VIETNAMLabor Laws

Labor laws of Vietnam are advantageous for workers

Based on a substantial one-party rule by the Communist Party of Vietnam, Vietnam is governed according to democratic centralism, which is defined as the integration of the centralized system and democracy. Legislative power, administrative power, and judicial power function not to maintain checks and balances, but as special branches for supporting the administration of the nation. Among the above, administrative power is charged by the government organized around 22 of the States and the State Committee, and the labor laws of Vietnam are primarily under the administrative jurisdiction of the Ministry of Labor, Invalids, and Social Affairs (MOLISA).

In Vietnam, which is a socialist state, workers are generously protected, and the labor laws work more favorably for workers than in Japan. For instance, when a company is to employ a worker for a definite term, if such employment is continued for a given period or longer, the company is required to thereafter employ that worker for an indefinite term, and the reason must be specified when the company is to dismiss a worker. Furthermore, when a dispute arises between the company and a worker, favorable judgments for the worker are often rendered, and it is necessary to take note that, in order to avoid future disputes, the company may be required to implement careful measures for the dismissal procedure.

The New Labor Code (Law No. 45/2019/QH14, "New Code" or "Labor Code"), which replaces the Old Code (Law No. 10/2012/QH13), was promulgated on December 6, 2019, and became effective on January 1, 2021.

Even under the New Code, the situation where the labor code works more favorably for workers has been followed. For example, the New Code includes severe revisions that have been made for employers, such as raising the retirement age or unilaterally terminating a labor contract simply by giving advance notice from employees with fixed-term contracts.

Labor union and strikes

In Vietnam as a socialist state, not only a company trade union but a prefecture/district level (smaller administrative unit than central municipalities/state level) trade union is organized as a part of the Vietnamese Communist Party System Organ headed by the Vietnam General Confederation of Labor.

In Vietnam, for certain types of labor disputes, employees are legally entitled to strike if the dispute has not been settled by mediation or arbitration (Labor Code, Article 199). Most strikes are to demand an increase in base pay, though protests against overwork and the low quality of the employee cafeteria are also common reasons for such strikes. The procedures for going on strike are (1) to conduct a survey on strikes with all employees or the trade union, (2) to decide to go on a strike, and (3) to go on a strike (Labor Code, Article 200). However, workers had poor knowledge of the legal procedures for a strike, and actually, most strikes were illegal; nevertheless, even if the strike turned out to be illegal, there were cases where a resolution was brought by largely accepting the workers' demands under the New Code.

Increase in the minimum wage

From 2014 onward, the inflation rate has remained in single digits and has been relatively stable. Nevertheless, the minimum wage has been increasing every year, and from July 2022, the minimum wage increased by approximately 6% monthly in comparison to the previous one (January 2020) (nationwide average). Even if the company has already paid the minimum wage more than the amended minimum wage, mostly workers demand increases in the base pay under the latest revision rate, so the company is always required to confirm the latest details of such amendment.

Other

1. High turnover rate

   In Vietnam, there are social customs where workers take care of their parents and relatives, in addition to their own families, and their interest in salary and welfare is considerably high. Many workers do not hesitate to switch to a different job if they are presented with more favorable conditions. In order to prevent the outflow of competent personnel, while it is necessary to treat the workers fairly with regard to salary and benefits on the one hand, it is also necessary to consider the fact that, once a company hires a worker, it is difficult to dismiss that worker easily, and it is crucial that the company concludes a well-balanced employment contract, such as the terms of contract.

2. Mandatory retirement

   Under the Old Code, the mandatory retirement age was 60 for males and 55 for females. Under the New Code, the mandatory retirement age will increase gradually up to 62 for males (an increase of three months per year until 2028) and 60 for females (an increase of four months per year until 2035) (Labor Code, Article 169, Paragraph 2). Unless otherwise agreed, it may be the reason for termination of the employment contract when the employee's age reaches mandatory retirement age [termination of the employment contract by the employee (Labor Code, Article 35, Paragraph 2, item (e)), (termination of the employment contract by an employer (Labor Code, Article 36, Paragraph 1, item (d))]. Under the Old Code, when an employment contract is terminated based on the mandatory retirement age, the period of social insurance coverage needs to be satisfied¹: however, this is not required under the New Code.

3. Confidentiality of workers

   In Vietnam, the need to protect corporate secrets has increased pursuant to the maturity of the industry, and the Labor Code prescribes that, when a worker is directly involved with operational or technical secrets prescribed under the Labor Code, it is provided that the company has the right to reach a written agreement in advance with that worker with regard to the confidentiality obligation and compensation for damage upon violating such confidentiality obligation (Labor Code, Article 21, Paragraph 2). In order to avoid any future protest from a worker who is in contact with corporate secrets to the effect that the confidentiality obligation was not expressly imposed, going forward, it is desirable to clearly prescribe provisions concerning confidentiality in the employment contract or the internal work regulations and separately to enter into a nondisclosure agreement while the worker is employed.

   Employees, as a matter of course, use their corporate email address for private purposes and use private social media for business purposes. It is important to expressly set the rules for using them.

Basic labor laws

1. Characteristics

   While Vietnam adopts the same continental civil law as Japan, much of the subject matter is still undergoing trial and error, and the satisfaction of various codes (Orders, Resolutions, Decrees, Decisions, Directives, and Circulars acknowledged as being the Legal Documents set forth in the Laws on the Promulgation of Legal Documents 2015), which are issued on a case-by-case basis as needed, is required quite often. This situation will not change under the New Code, when a company is to impose some kind of disposition that would be disadvantageous to a worker, the company is required to confirm whether new bylaws or guidelines were presented based on the formulation of these various codes and, when formulated, whether the procedures taken by the company are in violation of the subject matter of such codes.

