the
person's

work

by

the

employer"

( />“Employees mean persons whom are at least 15 years of age,
having capacity to labor and work under a labor contract, getting paid
and subject to their employers’ monitoring and management." (Article
3, Vietnam Labour Code 2012)
Employer. "A legal entity that controls and directs a servant or worker under
an express or implied contract of employment and pays (or is obligated
to pay) him or her salary or wages in compensation". (Read more:

/>wJS5S)
“Employers means enterprises, agencies, organizations, cooperatives, households, individuals hiring, using labor under labor
contracts; in case of individuals, such persons must be from full 18
years old and have full civil act capacity." (Article 3, Vietnam Labour
Code 2012)
Extent. The degree of Employers’ Compliance and level of Employees’
Satisfaction.


7

Labor relations: "A broad field encompassing all the myriad interchanges
between employers and employees. While labor relations is most often
used to discuss this exchange as it pertains to unionized employees, it
may also refer to non-union employees as well. Labor relations are
dictated in a large part by the government of a nation and the various
regulations it provides to industry regarding the treatment of
employees." ( />"Labour relationship is social relationship rise in processing of
leasing, using labour, paying salary between employees and
employers." (Article 3, Vietnam Labour Code 2012)


8

Chapter II
REVIEW OF LITERATURE
Through extensive data gathering from different books and internet
sites, this chapter serves as informative references of this research study
particularly focusing on its objectives. Different research studies have also
been found which are precisely significant to the development of the study.

Vietnam General Confederation of Labor and Vietnam Labor Relations
Project ILO (2010) in the article entitled "Trade Unions and labor relations in
market economy situation in Vietnam" stated two main research outcomes:
Vietnam Trade Unions - the reality of organizing, practicing and revamping
Law on Trade Unions; The foundation of basis trade unions and the
relationship of higher - level trade unions and basis trade unions - reality,
challenge and resolution.
According to the author of the book, labor relations remain in trouble;
many strikes take place in Vietnam. This practice shows a lot of troubles in
organization structure, direction as well as trade union’s capacity in
representative and collective bargaining. There have a number of factors
impact clear labor relations, but in case of non - capacity of collective
bargaining with the employers, there will definitely have many strikes.
Therefore, that damages national benefits.
The group of authors also have given anticipation about 3 developing
trends of labor relations in Vietnam, include: The role of labor relations
parties, particularly, the more importance of trade unions; The nature of labor
relations will change accordance with market mechanism; all of the issues,


9

such as: interests conflict between the employer and the employee, labor
dispute as well as strike are in trouble.
In addition, Nguyen (2011) in the study entitled “Labor relations
curriculum” stated that labor relations are the system of relations between
individuals or representative organization of labors with other objects as well
as state. Those relations take place around process of hiring employment (the
employee and the employer) to ensure harmonious and stable benefits of the

parties.
According to Nguyen Tiep, there have 3 groups of labor relations
objects, include: The employees and the representative organization for their
interests; the employers and the representative organization for their interests;
and the State. In these cases, the employer and the employee have
bargained to each other to achieve the goal of each party, while the State
establishes legal system and application methods for effective law ( it means
that the two objects – the employer and the employee have respected to law).
In process of state legal implement, the employer and the employee can
discover the nonsense of law. They can make reflections on those things,
thus help state reconsiders and adjust.
Evaluating of labor relations in Vietnam, Nguyen Tiep assists on
completing legal framework of labor relations to go with market economy and
international integration. The mechanisms of representative labor relations
parties are incomplete in Vietnam. The system of making reference, opinions,
negotiation as well as making - decision has been in trouble. Field level and
national level Collective labor agreement are yet to practice. Enterprise
collective agreement has not high quality, reflect the formal feature. The


10

employees’ style is yet to set up on large scale. The employee’s and the
employers’ awareness of labor law is not high. The negotiation skill of the
parties is limited. All the above problems has sided - effect to the development
of sound and stable of labor relations in enterprises.
Phan Thanh Khoi (2003) in the study “Political awareness of workers in
several enterprises in Hanoi now” has evaluated workers’ political awareness
in several enterprises in Hanoi. From Khoi point of view, state owned
enterprises have trade unions, while foreign investing enterprises are yet to

have that in Hanoi. Worker’s awareness is limited. To enhance workers’
political awareness, several methods need to do: resolving job, increasing
income, training law and the important thing to do is connecting manpower in
enterprises to build and consolidate workers ‘political awareness. Thank to
that, labor relations in enterprises will be better.
Pham Quy Tho (2008) in the article “Labor market in Vietnam - Reality
and development resolution” contend that the labor market is one of 5
fundamental markets in Vietnam that requires studying. Thus, the author has
analyzed the foundation and development of labor relations in Vietnam,
assessed good side and sided-effect of labor relations development process
to social economic development in Vietnam. Then, Pham Quy Tho gives
propose for direction and development resolution labor market in years to
come.
Pham Quy Tho contends that, labor relations (the employees and the
employers) are one of the key issues in the foundation and the development
of labor market process in our nation. Thus, developing labor market needs to


