PouYuen Vietnam – one of the largest footwear companies in Vietnam and a supplier to Adidas, Nike, and Puma – has required 20,000 of 50,000 employees to work on reduced shifts from December 1 to the end of February next year because a decline in orders has slowed production.

Many people no longer have access to overtime at weekend, and may receive a poor holiday bonus, photo Le Toan

The affected workers will be paid VND180,000 ($7.80) for each day they will have to take off, and the company leaders have said they hope employees will sympathise and have patience with the company during a difficult time.

At Whittier Wood Products Vietnam Co., Ltd. in Amata Industrial Park in the southern province of Dong Nai, the company’s orders are half what they usually are. Since September, overtime has been suspended and the company plans to stop all work on Saturdays.

According to the Employment Service Centre in Ho Chi Minh City, in October more than 10,400 people applied for unemployment benefits, raising the total number of people who lost their jobs in the past 10 months in the city to nearly 128,000 people, an increase of 26 per cent compared to the same period last year.

Since the beginning of the year, about 28,000 workers have been laid off in the southern industrial hub of Binh Duong, and about 240,000 have had their working hours reduced. Binh Duong Department of Labour, Invalids, and Social Affairs has approved decisions on unemployment insurance benefits for nearly 70,000 unemployed workers.

In Dong Nai, in the first 10 months of this year, nearly 57,800 people applied for unemployment benefits, compared to 37,760 people in the same period last year.

Dang Tuan Tu, union president at Changshin Vietnam, which has 42,000 employees, told VIR, “This reduction in orders is the common situation in the majority of garment and textile as well as footwear manufacturers in Vietnam. At present, our orders have declined by 35 per cent. Since July, the company has let employees have two Saturdays off every month. From December, we will arrange four days off per month.”

A South Korean textile firm representative in Dong Nai with over 35,000 employees said, “The reduction of the workforce and working hours at Christmas and New Year, instead of massively recruiting more workers to complete orders, is an unprecedented paradox in the labour market.”

The orders from foreign partners have plunged due to partners such as Adidas and Nike losing their charm in China – the world’s largest consumer market. High inflation in both the US and key export markets like the EU, and the Russia-Ukraine conflict is also causing a gloomy shopping atmosphere, the representative said.

Adidas reported a 35 per cent drop in China sales in the most recent fiscal quarter, while Nike saw a decline of 19 per cent as young shoppers stayed away.

Adidas last updated its profit outlook in late August and posted a 28 per cent decline in operating profit in the second quarter. The company reported a preliminary 4 per cent bump in revenue for the third quarter – however, it said net quarterly income was estimated at $176.7 million, a 63 per cent drop from the same period a year ago. For all of 2022, Adidas expects its net income to total $493.9 million, far below the previous $1.28 billion.

The company said much of the shortfall was due to its decision to initiate the wind-down of its business operations in Russia. “In addition, non-recurring costs related to accelerated cash pooling in high inflationary countries, a recently settled legal dispute as well as higher provisions for customs-related risks also hurt the company’s gross profit, operating overheads, and financial and tax expenses in the quarter,” it noted in its Q3 financial statement.

It is not the first time that garment and textile groups along with footwear manufacturers have faced difficulties due to a decrease in orders, so many have plans in place in an attempt to retain their labour force.

“Changshin Vietnam’s union and the board of directors reached a compromise to ensure the income and welfare of employees. Besides that, the Lunar New Year bonus will remain between one and two monthly salaries, depending on seniority. Entire days off will be calculated as annual leave, and workers’ incomes will not be impacted,” said union representative Tu.

“We predict this difficult situation will last to at least the second quarter of 2023. The most important thing is to retain employees to overcome this difficult period; otherwise they will move to their hometowns or look for other jobs.”