MANAGING CHANGE LABOUR REGULATIONS IN VIETNAM With the increasingly open business environment and international integration policies, Vietnam continues its stable development into one of Asia’s most attractive investment destinations in the process of restructuring global supply chains and a potential market for international corporations. Vietnam needs a more skilled workforce to change comprehensively from an agricultural country into a sought after location for industrial production and services. To set course for sustainable growth and attracting foreign investment, Vietnam Government has made several changes in the Labour regulations. Establishing international labour standards is a necessary and coherent step on this way. Rödl & Partner MANAGING CHANGE LABOUR REGULATIONS IN VIETNAM 3 Content 1. Introduction 6 2. Law on Labour Contracts 6 2.1. Labour Contract 7 2.2. Terms of Labour Contracts 8 2.3. Foreign employees 8 2.3.1. Visa 9 2.3.2 Temporary Residence Card (TRC) 10 2.3.3. Foreigners requiring a work permit 11 2.3.4. Application process for a work permit 12 2.3.5. Exemptions for foreigners 13 2.4. Probation 13 2.5. Working hours, rest hours, holidays, overtime 14 2.6. Minimum wages 15 2.7. Salary during sickness and maternity / paternity leave 16 2.8. Potential bonus schemes 16 3. Internal Labour Rules (ILR’s) 17 4. Labour discipline 17 4.1. Health and safety obligations 18 5. Trade Union 18 6. Strikes 19 7. Termination of Employment 19 7.1 Unilateral termination 21 7.1.1 Termination by Employer 22 7.1.2 Termination bay Employee 24 7.2 Bilateral termination 24 8. Taxes and duties 25 8.1 Personal income tax (PIT) 25 8.2 Compulsory social insurance, health insurance, unemployment insurance and trade union fees 25 9. Penalties 26 9.1 Work permit violations 26 9.2 Penalties for employers for violations in Trade Union Contributions 26 About us 28 Contact 30 1. Introduction The following provides a short overview over the regulatory and practical requirements on Labour regulations of Vietnam. Vietnam’s population is about 95 million. The current labour force is around 58 million people, and about 1 million young adults entering the labour market annually, Vietnam has a large base of the labour force. However, approximately only 12 % of the population is considered to be trained or skilled. As one might expect, the position of employees is rather well protected compared to other countries. Protection wise there is no distinction between foreigners with a local labour contract and Vietnamese employees. The Labour Code, however, grants certain protections to particular groups of employees (women, disabled, elderly, etc.) Vietnam’s labour legislation and its implementation in practice are well developed. It covers almost all aspects of labour relations in the work place from the right to work to the right to organise of workers, from labour contracts to collective bargaining agreements, from minimum working ages to minimum wages, etc. The Law on social security has introduced some wide-ranging changes which are considered to be good for international investors. As a member of the WTO and FTA’s being initiated, Vietnam is in urgent domestic and international demand for the incorporation and implementation of international labour standards. Vietnam will receive legal, political and economic benefits from the implementation of FTA’s with the region and beyond. Those agreements will increase trust, legal certainty and therefore be beneficial for foreign investors in Vietnam. 2. Law on Labour Contracts The main law regulating employment relationships in Vietnam is the 2019 Labour Code, which took effect on 1 January 2021. For foreign nationals, there is also a set of implementing regulations, including Decree 152/2020/NĐ-CP, which mainly provides guidance on matters related to work permits for foreign workers in Vietnam. 6 The Labour Contract must follow the key contents as provided by laws. This applies also to multinational companies that prefer to have their own standard contracts for all jurisdictions they do business in. The Vietnamese Labour regulations provide the legal options of probation, indefinite and definite labour contracts. 2.1. LABOUR CONTRACT The labour contract should be written in Vietnamese. If one of the parties is a foreigner (this includes foreign-invested enterprises), the contract may be bilingual (Vietnamese, followed by a translation into a foreign language), but the Vietnamese version prevails in case of inconsistencies between the two versions. As a general rule, a labour contract is effective from the date stated in the contract and there are no filing requirements to effectuate the labour relationship. An employer has to declare its use of employees to the labour authority within 30 days from the date of its commencement of operation. Further reports on changes have to be made every six months. Salary paid to Vietnamese employees must be paid in Vietnamese Dong (VND). Within the territory of Vietnam all transactions in contracts and agreements are required to be conducted in Vietnamese Dong. The law provides several exceptions to this general rule. Foreign employees (whether they are residents or non-residents) are permitted to receive salaries, bonuses and allowances in a foreign currency. Therefore, the salary may be stated and paid in any tradable currency. 