   *Overview of Common Law and Civil Law
   Common Law is a legal system mainly in use in the UK and in nations formerly part of the British Empire (the USA, Canada, Australia, New Zealand, etc.), which emphasizes decisions based upon traditions, customs, and precedent.

   On the other hand, civil law developed on the European continent in nations, such as France and Germany, and as a legal system compared to common law, civil law places emphasis on statutes. Japan uses a civil law legal system.

2. Labor laws

   (i) Labor Code 2019 (Law No. 45/2019/QH14)

   This law comprehensively regulates the basic labor-related matters of Vietnam. In addition to prescribing the provisions regarding employment contracts, work hours, and holidays, the Labor Code also sets forth the labor dispute resolution procedures (Labor Code Article 179 onward) and the outline of social insurance (Labor Code Article 168 and 169). Decree on retirement age No. 135/2020/ND-CP, decree on working conditions and labor relations No. 145/2020/ND-CP, and decree on foreign workers No. 152/2020/ND-CP are proclaimed as the detailed regulations of the Labor Code.

   The Labor Code guarantees the shortening of work hours and additional leaves for minors, elderly persons, physically disabled persons, and females, and it should be noted that, with regard to part-timers whose work hours are shorter than the statutory work hours, the Labor Code guarantees them the same level of treatment and wage systems as full-time workers (Labor Code, Article 32, Paragraph 3).

   (ii) Law on Trade Unions 2012 (Law No. 12/2012/QH13)

   A new Law on Trade Unions has been enforced as of January 2013. The Law on Trade Unions prescribes matters related to the organization, rights, and obligations of trade unions. The Law on Trade Unions also sets forth matters related to legal strike procedures, in addition to the trade union's involvement in the creation of internal work regulations of trade unions and in the employment contract negotiations with trade unions, as well as its function to serve as the window of labor disputes (involvement in disputes, initiation of lawsuits), and its relation with the labor department (cooperation with investigations).

   A company is required to cooperate in the establishment of a trade union, and once established, the company must provide information and discuss and cooperate with the trade union and must make a contribution to the trade union fund in the amount of 2% of the wages to be used as the basis for calculating social insurance (Law on Trade Unions, Article 26).

   (iii) Employment Law 2013 (Law No. 38/2013/QH13)

   The Employment Law is composed of a total of 7 chapters and 62 articles and prescribes in detail matters related to the employment generation, information related to the labor market, national trade certificate, recruiting service, unemployment insurance, etc.

   (iv) Social Insurance Law 2014 (Law No. 58/2014/QH13)

   The Social Insurance Law is composed of a total of 9 chapters and 125 articles and prescribes in detail matters related to the rights and obligations of companies and workers pertaining to social insurance, as well as matters related to the accumulation of funds. Companies and their workers must participate and contribute to social insurance, health insurance, and employment insurance. The applicable scope of the revision was extended to foreign workers from December 1, 2018, in principle, if such worker meets requirements of relevant rules (Decree No. 143/2018/ND-CP).

   (v) Health Insurance Law 2008 (Law No. 25/2008/QH12)

   This law sets forth matters related to health insurance and was enforced as of January 2015. Based on the Decree of 2014 (Decree No. 105/2014/ND-CP), information related to payments has been partially supplemented.

   (vi) Others

   Law on Vocational Education and Training 2014 (Law No. 74/2014/QH13)

   This law prescribes matters related to the organization and operation of institutions to implement vocational education and training, and the details of the vocational education and training.

   Law on Gender Equality 2006 (Law No. 73/2006/QH11)

   This law prescribes various measures for promoting gender equality. With regard to employment, this law sets forth equal treatment at the workplace, and applies to private companies.

   Law on Persons with Disabilities 2010 (Law No. 51/2010/QH12)

   This law prescribes the rights and obligations of disabled persons, as well as the responsibilities of the State, family members, and society. This law promotes the participation of disabled persons in society by guaranteeing the education and training of disabled persons and their participation in social activities.

   Law on Occupational Safety and Health 2015 (Law No. 84/2015/QH13)

   This law prescribes securement of occupational safety and health, policies, and systems for victims of labor accident and occupational disease, the rights and obligations of each party/persons regarding to the occupational safety and health, and national management regarding to the occupational safety and health, and this law is applicable to workers who have not entered into employment contracts.

Employment contracts

1. Labor Code and workers

   The Labor Code applies to (i) Vietnamese workers, (ii) employers, (iii) foreign workers working in Vietnam, and (iv) other institutions, organizations, and individuals having a direct labor relationship (Labor Code, Article 2). Even with regard to officers and other persons in management positions, if it is substantially determined that they are serving under the instructions of a domestic or an overseas employer (e.g.: supervisor of a foreign parent company), it should be noted that they may be subject to the Labor Code as workers. Companies shall report their employment status within 30 days from the commencement date of operation and report periodically on the condition of changes of employees during operation to the labor authority under the People's Committee (Labor Code, Article 12, Paragraph 2).

2. Employment contract

   An employment contract is defined as an agreement between an employee and an employer on remuneration, a paid job, working conditions, and the rights and obligations of each party in the labor relationship. In addition, regardless of the name of the contract, it is considered an employment contract if there is any description in relation to salary, a paid job, and management and supervision of a party (Labor Code Article 13, Paragraph 1).

   Under the Labor Code, it is necessary to describe the following matters in an employment contract (Labor Code, Article 21, Paragraph 1).

