On November 20, 2019, Vietnam’s National Assembly adopted the New Labor Code. The New Labor Code replaced the 2012 Labor Code starting January 1, 2021. These changes are likely to affect HR and Payroll processes for foreign companies in Vietnam.
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The implementation of the new labor law will undoubtedly create a strong foundation for the federal government, employees, and the representative organizations of employers towards equal rights for all parties involved and shared prosperity.
Significant Improvements of the New Vietnam Labor Code
The following is a summary of the critical adjustments that have contributed to the new Vietnam Labor Code:
1. Labor Contract
- Identifies the labor e-contracts’ validity that is created in data messages according to Vietnam’s e-transactions regulations
- Two types of labor contracts are available: definite-term labor contract and indefinite-term labor. A definite deal has a validity of 36 months, and no extension is allowed
- Temporary or seasonal labor contracts are no longer available
- A document with a different name is also considered an employment contract if it contains the agreement on the paid job, salary, management, and supervision of a party.
- Both parties may conclude an oral contract with a term of less than 1 month.
2. Probation
- Probation is not allowed if the employee works under an employment contract with a duration of less than 1 month.
- The probationary period shall be negotiated by the parties on the basis of the nature and complexity of the job. Only one probationary period is allowed for a job and the probation shall not exceed:
– 180 days for the position of enterprise executive prescribed by the Law on Enterprises, the Law on management and use of state investment in enterprises;
– 60 days for positions that require a junior college degree or above;
– 30 days for positions that require a secondary vocational certificate, professional secondary school; positions of or for technicians, and skilled employees;
– 6 working days for other jobs.
3. Unilateral Labour Agreements’ Termination by Workers
- A worker can terminate a definite term labor contract without reason after giving and completing their notice.
- The notice will be at least 30 days if the definite term employee’s contract lasts 12 to 36 months, or at least 3 days if the employment contract is less than one year or at least 45 days in case of an indefinite-term employment contract;
- No notice is required in specific conditions such as injustice, maltreatment, or unwanted sexual advances mentioned in Labour Code
4. Unilateral Labour Agreements’ Termination by Employers
The New Vietnam Labor Code supplies extra lawful grounds for companies to end employees’ labor contracts in the following circumstances unilaterally:
- The worker is absent from work for five continuous working days without giving a justifiable reason
- The worker reaches their legal retirement age
- The employee provides false personal or qualification info to the employers that are recorded in the employment contract
- The employee repeatedly fails to perform his/her work according to the criteria for the assessment of employees’ fulfillment of duties established by the employer.
- The employee is sick or has an accident and remains unable to work after having received treatment for a period of 12 consecutive months in the case of an indefinite-term employment contract, for 06 consecutive months in the case of an employment contract with a fixed term of 12 – 36 months, or more than half the duration of the contract in case of an employment contract with a fixed term of fewer than 12 months.
5. Work Permit’s Validity for Foreigners
There is a limitation of work permit extensions under this new law. The maximum work permit’s term is two years and can only be extended for another two years. As a result, foreigners working in Vietnam have a total work permit term of 4 years. After four years, foreigners need to apply for a brand new work permit in Vietnam.
Related: How to Successfully Onboard New Employees in Vietnam
6. Working Hours under the new labor law
- The total working hours per week is 48 hours, and the regular working hours per day cannot exceed 8 hours.
- If there is an overtime contract between the employee and the employer, the overtime duration shall not exceed 12 hours per day, 40 hours per, and 200 hours per year.
- Exceptions are shoes, textile and garments, and electronics industries during peak seasons when there is a heavy workload. The overtime is then capped at 300 hours per month.
7. Extra Public Holidays
- The National Independence Holiday has become one of the public holidays, which falls on the first day or third day of September every year.
8. Employees’ Wages and Salaries
- Companies shall pay foreign employees in foreign currency
- Employers shall provide the payslip to employees once the salaries are settled. The payslip shall specify their salary, deductions, and overtime pay
- Employers shall bear the bank transfer and account opening costs
- Authorized individuals can receive the compensation on the employee’s behalf
9. Retirement Age
- Adjusted from 60 to 62 by 2028 for men
- Changed from 55 to 60 by 2035 for women
Challenges due to Vietnam’s New Labor Code
Even though the Vietnamese government has announced Decree 145 on employment conditions and Implementation Decree 135 on retirement age, there is still no relevant mandate for registering employees’ representative organizations. There is also no additional regulation on collective bargaining. The lack of the mentioned essential decrees will prevent employees and employers from enjoying the 2019 labor code’s benefits.
Authorities and employers must offer proper legal tools to help workers be proactive and make the most out of the new labor code and ensure that workers’ rights are protected.
How Cekindo can Assist in Ensuring Labor Compliance and Lifting the Burden
The Vietnamese Labor Code includes a variety of adjustments and explanations. Therefore, companies based in Vietnam should get ready for these changes beforehand to ensure that their employment remains compliant. We can take care of all your HR and Payroll needs.
As a leader in recruitment, staffing, and various human resource solutions, Cekindo has the knowledge and experience to ensure your organization’s labor compliance in Vietnam. With our certified business specialists and legal experts, we can take your business to greater heights by taking care of the time-consuming and challenging HR tasks. For more visit our Payroll Outsourcing Service Page.
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