Vietnam Employment Regulations – A Comprehensive Guide

Vietnam’s increasingly open investment environment is facilitating integration with global business practices, prompting the country to continually streamline its labor laws and policies. In this context, an amended Labor Code was approved, which came into effect in January 2021. This amendment aligns Vietnam’s regulations with international labor standards, particularly as the nation becomes more integrated into the world economy, as noted by the International Labor Organization (ILO).

Companies operating within Vietnam must ensure compliance with the Labor Code, which outlines the legal framework regarding the rights and obligations of employers and employees. This includes provisions related to working hours, labor agreements, social insurance, overtime, strikes, and termination of employment contracts.

This article delves into some essential requirements for employers hiring employees in Vietnam:

• Employee-employer contracts
• Rules for severance and payments
• Bonuses
• Allowances and benefits
• Retirement
• Protection of personal data
• Other provisions

Employment Contracts

A labor contract must include crucial provisions such as the scope of work, working hours, rest breaks, wages, job location, terms of the contract, and occupational safety and hygiene conditions, alongside social insurance details.

There are two primary types of labor contracts in Vietnam:

• Indefinite term – This contract has no specified term or termination date.
• Definite term – Here, a period not exceeding 36 months is established for the contract, which may only be renewed once.

E-contracts are officially recognized and carry the same validity as written contracts, while verbal contracts are allowed if they are valid for less than one month. Notably, seasonal contracts are not permitted.

Furthermore, full-time and part-time contracts have identical obligations and rights. Companies with ten or more employees are mandated to register their internal labor regulations with the provincial labor department, covering policies about working hours, labor safety, workplace discipline, and confidentiality.

Working Hours

The Labor Code caps working hours at 48 per week, stipulating that normal working hours should not exceed eight hours daily or 48 hours weekly. Employers may offer overtime by mutual agreement, yet this cannot exceed 12 hours a day, 40 hours a month, and 200 hours annually.

• Notably, under Resolution No. 17/2022/UBTVQH15, employers can extend overtime to 300 hours per year in specific industries with seasonal demands, provided that the employee agrees beforehand.
• This exception does not apply to employees aged 15 and under 18, those with disabilities, or female employees in certain stages of pregnancy or nursing.

Employers must also limit working hours for employees in dangerous conditions, abiding by national regulations.

Compensation Structure in Vietnam

Minimum Wages

Vietnam has two categories of minimum wages.

The first category is the standard minimum wage of VND 2,340,000 (~US$93), which applies to employees in state-owned enterprises and is used to calculate social contributions for all companies.

The second category sets minimum wages for employees in non-state enterprises, differentiated by regions as defined by the government.

Performance and Earnings-Based Bonuses for Employees

Bonuses, reflective of company performance and aimed at boosting morale, can be awarded throughout the year. All salaries and bonuses are subject to personal income tax (PIT) in Vietnam.

Allowances and Benefits

Employees may receive various allowances and benefits designed to retain talent. According to Circular No. 92/2015/TT-BTC, some of these benefits are non-taxable, such as:

• Housing, utilities, and service payments exceeding 15% of taxable income;
• Life and optional insurance;
• Membership fees for clubs and health services;
• Telephone and stationery allowances;
• Funeral and wedding payments, transport allowances, and training allowances.
• Employer support for critical illness and flight tickets for foreign employees.

Overtime

Overtime occurs when a worker exceeds the established limits, triggering the need for compensation based on the agreement with the employee. Employee consent is essential regarding terms and locations for overtime work.

Moreover, overtime may be influenced by factors such as weekends, public holidays, and night shifts (defined as hours between 22:00 and 6:00).

Termination, Severance, and Payment

Employees have the right to terminate their employment contract unilaterally without explanation, provided they give advance notice as specified in labor law. Immediate termination is allowed in cases of mistreatment, pregnancy, or salary delays.

Employers can only unilaterally terminate a contract under specific conditions as outlined in Article 36 of the labor law, with notice periods varying by contract type.

Termination payments may include unused annual leave, severance allowance, and any other contractual payments.

Retirement Age

The current retirement age is set at 60 years and 3 months for men and 55 years and 4 months for women, with gradual annual increases until it reaches 62 and 60 years, respectively, by 2028 and 2035.

Retirement age can also depend on working conditions, allowing earlier or later retirement based on specific job environments. Maximum extensions for retirement can be up to five years.

Hiring Foreign Employees

Foreign companies seeking to operate in Vietnam must comply with the Labor Code, covering all outlined regulations. A Vietnamese entity may recruit foreign workers for managerial, executive, and expert roles when local talent does not meet business needs. Notably, representative offices in Vietnam can hire directly, unlike in some other Asian nations.

Additional Provisions Under Vietnam’s Labor Code

Vietnam allows independent trade unions, which must seek permission from state authorities to operate. This provision aligns with several free trade agreements Vietnam has entered. Enterprises with ten or more employees are required to register a copy of their internal labor regulations with local labor authorities, detailing aspects like working schedules and occupational safety.

Salary

While the government does not enforce salary policies at the individual company level, employers are expected to establish their pay scales and productivity norms, adhering to minimum wage regulations.

Discrimination

The Labor Code includes protections against workplace discrimination, encompassing sexual harassment and biases based on various personal attributes. Enhanced protections are implemented for younger workers to ensure a fair working environment.

Sexual Harassment

The code specifies guidelines to address sexual harassment in various forms—physical, verbal, or otherwise— and expands the definition of the workplace to include all job-related environments.

Labor Supervision

Once a company is operational, it must maintain a labor-management record, with changes in labor reported to the local labor department every six months, alongside mandatory workforce reports to relevant agencies.

Female Employees

Female employees with children under 12 months are entitled to a daily one-hour break for breastfeeding, along with a 30-minute break during menstruation. The specifics of these breaks can be agreed upon but must adhere to minimum requirements. If these breaks are not taken, employers must offer additional compensation for work done during that time, separate from overtime pay.