   Cf. Matters to be notified to workers in advance

   1. Information of the employer (name and address of the company, title and name of the signer)
   2. Information of worker (name, date of birth, gender, address, ID number of worker)
   3. Job description, workplace
      *Since the worker's consent is required for changing the job description, the company may find it convenient if it is not excessively limited.
   4. Period of employment contract
   5. Wage (time of payment, payment method, allowance, and other additional benefits)
   6. Wage increase and promotion system
   7. Work hours, holidays
   8. Work safety facilities of workers
   9. Social insurance, health insurance, and unemployment insurance
   10. Training and instruction course for up-skilling

   An employment contract may be concluded in the form of electronic data other than physical documents (Labor Code, Article 14, Paragraph 1, Law of Electric Transaction, Article 10). An employment contract with a term of less than one month may be concluded by an oral agreement.

   There are two types of employment contracts, specifically, (i) an indefinite term employment contract and (ii) a fixed-term employment contract for a duration up to 36 months (Labor Code, Article 20, Paragraph 1). Under the Old Code, there were three types of employment contracts: a contract for a duration less than 12 months, a contract for a duration between 12 to 36 months, and an indefinite term contract that has been consolidated into the two types as stated above.

   (i) Indefinite term employment contract (Labor Code, Article 20, Paragraph 1(a))

   The employment contract for indefinite term employment is the basic employment contract in Vietnam. Grounds for dismissal under the Labor Code are limited, and the workers are generously protected.

   (ii) Fixed-term employment contract for a duration of up to 36 months (Labor Code, Article 20, Paragraph 1(b))

   This is an employment contract in which the contract term is limited to 36 months, and the company may terminate the contractual relationship at the expiration of the contract term. The fixed-term employment contract may be renewed only once. When the company wishes to continue employing the worker based on fixed-term employment again, the company is required to conclude a new fixed-term employment contract with the worker. If the worker continues working without concluding an employment contract within 30 days after the expiration of the contract term, the company should take heed because it will be deemed that the company has switched to an indefinite term employment contract (Labor Code, Article 20, Paragraph 2). When the contract term expires after renewal, the company must decide whether to terminate the employment contract or conclude an indefinite term employment contract with the worker. When terminating the employment contract, it is recommended that the company provide a prior written notice to such effect in order to prevent the worker from asserting the implicit renewal of the employment contract. Since renewal is only allowed once, the maximum length of employment based on a fixed-term employment contract is six years (initial employment for a period of 36 months + additional employment for a period of 36 months based on renewal of the employment contract).

   While there are many local companies that go against this system, such company assumes the risk of paying a fine (20 million dong or less) or it may be determined that the employment contract is invalid in subsequent dispute procedures.

   The company shall provide the following information to the worker upon the conclusion of an employment contract (Labor Code, Article 16, Paragraph 1).

   Cf. Matters to be reported to workers in advance

   1. Job description
   2. Work location
   3. Working conditions
   4. Work hours
   5. Rest break
   6. Occupational safety and sanitary conditions
   7. Wages
   8. Payment method of wages
   9. Social insurance, health insurance, and unemployment insurance
   10. Confidentiality obligation of trade secrets (if any)
   11. Other matters directly related to the conclusion of the employment contract which are required by workers

3. Probationary period

   It is possible to have probationary period in Vietnam. However, only one probationary period is allowed for a job and the maximum probationary period is determined depending on the job description (Labor Code, Article 25).

   Position/Level

   Maximum number of days

   Enterprise executive prescribed by the Law on enterprises or the like (e.g. the general director candidate at the local company)

   180 days

   Position required a specialty and technological standards with a junior college degree or above

   60 days

   Positions that require moderate expertise (positions requiring moderate expertise and skills, including technicians and those who have expertise)

   30 days

   Others (simple tasks)

   Six days

   The probationary salary shall be negotiated by both parties and shall not be lower than 85% of the offered salary (Labor Code, Article 26). The company is required to notify the probationary worker of the worker's employment or non-employment, and the company is required to conclude an employment contract if that probationary worker has satisfied the required level (Labor Code, Article 27, Paragraph 1). During the probationary period, each of the employer and the worker may terminate the concluded probation contract without prior notice and compensation obligation (Labor Code, Article 27, Paragraph 2).

Duty to prepare internal work regulations, and registration thereof

Under the Old Code, a company that employs ten or more workers was obliged to create and report the written internal work regulations and post the same in the workplace (Old Code, Article 119, Paragraphs 1 and 4). Under the New Code, regardless of the number of workers to be employed, every employer must create and report the internal work regulations and exhibit them in their workplace (New Code, Article 118, Paragraph 1, item 4). As indicated in Section 3-3 "Procedures" described later, a company that employs ten or more workers should note that the internal work regulations must also be registered with and applied to the Labor Department within a certain period.

Details

When a company has a trade union, it has to hear and consider the view of the trade union (Labor Code, Article 118, Paragraph 3). The following matters must be prescribed in their internal work regulations (Labor Code, Article 118, Paragraph 2). In addition to the items prescribed under the Old Code, (4), (7), and (10) of the following are required to be included in internal work regulations under the New Code.

1. Work hours, rest breaks
2. Workplace rules
3. Occupational safety and hygiene in the workplace
4. Matters in relation to sexual harassment in the workplace for prevention and protection, and the process and procedure for disciplinary actions when sexual harassment has occurred in the workplace.
5. Protection of the company's assets, trade secrets, technical/business secrets, intellectual properties
6. Grounds for disciplinary action, description of disciplinary action, liability for damage (related to facilities etc.)
7. In the case to transfer the worker temporarily to different work from the work prescribed in the labor contract
8. The worker's breach of the internal work regulations and the form of disciplinary measures
9. Liability for damage
10. The person who has the authority to implement disciplinary measures

Procedures

Within ten days after issuing the internal work regulations, the company that employs ten or more workers is required to submit such internal work regulations to the local state-level labor authorities, together with the minutes indicating that the company has held discussions with the trade union, if there is a trade union, and documents that prescribe the company's grounds for disciplinary action (Labor Code Article 119, Paragraph 2, Article 120). Labor authorities will examine the contents of the internal work regulations and register the same if there are no legal problems. If the correction or resubmission described below is not required, the internal work regulations will become valid 15 days after being received by the Labor Department (Labor Code, Article 121, the first sentence). When the Labor Department discovers a legal breach of any provisions of the internal work regulations, the Labor Department will instruct the company to correct or resubmit the internal work regulations. While the Labor Department is required to give instructions within seven business days after the Labor Department has received the submission if there is any problem with the internal work regulations (Labor Code Article 119, Paragraph 3), in reality it is not unusual that this process takes two weeks, and even up to one month in certain cases, after submission. Other than the above (if the employer has fewer than ten employees), the written internal work regulations will be effective from the date of the effective term prescribed in the work regulations after promulgation of the internal work regulations (Labor Code Article 121, the second paragraph).

