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Employment in Vietnam

Vietnam’s labour laws are heavily employee-friendly, particularly on issues related to the termination or dismissal of employees. As the following only aim to act as a guide in the broadest sense, it is still recommended that professional legal advice be sought when employing in Vietnam.

Key points on employment in Vietnam

Most employment matters in Vietnam are governed by the Labour Code. For further reading on the Labour Code, please refer here.

Many of the country’s statutory requirements, including those pertaining to leave and vacation, provide for rights to employees who work under “normal” conditions, as well as those under hazardous, strenuous, or dangerous conditions with the latter group having more favourable rights.

  1. Contracts

    Under the Vietnamese Labour Code, there are 3 types of labour contracts:

    • Indefinite term labour contracts (IDT);
    • Definite term labour contracts (DT) (from 12 to 36 months);
    • Less-than-12-months term labour contracts (also known as “seasonal contracts”). However, seasonal contracts may only be signed for tasks of a seasonal nature, except under the following circumstances: when temporary replacement is necessary for an employee who is i) called for military duty, ii) takes maternity leave or iii) is temporarily absent for other reasons.

    All labour contracts must be in writing and contain the following provisions:

    • The work to be performed
    • Hours to be worked and hours to rest
    • Salary/wages
    • Work location
    • Contract duration
    • Occupational safety and hygiene conditions
    • Employee insurance

    For DT contracts, in the case of  expiration of the first contract but the employee continues to work for the employer, both parties must sign a new labour contract within 30 days of its expiry. Otherwise, the first DT labour contract will automatically be regarded as an IDT contract.

    Employers are allowed to sign and extend one DT contract per employees, after which the two parties must enter into an IDT contract.

    All labour contracts must be in compliance with the Vietnamese laws and the collective labour agreement of the relevant company (if there is one). As the standard employment contract template of the Ministry of Labour, Invalids and Social Affairs (DOLISA) does not specific contain provisions designed to protect the interests of employers, foreign companies operating in Vietnam are often advised to create both a specific labour contract and a set of internal rules specifying employee rules and regulations (ILR).

    Employers with more than 10 employees are required to issue and register their ILRs with the DOLISA within 6 months of operation. In the absence of registered ILRs, companies operating in Vietnam will find it very difficult to discipline and dismiss employees.

Employee Entitlements

Information Explanation
Working on Sundays ?

No.

Medical Leave ?
An employee is entitled to paid sick leave (75% salary contributed SI), where no hospitalization is necessary
(i) 30days if the employee has been employed for less than 15 years
(ii) 40 days if the employee has been employed for more than 15 years
but less than 30 years
(iii) 60 days if the employee has been employed for more than 30 years
 
Maternity Leave :
180 days (6 months) 100% salary contributed SI.

Employment Termination

Information Explanation
Severance / Redundancy Pay ?

Employees who have been employed for at least 12 months are entitled to  one month’s salary, plus salary allowance, if there is any, for every year of service with a minimum of two months’ salary.

Termination of Employment ?

Except where labour contracts are mutually terminated or automatically terminate (e.g. through expiry), there are three legal bases whereby the employer can terminate labor contracts:

  • Unilateral termination;
  • Dismissal;
  • Redundancy.

Unilateral Termination

While it is often difficult for an employer to unilaterally terminate an employee, the employer may still do so under the following circumstances:

  • The employee regularly fails to fulfil his contractual duties
  • The employee is ill and no recovery is in sight after having received treatment for a specific period (half of the term for a labour contract for seasonal jobs or a labour contract with a term of less than 12 months; six consecutive months for a labour contract with a term of 12-36 months; and 12 consecutive months for a labour contract with an indefinite term)
  • The employer is forced to make cuts in the production and workforce due to force majeure events such as fire or natural disaster; or
  • The company or organisation ceases operations.

Procedure

Employers are required to serve prior notice to the employee in the case of unilateral termination, with the notice period depending on the type of labour contract and the reason for termination. The employer may pay the employee the salary equivalent in lieu of the notice period as long as the latter so agrees. While the current Labour Code is not clear as to whether the employer has to consult with trade union in exercising its right to unilateral termination of labor contract, doing so would still be advised for the sake of prudence.

Severance Allowance 

Only employees who have been employed for at least 12 months are entitled to severance allowance. The statutory severance allowance is equivalent to a half-month salary, plus salary allowance, if there is any, for each year of service for termination of labor contracts in cases of unilateral termination.

Dismissal 

Dismissal is permitted only when the employee has committed one (or more) of the following acts:

  • The employee steals, embezzles, gambles, deliberately causes injuries, uses drugs at the workplace, discloses trade or technological secrets, infringes employer intellectual property rights, or commits other breaches causing serious damage or threatening to cause particularly serious damage to employer interests or assets;
  • The employee who has previously been disciplined by an extension of wage increase timing, recommits the same offense during the trial period; or recommits the offense after being demoted; or
  •  The employee has been absent for a total of five days per month, or 20 days per year, without any legitimate reason.

Before dismissal, the employer must send at least one written warning to the employee, stating exactly when he has committed each of the above acts. The warning letter must be made in writing and with signature/stamp of the employer, to be acknowledged (not necessarily: accepted) by Employee. In practice it is recommended to have two (2) warning letters, in first of which employee is set a deadline to correct/adjust his wrong behaviour or actions.

Procedure

Firstly, the employer must collect all the evidence of the misconduct and conduct a disciplinary hearing in the presence of the concerned employee and the representative of the Union. The disciplinary hearing must be recorded in written minutes with the signatures of the attendees. After the disciplinary hearing, the employer is only allowed to issue the dismissal decision after consultations with the relevant Union.

In practice, it may take several weeks to months for the dismissal process to be completed. A dismissal will be declared illegal if the employer does not strictly follow the procedures as required by law.

Severance Payment 

No severance payment is available for employees who have been dismissed.

Redundancy

A company may retrench its employees where there is an organisational restructuring or technological change, including

i) partial or complete changes of machinery or equipment or replacement by advanced technological process in order to achieve increased capacity;

ii) changes of product lines or structure of products leading to a reduction in the number of employees required; or

iii) merger or dissolution of a number of departments within the company.

Procedure

In a redundancy scenario, the Labour Code requires the company to retrain the affected employees and to assign him/her to a new job that may be available at the company. If new employment is not available, the employer must give statutory notice by publishing, either internally or externally, a list of employees to be laid off.

While individual notice is not specifically required, the employer must first consult with the appropriate trade union’s executive committee and notify the local authority of the layoff 30 days prior to the termination date.

 

Termination disputes

An individual employee / class of employees may initiate Labour Court proceedings in relation to any labour dispute.

Outsourcing Employment Through a GEO Employer of Record Service

Compliance with local employment requirements is just one of the issues foreign companies face when employing staff in Vietnam. For companies which intend to employ their staff directly through their incorporated Vietnamese entity, professional legal advice is recommended. Shield GEO provides an alternative path for companies to outsource the employment of their staff in Vietnam.

As a Global Employer Organization (GEO), Shield GEO acts as the Employer of Record and ensures the employment is compliant with host country regulations regarding employment. In addition Shield GEO will handle payroll processing, tax and immigration. Using Shield GEO is the fastest and most cost effective way to deploy local and foreign workers into Vietnam.

The Shield GEO solution is an attractive alternative where

– the company is looking to employ staff quickly

– the company doesn’t have an appropriately incorporated entity in Vietnam

– the company wants to work within a defined budget

– the company wants to limit its initial commitment in Vietnam

– the company needs help with tax, employment, immigration and payroll compliance in Vietnam

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