Introduction

Vietnam has a rigorous regulatory framework governing both employment of local employees and migration of foreign employees into the country. The legal cornerstone for employment in Vietnam is the Labor Code, which prescribes extensive protections and rights for local employees including requirements on minimum wages, working hours, contracts, leave, unions and more. Employers must abide by these labor regulations in their hiring and employment practices. At the same time, Vietnam also exercises strict control over immigration to protect local jobs and interests. The Law on Entry, Exit, Transit and Residence of Foreigners in Vietnam lays out the visa and work permit requirements for foreigners to enter, stay and work in Vietnam. Work permits are tied to specific employers and jobs, and require documents like educational certificates, health checks and clean criminal records. While Vietnam has eased some regulations to attract foreign talent, its immigration system remains highly restrictive with thorough compliance processes.

Contracts and Employment

Labour recruitment and management

An employer has to declare the engagement of employees to the labor authority within 30 days from the date of its commencement of operation. In addition, the employer has to make a Labor Management Book at the head office, branch and representative office within 30 days from the commencement date of operation and such a Book contained the basis content as prescribed by law.

Biannually, further reports on changes to the workforce have to be made.

Probationary Contract

It is common practice to arrange a probationary period in Vietnam when engaging new employees. The duration of the probationary period, as agreed upon by the two parties, shall depend on the nature and complexity of the work and the job position of the new employee. In detail, the parties may agree on the following probationary periods:

• Up to 180 days in the case of the job being for an enterprise manager;
• Up to 60 days for working in a position requiring college-level or higher specialized or technical expertise;
• Up to 30 days for working in an industry or trade requiring intermediate-level skills or as a technician or professional staff member; or
• Up to six working days for any other position that requires no training.

Presently, a probationary period can be included in either the labor contract or in a separate probation agreement. During the probationary period, the probationary salary shall be negotiated by both parties but shall not be lower than 85 percent of the ordinary salary for the job. Either party may terminate the employment relationship during the probationary period without providing prior notice or paying compensation. It should be noted that probationary periods are not applied to labor contracts under 1 month.

Labor Contract

Labor contract is an agreement between an employee and an employer on paid work, wages, working conditions, and the rights and obligations of each party to the labor relationship. The labor contract can be entered into in writing or by electronic means in the form of data messages, however, the labor contract must include basic term and conditions as prescribed by law.

According to the Labor Code 2019, there are two types of labor contract, including:

1. Indefinite term labor contract; and
2. Definite term labor contract.

Definite term labor contracts can be agreed by parties up to 36 months and twice in a row. After two definite term labor contracts in a row, an indefinite term labor contract must be concluded.

If an employer employs less than 10 employees without a written Internal Labor Rules, the labor contract template must comprise the contents regarding the labor discipline and material responsibility.

Minimum wages

Vietnam currently applies two different minimum wages simultaneously: The Basic Minimum Wage and the Regional Minimum Wages. While the Basic Minimum Wage sets the base for calculating the cap on social insurance, health insurance, and the salary for state employees, the Regional Minimum Wages play an important role in setting the minimum wage for non-state employees as well as the base for calculating the cap on unemployment insurance. The Basic Minimum Wage and the Regional Minimum Wage will be adjusted annually by the Government.

From 1 January 2024 until 30 June 2024, the Basic Minimum Wage and the Regional Minimum Wage will be as follows:

Basic Minimum Wage: The Basic Minimum Wage amounts to 1,800,000 VND per month and is applied across the country.

Regional Minimum Wages: As the cost of living varies, the Vietnam government divides the Regional Minimum Wages into four groups to reflect economic realities. The current regional minimum wages are as follows:

*For more detailed information see appendix Decree No. 38/2022/ND-CP; defined as of 12 June 2022.

Salary during sickness and maternity/paternity leave

Under Vietnamese labor law, employers are not obligated to pay salary to employees who are ill or on maternity leave. Wages during approved medical or maternity leave are covered by the social insurance fund. The standard maternity leave duration is six months as outlined in the Labor Code. Additionally, pregnant employees, those currently on maternity leave, and mothers with a child under 12 months may only be terminated if the enterprise shuts down completely. No other grounds for dismissal are permitted for these protected categories. The Labor Code also provides paternity leave eligibility, ranging from 5 to 14 working days depending on factors like multiple births and delivery method. Employers should ensure compliance with all regulations related to maternity, paternity and medical leave to avoid unlawful termination claims.

Potential Bonus Schemes

It is common in Vietnam for employers to pay a 13th month salary as a year-end bonus (i.e., Tet bonus). Such bonuses can depend on the performance of the employee and/or the company.

International companies investing in Vietnam commonly provide supplemental private health insurance as an additional benefit. Company-sponsored team outings and trips are also commonly expected by employees and seen as a perk. In a country with high staff turnover, these types of team events are usually considered important for boosting morale and retention.