Precautions concerning internal work regulations

When a company wishes to take disciplinary action, the following matters are required under the Labor Code in order to protect the workers from the company's abuse of its discretion (Labor Code, Article 122, Paragraph 1), and the company only takes disciplinary action of (i) a reprimand, (ii) prolongation of the wage rise period for no more than six months, (iii) demotion, and (iv) dismissal (Labor Code, Article 124). Applying monetary fines or deducting the salary or wage is forbidden to impose as disciplinary measures (Labor Code Article 127, Paragraph 2). It should also be noted that even when the worker corresponds to multiple grounds for disciplinary action, there are restrictions in that punishment will be limited to the heaviest punishment that is scheduled (Labor Code Article 122, Paragraph 2), and as a general rule, the company must take disciplinary action within six months from the occurrence of such grounds for disciplinary action (within 12 months in case financial or technical secrets are leaked (Labor Code Article 123, item 1).

Cf. Disciplinary action

1. Company's burden of proof regarding the worker's error (fault)
2. Participation in disciplinary procedures of trade union
3. Guarantee of worker's participation in disciplinary procedures and the opportunity to defend himself/herself
4. Preparation of written minutes

Taking disciplinary action against any violation that is not defined in the internal work regulations, employment contract, and other labor law is not allowed (Labor Code Article 127, Paragraph 3). Hence, on a practical level, it is important that the grounds for disciplinary action and specific acts corresponding to such grounds that the employer determines at its discretion are specified in the internal work regulations; provided, however, that the law stipulates when dismissal may be implemented as a disciplinary measure (See “5-3 Punitive dismissal”).

Furthermore on a practical level, from the perspective of securing evidence to prepare for any subsequent dispute, when there is any fact of a violation, it is recommended that the company obtain a signed document from the worker (for instance, in the event of a violation, the company should deliver a document to the worker describing the specific facts of the violation and grounds for disciplinary action, and obtain the signature of that worker to the effect of agreeing to the details of the document).

Wages

1. Payment, etc.

   The term "wages" refers to the monetary amount paid to the employee by the employer to perform the work as agreed by the two parties and includes compensation, allowances, and other payments (Labor Code, Article 90, Paragraph 1).

   Companies are required to pay the full amount of wages directly to its employees on time (Labor Code, Article 94, Paragraph 1). The wages may be paid in cash or transferred to the bank account of the respective employee: if a bank transfer is chosen, the relevant employer shall be responsible for opening a bank account and bearing the transfer fee incurred (Labor Code, Article 96, Paragraph 2).

   The specific time of payment of the wages is as follows.

   Cf. Time of payment based on wage form (Labor Code, Article 97)

   Wage form

   Time of payment

   Hourly pay, daily pay, weekly pay

   Payment after the completion of the period or collective payment based on an agreement (provided, however, that payment must be made at a frequency of at least once every 15 days)

   Monthly pay

   Once a month or once every half month

   Piecework, subcontracting

   Based on agreement. If the job is to be performed over several months, advance payment may be received according to the workload completed in the relevant month

   Every employer shall set its wage grade, wage table, and the like as the grounds for the wage payment (Labor Code, Article 93, Paragraph 1). Any salary increase shall be implemented in accordance with the said wage grade and wage table. Under the Old Code, companies were required to follow the government regulations when creating wage tables, including those regulating the difference in face value between the highest and lowest wages and the difference in wages between grades; currently, however, each company is free to set its own wage table.

2. Overtime work

   1. (i) Overtime work

      Because Vietnam is a socialist country, all workers are eligible to receive the payment of overtime allowance. Generally, work hours are eight hours per day and may not exceed 48 hours per week (Labor Code, Article 105, Paragraph 1). When a company is to cause its workers to engage in overtime work, the company is obliged to pay workers the following extra wages for their regular salary (Labor Code, Article 98, Paragraph 1 Item (a)).

      Weekday

      150% or more

      Holiday

      200% or more

      Public holidays and New Year's holiday (paid days off)

      300% or more

   2. (ii) Nighttime work

      For nighttime work (work between 10:00 p.m. and 6:00 a.m. in the following morning), a company pays a minimum of 30% in addition to the worker's standard pay (Labor Code, Article 98, Paragraph 2).

   3. (iii) Overtime work performed at nighttime

      When a worker performs overtime work at nighttime, in addition to the payment of additional pay described in (i) and (ii) above, an amount equivalent to 20% of the said additional pay for overtime work will be paid (Labor Code, Article 98, Paragraph 3).

3. Minimum wage

   In Vietnam, the statutory minimum wage is defined as the minimum wage of workers who do the simplest jobs under normal work conditions and the wage is sufficient to support themselves and their families and appropriate for socio-economic development (Labor Code, Article 91, Paragraph 1). In Vietnam, unlike Singapore and Malaysia, all workers are guaranteed a minimum wage. The specific amount of the minimum wage is prescribed by the national wage council composed of the following three organs: the government, the Chamber of Commerce and Industry, and the General Confederation of Labor.

   The minimum wage is increased at a pace of approximately once a year, and the Regional Minimum Wage (RMW) was increased by approximately 6% in comparison to the previous one (January 1, 2020) since June 1, 2022 (refer to the following table). The General Minimum Wage (GMW) that is mainly applicable to government workers will also be increased from 1.49 million dong to 1.8 million dong in July 2023.

   Previously, because the minimum wage is applied based on the premise of being paid to inexperienced workers who have not been trained, workers who do not correspond to such inexperienced workers were guaranteed to receive a minimum wage that is higher by 7% or more than as prescribed in the Labor Code (Decree No. 49/2013/ND-CP, Article 7, Paragraph 3, Item (b), Decree No. 141/2017/ND-CP, Article 5). This rule has been deleted when the minimum wage was revised in July 2022.

   Cf. Local minimum wage applicable from 1 January 2018

   Region

   Major regions

   Minimum wage

   Region 1

   Hanoi City, Ho Chi Minh City, Hai-phong City, etc.

   4.42 million dong

   Region 2

   Da-nang City, Bac-ninh Province, etc.

   3.92 million dong

   Region 3

   Ha Nam Province, etc.

   3.43 million dong

   Region 4

   Regions other than those prescribed in Region1 to Region 3

   3.07 million dong

4. Wages of workers during probation period

   During the probationary period, the wage of a worker shall be determined by an agreement between the worker and the employer and shall be set at least 85% of the wage for similar categories of work (Labor Code, Article 26).

Bonus

While there are no specific guidelines or regulations regarding the bonus, it is customary to pay wages for the 13th month under the name of the "13th month salary" or the like. When previously paid bonuses or the like are to be restricted or confiscated, it should be noted that the company is required to consult with the trade union.

Such 13th month salary is commonly paid around the Tet New Year (Lunar New Year), so it is also called the "Tet Bonus." It is the longest holiday in a year and paid during the Tet season when many people return to their hometowns. In the event a company does not give definitive notice of the bonus or divides the bonus twice and pays before and after the Tet Holiday with the intention to prevent workers from returning to the workplace after the holiday, such behaviors tend to trigger the antipathy of workers and often bring about a strike. Strikes tend to occur in this season the most in a year, so companies should give definitive notice of the actual amount of the bonus to their workers in good time.

Overtime allowance

See Section 4-1 (2) "Overtime work." The company should take heed regarding the point that all workers are entitled to receive an overtime allowance. When the company is to ask a worker to engage in overtime work, it must be based on a mutual agreement between the worker and the company, but in any case, overtime hours must not exceed 50% of normal work hours in a day, 40 hours per month, or 200 hours per year (even in special cases, only up to 300 hours per year)(Labor Code, Article 107, Paragraph 2). If the overtime hours per month exceed the foregoing standards, the impact will be significant because the excess overtime will not be recognized as an expense in practice.

Because the framework of 200 hours per year is a burden on companies, the economic circle strongly demands an improvement to such rules under the New Code; the New Code has regulations to regulate the monthly overtime cap, which has been increased from 30 hours to 40 hours, and the yearly overtime cap, which is set at 200 hours, with the exception to be increased up to 300 hours only working for a specific industry, such as manufacturing, and processing to export textiles, garments, footwear, electric, electronic products, processing of agricultural, forestry, aquaculture products, salt production, and work that requires highly skilled workers that are not available on the labor market at the time.

Severance allowance and redundancy allowance

1. Severance allowance

   A company is responsible for paying severance allowances to its workers who have worked for more than 12 consecutive months; however, if in the event of any of the following, the company will not be obliged to pay the severance allowance (Labor Code, Article 46, Paragraph 1).

   • The worker has met the conditions for receiving a pension under the laws and regulations concerning social security.
   • The worker has been absent from work without permission for five (5) or more consecutive business days without a valid reason.

   The formula for calculating severance allowance is as follows (Labor Code, Article 46 and Decree No. 145/2020/ND-CP, Article 8).

   【Average wage for the last six months + other allowances 】× 0.5 × period of service (years of service)

   * Periods of unemployment insurance are not included in the period of service for calculating retirement allowances. * Service periods for calculating retirement benefits of less than six months are rounded up to six months if less than six months (2/1), and moved up to one year if more than six months (one year)

   When calculating the period of service above, the period over which the worker participated in the unemployment insurance is not taken into account (Labor Code, Article 46, Paragraph 2). Since it has been mandatory for Vietnamese workers to participate in unemployment insurance since 2009, it is considered possible that the period of service may be zero. If the period of service is zero, there is no need to pay severance allowance. However, where probationary periods and maternity leave periods are included in the period of service, this period is often not covered by unemployment insurance and may be obligated to pay severance allowance only for this period.

2. Redundancy allowance

   A redundancy allowance must be paid to a worker whose employment is to be terminated on the grounds of reorganization. The formula for calculating is the same as for severance allowance above. However, for redundancy allowance, workers who have worked for more than 12 consecutive months must be paid redundancy allowances with a minimum of two months' wages (Decree No. 145/2020/ND-CP, Article 8, paragraph 2).

Others (general holidays)

1. Weekly holiday, annual leave

   As a general rule, workers are given a weekly holiday of one day per week (more precisely, 24 consecutive hours) (Labor Code, Article 111). A company may also prescribe in its internal work regulations that Sunday will not be a holiday (Labor Code, Article 111, Paragraph 2).

   Workers who have worked for a company for 12 months or more are generally entitled to full-paid annual leave (annual leave) of 12 days (Labor Code, Article 113, Paragraph 1). Thereafter, an additional day of annual leave is granted for every five years of service (Labor Code, Article 114). For workers who have worked less than 12 months, annual leave is granted in proportion to the number of months worked (Labor Code, Article 113, Paragraph 2). With regard to the specific dates of taking annual leave, employers are required to set the schedule for taking annual leave for the respective workers after consultation with the employees and must report the proposed schedule to them in advance (Labor Code, Article 113, Paragraph 4). An employee who has not taken or not entirely taken up the annual leave that the employee is entitled may request the employer to purchase the untaken leave day (Labor Code, Article 113, Paragraph 3).