11

be based on harmony of the employees and the employers’ benefits as well
as limiting unemployment, ensuring social welfare step by step.
The Ministry of Training and Education (2004), in a paper entitled
“Some issues of labor relations in private enterprises and an enterprise with
foreign owed capital during Vietnam transition economy period”, regards to
labor relations in two kinds of enterprises: private enterprises and an
enterprise with foreign owned capital. The authors of the book study about the
above enterprises’ labor relations during Vietnam economy shift period. In
association with the authors, owing to the difference between the owner and
investment sources that lead to the labor relations of private enterprise and an

enterprise with foreign owned capital are different. The reason is that there
are the differences of cultures, languages of the labor relations’ parties.
Simultaneously, high working level as well as working time also leads to labor
disputes.
Meanwhile, the Trade Unions and worker department (2007), in the
article “Reporting surveys on reality of an enterprise with foreign owned
capital’s labor relations”, did a survey on labor relations in 60 FDI enterprises
in Ho Chi Minh City, Dong Nai, Binh Duong, Ba Ria - Vung Tau, Hanoi, Vinh
Phuc, Bac Ninh, Hai Duong.
The authors of the report mentioned that the most weakness in labor
relations conflict shows it is unstable, unsympathetic towards with enterprises
in trouble.
Those authors target the aim for building enterprises’ labor relations is
establishing progressive, harmonious, stable labor relations as well as
ensuring benefits of the employers, enterprises and society.


12

Do Quynh Chi (2010), in the paper entitled “The role of the employers
in renewal process of labor relations system - reality, challenges and
chances” gave main issues on the general result of research in the area. She
believes that mechanisms for labor relations at enterprises are ineffective in
Vietnam. The employers do not care and take part in process of labor
relations in Vietnam. From Chi’s view point, it is necessary to have new model
of labor relations in Vietnam. This model need to be build based on old
foundation and derived from basis experiment in enterprises and locals.
Therefore, Do Quynh Chi gives some of ways to do experiments. She also
recommends that, those experiments need to study, analyze and put in policy
talks due to it is a piece of huge parts which set up new labor relations in the

future.
Moreover, Nguyen Van Binh (2010), in the paper “Enhancing and
ensuring independence, representative of trade unions to join process of labor
relations effectively”, stated that the harmonious and stable development of
labor relations depend on many factors. However, in his report, he does not
refer to all factors but issues on labor relations legal frame, particular in trade
unions rules in labor relations.
From the above report, Nguyen Van Binh discussed issues on
organizing trade unions, particular in: how the law can help trade unions
become the real representative organization for the employees; from that,
trade unions take part in process of labor relations really and effectively;
therefore, taking part in building harmonious, stable, progressive labor
relations.


13

VCCI (2009), in the study "Labor issues from the employers'
perspective, Survey on labor in textile - garment industry in 2009" showed that
the textile - garment is one of the most labor relations strongest developing
fields in recent years. Owing to labor interchange, there is a rising trend of
labor disputes, unprompted strikes. The state has given several solutions to
control labor relations, such as encouraging bargaining and signing collective
labor agreement at enterprises as well as branches’ level, enhancing
negotiation between the employers and the employees at the enterprises.
However, how the labor relations sound or not depend on each enterprise’s
effort.
The authors of this research analyze results of surveys on 4 aspects in
enterprises’ labor relations: collective labor agreement, mechanism for
dialogue, resolution to appeal, strikes and labor disputes. The group has

shown the connection with those 4 aspects to each other and labor relations
situation at enterprises.
Michael Salamon contends that labor relations embrace a series of
phenomena, the inside and outside at working place, referring to confirmation
and adjusting employment relationship.
According to Michael Salamon, labor relation is a changeable and
complicated social activity. A labor relation is done by a diverse structure of
relationship and impact (individuals and collectivity) inside and outside of
organization, directly target to rule on employment relationship.
He also recommends that it is necessary to respect labor relations in
an organization. This relationship ought to consider and understand in
changeable and wider social, politics, and economic situation. The developing