Working hours, rest breaks during working hours, holidays, overtime

Provided below is a summary of the prevailing regulations in Vietnam pertaining to working hours, leave, and overtime.

Health and safety obligations

An employer must comply with the law on occupational safety and hygiene. The employer must rely on standards, national technical regulations and local technical regulations on occupational safety and hygiene in order to formulate their own internal rules and working procedures and to ensure occupational safety and hygiene as appropriate for each type of machinery, equipment and workplace.

Employers are required by law to contribute to the basic state health insurance for their employees, and they must also provide regular annual health checks. It is common for international companies to provide additional private health insurance in order to cover employees better than the compulsory state health insurance.

Internal Labor Rules

An enterprise with 10 employees or more must have written Internal Labor Rules (“ILR”) covering all important items of the working environment. The written ILR come into effect through registration with Department of Labor, War Invalids and Social Affairs (“DOLISA”). The ILR shall be the base for handling labor discipline against an act of violation of the labor laws or provisions regulated in the ILR. Carefully worded ILR is important in order for the employer to be able to take disciplinary action (including dismissal) against an employee in case of violation of labor discipline. The employer cannot dismiss or apply any labor discipline measures against an employee for an offense if this offense is not specified in the ILR, or if the ILR has not been duly registered.

If an employer employs less than 10 employees, it is not required to register a written ILR, but must comprise the contents regarding the labor discipline and material responsibility in the labor contracts.

Prior to issuing an ILR, employers must seek for opinion from the internal employee representative organizations consult any existing internal employee representative organizations (i.e. trade unions).

At minimum, a lawful ILR must not be contrary to the law on labor or other relevant regulations and must at least contain the following items:

1. Working hours and rest breaks;
2. Order in the workplace;
3. Occupational safety and hygiene;
4. Prevention of sexual harassment in the workplace; and the sequence and procedures for dealing with a breach being an act of sexual harassment in the workplace;
5. Protection of assets, business secrets and confidentiality of technology and of intellectual property of the employer;
6. Cases in which an employee may be temporarily transferred to undertake work different from that specified in his/her labor contract;
7. Conduct by employees constituting a breach of labor discipline and forms of penalty imposed for those breaches;
8. Liability for material damage;
9. The person authorized to impose disciplinary penalties; competent persons for signing labor contract on behalf of the employer.

Labor discipline

There are various types of labor disciplinary measures which depend on the seriousness of the breach of labor rules committed by an employee, which are:

• Reprimand
• Deferral of wage increase for a maximum of six months
• Demotion
• Dismissal

The statute of limitations for handling most labor disciplinary violations is 6 months from the date the violation occurs, except in cases where the violation relates directly to finances, assets, disclosure of technological secrets, or business secrets of the enterprise, in which case the statute of limitations for handling labor discipline is 12 months.

Principles and procedures for handling labor discipline

The procedures for handling a violation of labor discipline must strictly adhere to the procedures outlined in the labor regulations. The principles for handling a violation must comply with the following regulations:

• A meeting must be organized and duly recorded.
• The employer will bear the burden of proving the employee's fault with adequate evidence.
• An organization representing employees at the grassroots level, of which the employee is a member, has to participate.
• The employee has the right to defend himself or herself or ask for a lawyer.

It is prohibited to impose more than one form of labor discipline for a single violation. For an employee who simultaneously commits more than one violation of labor discipline, only the highest form of discipline corresponding to the most serious violation can be applied. Exceptions to the application of labor discipline apply to employees who are sick, pregnant, on maternity leave, and/or are mentally disordered.

Prohibited acts in handling labor discipline violations

Prohibited acts when handling violations of labor discipline include:

• Infringing upon the body or dignity of the employee.
• Applying a fine or wage reduction instead of a disciplinary measure.
• Disciplining an employee who has committed a violation that is not defined in the ILR or labor contract (in the case of an employer with fewer than 10 employees).

Trade Union

The Vietnam General Confederation of Labor (“VGCL”) is the sole national trade union center. All trade unions must affiliate with the VGCL.

Employers are not obliged to establish a trade union, but they have the responsibility of creating a favorable environment for the establishment of unions. In order for a union at the enterprise level to be established, five or more employees have to unite and request voluntary participation in it. Employers must provide the union in their enterprise with a suitable workplace and adequate facilities. Union officers are entitled to certain time off with pay in order to fulfill their functions.

Regardless of whether there is a trade union or not, the employer is obligated to pay the compulsory trade union fee equal to 2 percent of the total salary for social insurance contribution of all employees per month, and this has to be paid to the trade union’s account, in which nearly 70% of the trade union fee will be returned to the grassroots union of the company.

Employees who join the grassroots union of the company are also obliged to pay the trade union membership fee, equivalent to 1% of the salary that is used as a basis for social insurance contribution to the trade union’s account, in which 75% of the trade union membership fee will be returned to the grassroots union of the company.