2. Public holidays, etc.

   Workers are guaranteed the following public holidays and New Year's holiday (Labor Code, Article 115, Paragraph 1). Foreign workers are additionally allowed to take one day of leave for each of their country's own traditional or national public holidays. The New Code adds an extra public day off to the National Day public holiday, raising the number of public holidays to 11 days. The new national holiday will be on the 1st or 3rd of September, which is one day before or after the day of the National Day, or the 2nd of September (the actual date of extra day off will be decided annually by the Prime Minister (New Code, Article 112, Paragraph 1, Item (dd), and Paragraph 3).

   Date or Days

   Days

   Public holidays

   January 1

   1 day

   New Year's Day

   End of January to early February

   5 days

   Vietnamese New Year

   March 10 (lunar calendar)

   1 day

   Hung Vuong Anniversary Day

   April 30

   1 day

   Victory Day

   May 1

   1 day

   International Labor Day

   September 2 and the immediately preceding or following day (to be determined by the prime minister)

   1 day

   National Day

3. Special leave for weddings and funerals

   Article 115, Paragraph 1 of the Labor Code approves leaves for the following reasons.

   Reason	Number of days	Pay/No pay
   Marriage	3 days	Pay
   Marriage of child	1 day
   Death of natural parent, spouse's parent, spouse, or child	3 days
   Death of grandparent or sibling or Marriage of father, mother or sibling	1 day	No pay

Dismissal

Events of termination of an employment contract are prescribed under laws (Labor Code, Article 34). Thus, when the company is to dismiss its worker, the dismissal must correspond to one of the following circumstances, and it could be said that it is difficult to dismiss employees unless it is based on a mutual agreement. Grounds for terminating employment contracts include, for instance, punitive dismissal and dismissal on the grounds of reorganization.

Cf. Events of termination of employment contract

1. Expiration of employment contract
2. Termination of job prescribed in employment contract
3. Mutual agreement of parties
4. Worker receives the death penalty, sentence for imprisonment or sentence prohibiting the worker from performing his/her job under the employment contract
5. Expatriation of foreign national worker
6. Death or loss of competency of worker
7. Death or loss of legal capacity of individual employer, or discontinuation of business of company
8. Punitive dismissal
9. Termination of contract by worker according to the Labor Code
10. Termination of contract by company according to the Labor Code, or dismissal of worker for economic reasons (restructuring, etc.) or merger
11. Dismissal of workers by the employer due to organizational change, technical change, or economic reason, or due to company split, business transfer, or similar event
12. Expiration of the valid work permit period for a foreign national worker
13. During the probationary period, the worker has not satisfied the level of performance required by the employer, or either party has terminated the agreement on probation

Ordinary dismissal

It could be said that unilateral dismissal of an employee by the company is generally difficult in Vietnam. In the case of ordinary dismissal, the company can only dismiss a worker unilaterally when it is able to certify that the worker repeatedly breached the contractual obligations or is absent from work for five (5) consecutive days or more without a valid reason (Labor Code, Article 36, Paragraph 1). Other than the above, the company may dismiss a worker in the case of prolonged medical treatment (12 consecutive months for indefinite-term contracts, 6 consecutive months for fixed-term contracts between 12 and 36 months, or more than half of the contract period for fixed-term contracts of less than 12 months), or where the worker does not report to work within 15 days from the expiry of the suspension period of the employment contract due to military service or other reasons.

Furthermore, any non-performance of contractual obligations shall be judged in light of the criteria for completion of specific work, and the company must prescribe such criteria with reference to the views of the trade union of the company and internally announce thereof.

Punitive dismissal

Punitive dismissal is possible only when certain acts prescribed under the laws are acknowledged (Labor Code, Article 125). The burden of proof lies with the company, and the dismissal procedures must be carried out carefully as described below in order to ensure the lawfulness of the dismissal.

Cf. Acts subject to punitive dismissal

1. Criminal acts and other acts of infringement of rights
   • Theft, embezzlement, gambling, and acts of intentionally hurting others in the workplace, and certain other criminal acts including drug use
   • Divulgence of corporate secrets, infringement of intellectual properties, acts that cause material damage to the assets or profits of the employer, and acts of sexual harassment in the workplace as provided for in the internal work regulations
   • Other acts that will or may cause material damage to the company
2. Repeated acts that correspond to suspension of pay raise
   • Subsequent offense during pay raise suspension period
   • Subsequent offense of an act corresponding to discharge (demotion)
3. Unauthorized absence for 5 days or more per 30 days or 20 days or more per 365 days without due cause
   (Due cause includes disasters, illness of worker or a relative (requires an appropriate certificate by a medical institution), and matters set out in the internal work regulations)

Dismissal on grounds of reorganization

Dismissal on grounds of reorganization can only be carried out when it is provided for by the law (Labor Code, Article 42 and 43). Provided, however, that since the provisions under the law are often unclear, it is necessary to consult with a local expert to see if the intended dismissal may be implemented.

C.f.: Dismissal on grounds of reorganization may be implemented:

(1) When the employer cannot maintain employment because of changes in the organizational structure or technology, including:

• Changes in the organizational structure, labor rearrangement
• Changes in processes, technology, machines and productive equipment associated with the employer's type of industry and job category; and
• Changes in products or product structure

(2) When the employer cannot maintain employees for economic reasons, including:

• Economic crisis or economic depression
• Enforcement of the state policies, laws, or international treaties during economic restructuring

(3) When the employer cannot maintain employees due to division, merger, business transfer, etc.
As a procedure for implementing dismissal on grounds of reorganization, the following are required: (1) development of the labor utilization plan (Labor Code, Article 44), (2) discussion with the representative organization of employees, (3) provision of 30 days' prior notice to the People's Committee of the province and the employees (Labor Code, Article 42, Paragraph 6), and (4) payment of redundancy allowance to the employees by the employer (Labor Code, Article 47).

Dismissal procedures

In Vietnam, dismissal is permitted only in extremely limited circumstances, and, even if a worker is dismissed, favorable judgments for the worker are often rendered in a subsequent labor dispute, and the company is required to follow the dismissal procedures with extreme caution. Please note that laying off the worker against the law or forcing or threatening to resign may be deemed to be criminally liable(refer to Penal Code, Article 162, Paragraph 1 and 2). When the company intends to implement dismissal, other than certain exceptions, it is required to notify to the affected worker in advance. The required prior notice period varies according to the form of employment (Labor Code, Article 36, Paragraph 2).

Prior notice (number of days required is as indicated below)

Holding of meetings and preparation of minutes regarding the default of obligations set out in the internal work regulations, and issuance of a decision (when the meeting is held, the company is required to have the trade union (or its representative) participate in the procedures, and offer an opportunity for the worker to defend himself/herself)

Labor disputes

1. Types of labor disputes

   Labor disputes in Vietnam are largely classified into disputes between an individual employee and the employer (“individual labor disputes”) and disputes between a representative organization of employees and the employer (“collective labor disputes”). Collective labor disputes are further divided into those relating to already existing agreements and/or rights between the worker and the employer (“collective labor disputes on rights”) and those relating to the formation of new work conditions between the worker and the employer (“collective labor disputes on interests”) (refer to Labor Code, Article 179).

2. Procedures of labor disputes

   In any labor dispute, the parties shall first try to settle the dispute through consultation. If the parties are still unable to settle the dispute, the dispute shall, in principle with mediation as a preliminary step, then go through the prescribed dispute settlement procedure.

   An outline of the flow of labor disputes is as set out below.

   1. In the case of individual labor disputes and collective labor disputes on rights

      Settlement by the parties ⇒ Mediation ⇒ Mediation by the Labor Arbitration Council or presented to the court

   2. In the case of collective labor disputes on interests

      Settlement by the parties ⇒ Mediation ⇒ Mediation by the Labor Arbitration Council or go on a strike

   Because of the complicated procedures as stated above, both workers and companies do not understand the legitimate procedures under the provisions of Labor Code, and in practice, mediation and arbitration are said to be rarely used for the settlement of labor disputes.

Others

1. Termination by workers

   A worker shall have the right to unilaterally terminate the employment contract by notifying the employer in advance. Unlike with employers, the reasons for termination are not limited (Labor Code, Article 35, Paragraph 1).

   Employment form

   Number of days

   Indefinite-term employment contract

   Up to 45 days before

   Employment contract with a fixed term between 12 and 36 months

   Up to 30 days before

   Employment contract with a fixed term of less than 12 months

   Up to 3 business days before

   Provided, however, that a worker shall have the right to unilaterally terminate the employment contract without prior notice if any of the following applies to the worker (Labor Code, Article 35, Paragraph 2):

   Cf.) Prior notice is not required in the following cases:

   1. The worker is not assigned to the work or workplace or not provided with the working conditions as agreed in the employment contract, except for the case of temporary reassignment of a worker to a work not provided for in the employment contract.
   2. The worker is not paid adequately or on schedule, except for the case of force majeure event.
   3. In the case of being assaulted, insulted physically or verbally by the employer, adverse effect to their health, character and reputation, or being forced to work.
   4. The worker has been sexually harassed in the workplace.
   5. The female worker who is pregnant and to whom a health facility gives judgment that if she continues to work, it may adversely affect her pregnancy
   6. The worker reaches retirement age (unless otherwise agreed by the worker and the company).
   7. In the case that the company fails to provide truthful information upon executing an employment contract and that affects the performance of the employment contract.

2. Reimbursement for the untaken annual paid leaves

   As stated above, a worker may request the employer to purchase any untaken annual leave at the time of retirement (Labor Code, Article 113, Paragraph 3). The amount of reimbursement is calculated by multiplying the daily wage rate by the amount of untaken annual leave. It is recommended that appropriate management be put in place to ensure that the employer is not unexpectedly obliged to purchase a large amount of annual leave upon retirement of any employee.

In order for a foreigner to work in Vietnam, it is necessary to obtain both (i) a visa that permits that foreigner to enter and reside in Vietnam, and (ii) a work permit that allows that foreigner to work in Vietnam.

With regard to (i) above, the common practice is for Japanese company workers to acquire an LD visa, which is issued to company workers. Note that, when requirements are satisfied, a temporary residence card (TRC) may be acquired in substitute for the visa of (i) above.

The Law on Entry, Exit, Transit, Residence of Foreigners in Vietnam (Law No. 47/2014/QH13) has been revised by the Law No. 51/2019/QH14 (the “revised Law”), which became effective on July 1, 2020. The revised Law includes the official introduction of electronic visas, the ability for electronic visa holders to change their visa category in country, and the elimination of the 30-day cooling-off period for visa-exempt foreign nationals, among other changes. Since there are no detailed guidelines for the revised Law, it is necessary to confirm further information.

Visas

1. Types of visas

   There are various types of visas, for periods up to five years, and because there are a large number of visas according to the organization or position, it would be desirable to contact the embassy to confirm the appropriate visa.

