PROSPECTIVE INVESTORS: LABOR REGIME IN VIETNAM

Vietnamese people and foreigners working in Vietnam are subject to the Labor Code. The Labor Code has created a legal framework which sets out the rights and obligations of employers and employees, working hours, labor contracts, payment of social insurance, overtime work, strikes, and termination of employment contracts, etc.

1. Working Age
The minimum working age in Vietnam is 15. An apprentice at a job training centre must be at least thirteen (13) years of age, except in the case of certain jobs in respect of which the Ministry of Labour, War Invalids and Social Affairs determines otherwise, and must be sufficiently healthy to satisfy the requirements of the job.

2. Recruiting Procedure
Foreign invested enterprises (FIEs) may recruit Vietnamese employees directly or may contract with an employment service agency to do so. The FIEs are required to notify the list of recruited employees to the local authority in charge of the State administration of labor.

3. Labor Contract
The labor contract must be in writing and in accordance with the model labor contract issued by the Ministry of Labor, War Invalids and Social Affairs. Verbal agreements may be entered into with domestic servants or the temporary workers working for less than three months. A labor contract can be one of the following types:

• An indefinite term labor contract is a contract in which the two parties do not determine the term and the time for termination of the validity of the contract;

• A definite term labor contract is a contract in which the two parties determine the term and the time for termination of the validity of the contract as a period from twelve (12) months to thirty six (36) months; and

• A labor contract for a specific or seasonal job with duration of less than twelve (12) months.

For contracts lasting less than three months, a written contract is not required. The probation period can last up to a maximum of 60 days for jobs demanding a special skill but is 30 days for other jobs. The salary of a worker during the probation period cannot be less than 70% of the agreed salary.
During the probation period, contracts can be terminated by either party without a notice period and payment of indemnities.

4. Termination of Labor Contract
An employer can terminate a labor contract early under any of the following circumstances:

(i) The employee repeatedly fails to perform his or her work in accordance with the labor contract;

(ii) An employee is disciplined or dismissed in accordance with the Labor Code;

(iii) Where the employee is ill or suffers injury and remains unable to work after receiving treatment for a period of one year for an indefinite term contract, six months in the case of a definite term of contract and half the contract term in the case of a specific or seasonal job;

(iv) The employer is forced to reduce its production and employment while trying to recover from a natural disaster, a fire or an event of force majeure; and

(v) The employer ceases operations.

Except unilateral termination in item (ii) above, an advance notice of 45 days is required for an indefinite term contract, 30 days for a definite term contract with duration of one year to three years and three days for a specific or seasonal job less than one year.

An employer has no right to terminate a labor contract:

• of an employee who is suffering from an illness or injury caused by a work-related accident or occupational disease and is under medical care; or

• of an employee who is on annual leave, personal leave of absence or any type of leave permitted by the employer; or

• of a female employee for reason of marriage, pregnancy, taking maternity leave, or raising a child under the age of twelve (12) months, except where the enterprise ceases its operation.

5. Illegal Termination of Labor Contract
If an employer unlawfully terminates the employment of an employee, the employee must be re-employed and the employee must pay compensation equal to the amount of lost wages. Where the employee refuses to return to work, the employee must be paid lost wages plus an allowance equal to half a month’s salary for each year of employment plus allowances (if any).

6. Working Hours
The law provides for an 8-hour working day or a 48-hour working week. The employee may work overtime but the overtime should not exceed 4 hours per day and 200 hours per year. In certain special cases stipulated by the Government, overtime hours can be increased to a maximum of 300 hours per year.

Businesses in all economic sectors, including businesses with foreign invested capital, are encouraged to adopt a 40 hour working week.

7. Annual Leaves
The employee with 12 months service is entitled to an annual leave with full pay. The annual leave will be classified as follows:

• 12 days for a person working under normal conditions;

• 14 days for a person involved with heavy, noxious or dangerous job activity or working in places with harsh living conditions or for persons under 18 years of age; and

• 16 days for persons involved with especially heavy, noxious and dangerous jobs activity or working in places with especially harsh living conditions.
The number of days of annual leave shall be increased proportionally to the period of employment in an enterprise or with an employer by one additional day for every five years of employment.

8. Compulsory Insurances
There are 3 compulsory insurances (including health, social and unemployment insurances) applicable to every employer (including FIE) and employee (excluding foreign employee) who is working at least 3 months.

8.1. Health Insurance
Both the employer and the employee must make health insurance contribution to the Social Insurance Fund. The employer will have to pay 2% of the total wage fund and the employee is required to pay 1% of his/her salary provided in the labor contract.

