Vietnam Employment Outlook For Investors

In Vietnam the employment relationship is regulated by Labor Code No. 10/2012/QH13 (‘Labor Code’). The Government with the support of Ministry of Labor, Invalids and Social Affairs, at nationwide level, and the Department of Labor, Invalids and Social Affair, at provincial level, manages labor issues. This article will summarize general information of labor contract, probation, contract termination, insurance and work permit requirement for investors.

Labor Contract

A labor contract envisages an agreement between the employer and employee in written or oral form. The oral labor contract is applicable for jobs with a term of less than three months, while for occupations with term longer than three months employer and employee must enter into a written labor contract under the form of (i) seasonal contract (for job with a term under twelve months); (ii) definite labor contract (for job with a term from twelve months to thirty six months); or (iii) indefinite labor contract.

The labor contract must include  (i) name and address of the employer or the lawful representative of the employer; (ii) full name, date of birth, gender, residence address, identity card number or other lawful documents of the employee; (iii) job and workplace; (iv) terms of the labor contract; (v) wage, form of wage payment, deadline for wage payment, wage-based allowances and other additional payments; (vi) regimes for promotion and wage raise; (vii) working hours and rest hours; (viii) labor protection equipment for the employee; (ix) social insurance and health insurance; (x) training, retraining and occupational skill improvement.

Definite-terms contracts cannot be extended or renewed indefinitely; an employee can only enter into two successive definite term labor contracts with the same employer. After thirty days from the expiration date of a labor contract, employer and employee must sign a new labor contract or extend the term of the old contract. In case the two parties do not sign a new labor contract or extend the term and the employee continues to work for the employer for more than thirty days, the seasonal labor contract become definite labor contract, or the definite labor contract become indefinite contract.

Probation

Employer and employee can agree on a probation period, however employees of seasonal labor contracts are not subject to a probation period.  Each job cannot require more than one probation period, and the maximum probation period is sixty days for job requiring professional and technical qualification of college or higher education level. For jobs which have lower requirement, the probation period can be thirty or six days. During probation period, parties can terminate the probation and hence the labor contract without advance notification. Within three days before the end of the probation period for jobs requiring sixty or thirty days probation, the employer must communicate the probation result to the employee, but for jobs with six days probation, employer can announce the result at the end of the probation term.

Termination of Employment

Employer and employee can terminate the labor contract by (i) mutual agreement; (ii) unilateral termination; or (iii) employer is entitled to lay-off the employee due to structural or technological changes or because of economic reasons, merger, consolidation or division of enterprise.

Unilateral employment termination must have legal basis provided under the Labor Code and satisfy advance notice period. In particular, basis for employer to terminate labor contract include:

  • The employee often fails to perform his/her job stated in the labor contract;
  • The employee is sick or has an accident and remains unable to work after having received treatment for twelve consecutive months, in case he/she works under an indefinite-term labor contract, or for six consecutive months, in case he/she works under a definite-term labor contract, or more than half the term of the labor contract, in case he/she works under a labor contract for a seasonal job or a specific job of under twelve months;

When the employee’s health has recovered, he/she must be considered for continued entry into the labor contract;

  • If, as a result of natural disaster, fire or another force majeure event as prescribed by law, the employer, though having applied every remedial measure, has to scale down production and cut jobs;
  • Employee is not presence at workplace within fifteen days after the labor contract suspension period.

Employer must deliver the notice to employee at least (a) forty-five days for indefinite labor contract; (b) thirty days for definite labor contract; (c) three days for seasonal labor contract and for employee in case (ii) above.

Insurance

The employer and the employee must participate in the social insurance, health insurance and unemployment insurance scheme. The social insurance also covers 0.5% of the labor accident insurance.

The insurance rate contribution on monthly salary must conform with the following table:

For foreign employees, unemployment insurance is not applicable. From December 1st, 2018 to December 31st, 2021, employer of foreign employee, who work in Vietnam with work permit, practice certificate or practice license with indefinite labor contract or definite labor contract with term from one year and above, shall start contributing 3.5% to the social insurance. From January 1st, 2022, qualified foreign employee and employer starts contributing 8% and 17.5%, respectively.

Beside compulsory insurance, employer must submit 2% of trade union fee on salary fund which are used as the basis for social insurance for employee.

Work Permit

Foreign employee must obtain a work permit to be allowed to work in Vietnam. The term of the work permit is two years and it is issued by the Department of Labor, Invalids and Social Affair of the province where the employee intends to work. Nevertheless, employee in the following cases shall be exempted from work permit:

  1. Capital-contributing members or owners of limited liability companies;
  2. Members of the Board of Directors of joint-stock companies;
  3. Chiefs of representative offices and directors of projects of international organizations or non-governmental organizations in Vietnam;
  4. Those who stay in Vietnam for under three months to offer services for sale;
  5. Those who stay in Vietnam for under three months to deal with complicated technical or technological problems that adversely impact or are at risk of exerting adverse impacts on production and business activities and these problems cannot be handled by Vietnamese and foreign experts who are currently in Vietnam;
  6. Foreign lawyers possessing a professional practice license in Vietnam in accordance with the Law on Lawyers;
  7. Those who stay in Vietnam in accordance with a treaty to which Vietnam is a contracting party;
  8. Those who are studying and working in Vietnam, provided that the employer shall notify their employment to the provincial-level state management agency of labor seven days in advance; and
  9. Other cases provided by the Government.

Foreign employee who is not requested to have a work permit in Vietnam, employer must request Department of Labors, Invalids and Social Affair to issue a certificate of work permit exemption, if applicable.

Nhu Thai, Responsible of Vietnam Desk at Fidinam Singapore

Stay in touch with us

Subscribe to our newsletter and receive our news delivered straight to your mailbox, just a click away, Sign Up Now
Email address