   Cf. Main visas (Law No. 17/2014/QH13)

   Visa symbol

   Main examples of eligible persons

   Period

   LD

   Long-term workers

   Up to 2 years

   NN1

   Representative of an international organization, NGO or international project

   Up to 12 months

   NN2

   Representative of a foreign company or office, representative of a foreign company in Vietnam

   Up to 12 months

   NN3

   Worker of a local office, branch office, or representative office of a foreign project

   Up to 12 months

   DT

   Investors, attorneys

   Up to 5 years

   DH

   Students

   Up to 12 months

   DN

   Short-term workers of Vietnamese companies

   Up to 3 months

   HN

   Attendees of meetings, seminars, etc.

   Up to 3 months

   TT

   Spouses or children under 18 of foreigners who have the foregoing visa (*excluding NN3, DN, HN)
   or
   Child, parent, sibling, or spouse of a Vietnamese national

   Up to 12 months

   VR

   Persons who wish to enter Vietnam to visit relatives or for other social visits

   Up to 6 months

2. Acquisition requirements

   Acquisition requirements

   According to the respective visas, the applicant will be required to submit a document as prescribed under the revised Law.

   
   

   Procedures, etc.

   In order to acquire a visa, the company needs to submit documents to the Immigration Department. While the required designated documents, including the invitation letter of the worker issued by the Vietnamese corporation, will differ according to the type of visa, generally, the following documents are required; specifically, (i) a visa application form (designated form), (ii) a copy of a passport (that is valid for six months or longer) and a photograph, and (iii) a copy of a certificate related to the legal registration status of the company in Vietnam ((a) certificate of establishment or certified copy of the decision of the authorizing organ, (b) corporate seal, registration form with the representative's signature).

3. Effects of violation

   Depending on the type of violation, fines are imposed (e.g.: a fine of 10 million to 20 million dong will be imposed when a worker, without permission, conducts activities that differ from those that were approved when the visa was issued).

4. Temporary Residence Card (TRC)

   When a foreign worker is to reside in Vietnam for longer than one year, the foreign worker may also apply for a TRC in substitute for a visa. Eligible persons are those who correspond to ĐT, NN1, NN2, DH, LĐ, and TT (as well as LV1, LV2, PV1) in the foregoing visa table, and the permitted residency period differs depending on the type of visa. The respective issuing requirements of a TRC are similar to those of a visa, and the validity of a TRC is from 1 year up to five years. However, the validity of a TRC is, normally, substantially up to two years because it is pursuant to the validity of that person's passport and the validity of the following work permits.

Work permits

Prior to hiring a foreign worker, the company must report to the Municipalities or Provinces of Vietnam People's Committee and acquire a work permit; it should be noted that any violation may result in the deportation of that foreign worker.

The validity of the work permit depends on the contract term set out in the employment contract, in no case will the validity exceed two years. While the work permit may be renewed, even in this case the validity of the work permit will be up to two years.

1. Types

   Work permits are classified into three types. In other words, there are work permits for (i) representatives or management positions, (ii) professionals in the respective fields, and (iii) engineers. Job experience and work experience are required for the respective qualifications, and a certificate of a degree for verifying the specialty of the professional is required.

2. Requirements and procedures

   Foreign national workers may only be employed in managerial, executive, professional, and technical labor positions where Vietnamese workers cannot meet the business needs (Labor Code, Article 152, Paragraph 1). Thus, a document indicating that such foreign worker is a professional or a technical worker such as an administrator or a representative director and an approval document of the employment of that foreign worker from a competent regulatory body must be obtained in advance. After obtaining the approval document, the company is required to file an application with the Department of Labor, Invalids, and Social Affairs (DOLISA), which has jurisdiction over the scheduled workplace, at least 15 business days before the worker starts working. Generally, the following documents are required.

   Furthermore, when employing a foreign worker, it should be noted that the company must additionally submit, on a case-by-case basis, an employment plan to MOLISA or the state-level People's Committee Chairperson at least 30 days before the scheduled date of employment (Decree No. 152/2020/ND-CP).

   Cf. Example of necessary documents

   • Work permit application form (designated form)
   • Health certificate
   • Criminal record certificate (certificate that the worker has no criminal record)
   • Certificate indicating competence of eligibility of receiving a work permit, such as a diploma
   • Copy of passport, photograph
   • Other documents that are designated as being required
   • Approval of the State People's Committee Chairperson's regarding the working of foreign workers

   After the work permit is issued, the company will conclude a written employment contract with the worker. The employment contract must be concluded before the scheduled date of employment. Furthermore, after the employment contract is concluded, the company must submit a copy of the employment contract to DOLISA within seven business days.

3. Cases where work permits are not required

   In the following cases, foreign workers are not required to acquire work permits. However, even in these cases, the company is required to file an application with DOLISA at least 30 business days before the work start date of a foreign worker and obtain the approval of DOLISA regarding the hiring of that foreign worker.

   Cf. Foreign workers not required to acquire work permits

   Abridged translation of the Labor Code, Article 154

   1. Investor or owner of a limited liability company
   2. Member of the board of directors of a joint stock company
   3. Head of a representative office or a project director of an international organization or a non-governmental organization in Vietnam
   4. Person who enters Vietnam for a duration of less than three months to undertake marketing activities
   5. Person who enters Vietnam for a duration of less than three months to resolve complicated technical problems that pose risks of affecting production and business activities and which cannot be resolved by Vietnamese experts and foreign experts currently in Vietnam
   6. Foreign lawyer who is granted with a professional certificate in Vietnam
   7. Person who is acknowledged under international conventions and treaties of which the Socialist Republic of Vietnam is a signatory
   8. Person who is married to a Vietnamese citizen and resides in Vietnam
   9. Other persons set forth by the Government.

4. Effects of violation

   In response to violations, in addition to the deportation of the worker, a fine (30 million to 75 million dong) and or the like will be imposed on the employer (Decree No. 28/2020/ND-CP, Article 31, Paragraphs 4 and 5).