7 2.2. TERMS OF LABOUR CONTRACTS Probation Period Probation can be agreed by parties. The duration of a probationary period depends on the qualification and education and job position of the new employees but must not exceed the time limit as provide by law, i.e. 6, 30, 60, 180 days on case by case basis. Definite Term Definite labour contracts can be agreed by parties up to Labour Contract 36 months and twice in a row. 12 months is common after probation. Indefinite Term After two definite term contracts in a row, an indefinite Labour Contracts term contract must be concluded. Foreigners Locally employed foreigner will in practice always have a maximum of 24 months contracts due to work permit regulations. 2.3. FOREIGN EMPLOYEES The Labour Code explicitly states that it applies to foreign nationals working in Vietnam, and the general rule is, that foreigners working in Vietnam must comply with the Vietnamese Labour regulations, unless an international treaty to which Vietnam is a party objects. Foreigners can either have a local labour contract or be seconded from the parent company (“Internal Transfer”). If a labour contract is signed with a Vietnam-based entity, the law of Vietnam must apply regardless of the choice of law by the parties. In Vietnam, a visa and a work permit are two separate documents that are used for different purposes. A visa is an official endorsement allowing a foreigner to enter and to remain within Vietnam, while a work permit is the permission for a foreign worker to work in Vietnam. A visa can be replaced by a temporary residence card (“TRC”) which grants a foreign worker the right to stay in Vietnam for a certain length of time. If a foreigner wants to stay and to work in Vietnam, a work permit and a visa or a TRC will be required. 8 2.3.1. Visa The following visas are relevant in terms of employment and business activities: Forms of Objectives Issuance authority visa Business – This type of visa is for foreigners Overseas Vietnamese visa attempting to enter Vietnam for embassy / consulate business purposes. – The common validity of a multiple- entry business visa is three months. Family visa – This type of visa is for direct family Overseas Vietnamese member of a foreigner working in embassy / consulate Vietnam. The family members must have the adequate evidence of dependency. – The maximum validity of a multiple-entry family visa is 12 months on a case by case basis. Working visa – This type of visa is issued when an Overseas Vietnamese foreigner obtains a work permit. embassy / consulate – The validity of a multiple-entry working visa is the same as the validity of the work permit (maximum two years on a case by case basis). 9 Investment – This type of visa is for foreign Overseas Vietnamese Visa investors mentioned in the embassy / consulate Enterprise Registration Certificate and the Investment Registration Certificate. – The maximum validity of a multiple-entry investment visa is depended on the Investment Value (<3, 3-50, 50-100, 100+ billion VND) and shall be granted for the duration of 1, 3, 5 and / or 10 years depending on value respectively. For the Visa application (except for tourist visa) the following points have to be considered: Required documents Timeline Application Result – Application forms five working An approval for employee to – Enterprise Registration days receive the visa at overseas Certificate Vietnamese embassy / – Copy of passport consulate Note: In practice, the authorities only issue visas with the maximum validity of one year. To stay in Vietnam for more than one year, a foreigner must have a TRC. 2.3.2 Temporary Residence Card The TRC replaces a visa and it can be issued if a foreigner has a work permit, a Law Practice Registration or an Investment Registration Certificate investing more than three billion VND. The family can get the TRC along with the employee as long as they have dependency evidence. 10 The TRC can be renewed if the foreigner and his / her family do not need to leave Vietnam provided that the foreigner must work for the same company sponsoring his / her visa at the first time. 2.3.3 Foreigners requiring a work permit The initial principle is that all foreign individuals (i.e. non-Vietnamese citizens) require a Work Permit issued by the Department of Labour, Invalids and Social Affairs (“DOLISA”) before they commence and undertake any employment in Vietnam, exceptions apply.