8.2. Social Insurance

a. Employer
The monthly contribution of employers is made as follows:
• 15% of total salary fund from Jan. 2007 to Dec. 2009.
• 16% of total salary fund from Jan. 2010 to Dec. 2011.
• 17% of total salary fund from Jan. 2012 to Dec. 2013.
• 18% of total salary fund from Jan. 2014 onwards.

b. Employees
The monthly contribution of employees is made as follows:
• 5% of her/his salary from Jan. 2007 to Dec. 2009.
• 6% of her/his salary from Jan. 2010 to Dec. 2011.
• 7% of her/his salary from Jan. 2012 to Dec. 2013.
• 8% of her/his salary from Jan. 2014 onwards.

8.3. Unemployment Insurance
Unemployment insurance shall apply to (i) employees who are working in an enterprise with an indefinite term or a term lasting between 12 and 36 months, and (ii) employer who recruits 10 employees or more. The contribution is made as follows:

• Employee: 1% of his/her monthly salary provided in the labor contract;
• Employer: 1% of monthly salary fund.

9. Employment of Foreigners
Generally, foreign employees should be recruited for work positions intensively requiring technical or management skills. The employer is required to design a plan or program to train Vietnamese employees to replace such foreign employees.

In order to work in Vietnam, foreigners must obtain a work permit from labor authorities (i.e. the Department of Labor, War Invalids and Social Affairs of the province/city where their employer is located) prior to signing a labor contracts with their employers.

Regarding expatriates transferred within their enterprises which are operational in Vietnam, at least 20% of the total number of managers, managing directors and experts must be Vietnamese citizens.

However, a foreign-invested enterprise is allowed to employ at least 03 foreign managers, managing directors and experts.

Foreigners working for businesses, agencies, and organizations in Vietnam for 3 months or more must get work permits, except the following cases:

• Foreigners entering Vietnam to work for less than 3 months;
• Foreigners are members of a limited liability company with 2 members or more;
• A foreigner is the owner of a one-member limited liability company;
• A foreigner is the member of a joint stock company’s management board;
• Foreigners entering Vietnam to offer their services;
• Foreigners entering Vietnam to handle emergency cases; foreign lawyers have been granted job practice permits by the Vietnamese Ministry of Justice as regulated by the law.

In cases where a work permit is not required, the employer has to submit to the Province’s Department of Labor, War Invalids and Social Affairs a list of foreign workers comprising their name, age, nationality, passport number, and the starting and ending date of the job assumed by the worker. This list shall be submitted 7 days prior to the starting work date.

The employer must apply for a work permit for its foreigner employees at the Province’s Department of Labor, War Invalids and Social Affairs or any of the authorized EPs and IZs Authority.

After obtaining a work permit, the employer must sign a labor contract in writing with the employee (not including foreign workers assigned by the foreign party to work in Vietnam) and send a copy thereof to the authority that has issued the work permit.

The work permit has the same duration as that of the labor contract to be signed or of job assignment from the parent company but in any case, the period should not exceed 36 months and may be renewed.

10. Minimum Salary
Vietnamese law regulates a minimum salary of Vietnamese employees who are working for FIEs. Therefore, the minimum salary for an employee working in such enterprises must not be less than:

• VN$1,200,000 per month (equivalent to US$70) is applicable to businesses operating in inner districts of Ho Chi Minh City and Hanoi.

• VN$1,080,000 per month (equivalent to US$63) is applicable to businesses operating in suburban districts of Hanoi and Ho Chi Minh City; inner districts of Hai Phong City, Ha Long City of Quang Ninh Province, Bien Hoa City of Dong Nai Province; Vung Tau City of Ba Ria-Vung Tau Province; Thu Dau Mot Town and district of Thuan An, Di An, Ben Cat and Tan Uyen of Binh Duong Province.

• VN$950,000 per month (equivalent to US$56) is applicable to businesses operating in remain suburban districts of Hanoi; Bac Ninh, Bac Giang, Hung Yen, Hai Duong, Vinh Phuc, Hai Phong, Quang Ninh; Da Lat city, Bao Loc town of Lam Dong province; Nha Trang city , Cam Ranh town of Khanh Hoa province; Trang Bang town of Tay Ninh province; remain towns of Binh Duong province, Dong Nai; Tan An, Duc Hoa, Ben Luc, Can Duoc of Long An province; remaining towns of Can Tho city; Ba Ria, Chau Duc, Long Dien, Dat Do, Xuyen Moc of Ba Ria - Vung Tau.

• VN$920,000 (equivalent to US$54) is applicable to businesses operating in the remaining areas.

In addition, the minimum salary for skilled employees (including employees are trained by enterprises) must be 7% or more higher than the minimum salary as provided in 3 items above.
-ITPC