Strikes

Any strike organized by unions requires prior notification to the employer and the labor authorities, and has to follow all relevant regulations for going on strike. This procedure is often very complicated and lengthy. If a strike is not initiated by a union, it will be a wildcat strike. Such strikes are illegal because the law stipulates that strikes must be led by a union and are only permitted after dispute resolution mechanisms have failed.

The most common reasons for strikes include the desire of employees to negotiate higher wages or additional benefits.

Termination of a Labor Contract

In Vietnam, labor contracts can be terminated by mutual agreement, unilateral termination, contract expiration or for reasons in the labor law. Employers must follow proper procedures for termination including warnings, notice periods, severance allowance and restrictions on terminating protected groups. Wrongful dismissal can lead to reinstatement or compensation for the employee.

Cases of termination of a labor contract

a. For the local Vietnamese employees

¹This requirement means that termination must be notified a certain period of time ahead of it being implemented, as prescribed by Vietnamese Labor regulations. For bases that are not subject to the prior notice requirement, the termination can be communicated at any time that the party having the right to terminate considers appropriate and reasonable.

² Compulsory unemployment insurance has been introduced with effect as of 1 January 2009

b. For the foreign employees

Unilateral termination

A unilateral termination of a labor contract by the employer is only possible in very few cases and after a long and burdensome process of termination procedures. It is therefore often recommendable to enter into a termination agreement. In principle, an employment relationship can only be terminated if such termination is supported by a legitimate reasons and by observing the applicable notice period.

The statutory minimum notice periods are depended on the type of labor contract.

• Definite-term contracts of less than 12 months: three working days
• Definite-term contract: 30 calendar days
• Indefinite-term contract: 45 calendar days

(“Normal Notice Period”)

In some special industries and trades and for specific jobs (e.g. enterprise manager), the statutory minimum notice periods shall be as follows:

• Definite-term contracts of less than 12 months: At least equal to a quarter of the term of the labor contract.
• Definite-term contract and Indefinite-term contract: 120 days

(“Special Notice Period”).

Unilateral termination by the employer³

³Termination by employer is not allowed in any of the following situations:

• • • • Employee has been on leave for treatment due to sickness or accident;
      • Employee is on leave as permitted by the employer;
      • Pregnant employee; or
      • Employee is on maternity leave or is raising a child under 12 months old.

⁴This requirement means that termination must be notified a certain period of time ahead of it being implemented as prescribed by Vietnamese labor regulations. For bases that are not subject to the prior notice requirement, the termination can be communicated at any time that the party having the right to terminate considers appropriate and reasonable.

⁵Except for the cases in which the employee is entitled to receive retirement pension as prescribed by social insurance laws, and the cases in which the employee is absent from workplace without legitimate reason from five consecutive working days or more.

Termination by the Employee

Bilateral termination

In contrast to a dismissal, a mutual termination agreement is often the most common and viable option for ending an employment relationship.A mutual termination agreement between the employer and employee can help avoid potential disputes or issues with the termination procedure.

The agreement should cover details like the termination date, severance pay, remaining leave days, handover of responsibilities, bonus payments, and any other relevant topics. The more comprehensive the mutual termination agreement, the less likely the termination can be legally contested. Both parties should ensure the agreement thoroughly addresses compensation, benefits, transition plans, and other related matters.

Foreign employee

Foreign workers must be granted a work permit in order to work in Vietnam. The term of the labor contract for foreign workers working in Vietnam must not exceed the term of the Work Permit (i.e. max 2 years). Unlike Vietnamese workers, foreign workers and employers can agree to conclude multiple fixed-term labor contracts. Foreign workers working in Vietnam without a work permit will be forced to exit or be deported. Employers using foreign workers without a work permit will be administratively sanctioned for violations.

Visa

The following visas are relevant in terms of employment and business activities:

Temporary Residence Card (“TRC”)

The TRC replaces a visa and 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 provide dependency evidence.

For the renewal of the TRC, it is not required to leave Vietnam if the employer remains the same as for the previous TRC.

Foreigner requiring a work permit

While there are exceptions as outlined below, in general, all foreign individuals (i.e., non-Vietnamese citizens) require a Work Permit issued by the Department of Labor, Invalids and Social Affairs before they may enter any employment in Vietnam.

There are three general options:

Work permits are issued by the local DOLISA of the place of employment. They are issued for a maximum period of two years and may be renewed only one time. Before employing a foreigner on the basis of a local labor contract, the employer must apply for a need for foreign labor at the local DOLISA. In the case of an Internal Transfer, the parent company has to confirm that the employee has worked for the parent company for at least one year.

Application process for a work permit

For the application process, the following points have to be considered:

Exemptions for foreigners

Amongst others, following cases shall be exempted from the work permit requirement: