Doing Business In Viet Nam
The Labour Code which was promulgated on 23 June 1994 serves as the principal legal base for all the labour matters in Vietnam. This Code was amended and supplemented in 2002, 2006 and 2007 respectively. The Code applies to both employee and employer including foreign organizations that employ local and foreign staff working on regular basis in Vietnam.
Since June 1994, a number of decrees, decisions, circulars, directions and other regulations have been issued from time to time, by the Government and various ministries and agencies, to guide for the implementation of each chapter of the Code.
A new Code has been passed by the National Assembly’s Legislature XIII on 18 June 2012, which shall take effect on 1 May 2013.
Formerly, foreign capital enterprises must recruit employees first from individuals recommended by the local labour supplier(s). Now, foreign capital enterprises can do direct recruitment.
Employees must be at least 15 years old. Preference in employment should be given to Vietnamese citizens. However, if a Vietnamese person with appropriate qualifications is not found, foreign employees can be hired, provided that the period of that employment is fixed and appropriate training programs are established for Vietnamese employees for future replacement. It is worthy of note that Decree No.34/2008/ND-CP dated 25 March 2008 of the Government on employment and administration of foreigners working in Vietnam, as amended and supplemented by Decree No.46/2011/ND-CP dated 17 June 2011 of the Government cancelled the quota of recruited foreigners in a company, and imposed another restriction: In the case of a foreigner internally transferring within an enterprise, at least twenty (20) per cent of the total number of the managers, executive directors and experts of each enterprise with a commercial presence within the territory of Vietnam must be Vietnamese citizens; however, each foreign enterprise shall be permitted to have a minimum of three managers, executive directors and experts who are not Vietnamese.
Foreigners wishing to work in Vietnam must meet several prior conditions including being at least 18 years in full of age; being in good health as necessary to satisfy the job requirements; being a manager, executive director or an expert; not having a criminal record for a national security offence, and not currently being subject to criminal prosecution or any criminal sentence in accordance with the laws of Vietnam and foreign laws; and having obtained a work permit from the competent authority of Vietnam should the working term exceed three months.
It is worthy of note that foreigners are not required to obtain work permits if they:
(i) intend to work in Vietnam for less than three months;
(ii) are invited to Vietnam to assist local companies and organizations with technical problems that Vietnamese experts or foreign experts currently in Vietnam are unable to address, but if for above three months then after working for three months in Vietnam the foreigner must carry out procedures to register for issuance of a work permit;
(iii) enter Vietnam to offer services;
(iv) are members of boards of management of a shareholding company, owner of a one member limited liability company, member of a limited liability company with two or more members, foreign lawyers to whom the Ministry of Justice has issued a certificate to practise law in Vietnam, heads of representative offices, project offices or foreigners assigned to represent all activities in Vietnam by foreign non-government organizations;
(v) have internal transfer within an enterprise, in the service scope in the commitment service table of Vietnam with World Trade Organization with 11 services, including: business service; information service; construction service; distribution service; education service; environmental service; financial service; health service; tourism service; service of entertainment culture and transportation service;
(vi) come Vietnam to supply consulting service on professional knowledge and technique or implement other tasks serving to research, build, appraise, monitor and evaluate, manage and process programs, projects that use Official Development Assistance (ODA) in accordance with regulations or agreements in international treaty on ODA signed between authorized Vietnam agency and foreign agency;
(vii) are licensed to operate in information and newspaper sector in Vietnam by the Ministry of Foreign Affairs;
(viii) other cases in accordance with the Prime Minister’s regulations.
17.3 Labour Contracts
A labour contract must be in writing and signed between the employee and the employer's representative, unless the employment will last less than three months. The contract should provide for either a definite term, an indefinite term or for work on seasonal or limited basis.
A labour contract must be in conformity with the Vietnamese laws and collective agreements (if any), with maximal two definitive term contracts to be first permitted, then indefinitive term contract to be applied.
Indefinite term labour contracts, definite term labour contracts with a term from twelve (12) months to thirty six (36) months, and labour contracts with a term from three to under twelve (12) months must be signed in writing in accordance with Form 1 attached to Circular No.21/2003/TT-BLDTB&XH dated 22 September 2003 providing guidelines for implementation of a number of articles of Decree No.44/2003/ND-CP of the Government dated 9 May 2003 with respect to labour contracts. The employer shall prepare labour contracts in the prescribed form in A4 size and affix an integrity seal on the pages for use within its entity. Where a contracting party to the labour contract is a foreigner, the content of the contract must be made in Vietnamese; after the part in Vietnamese, there may be a part in a foreign language as agreed by the two parties; and the content in Vietnamese shall have legal validity. A labour contract may be written with a pen in ink of different colours (except for red colour) or may be typed. It must have clauses relating to: the nature of the work, working hours and rest breaks, the wage or salary, the location of the job, the duration of the contract, employment protection and conditions on occupational safety and hygiene, conditions in respect of social and medical insurance for the employee.
Probationary agreements are often included in the contracts. The probationary length varies, and subject to the nature and complexity of assigned jobs.
17.4 Statutory Minimums
Regular working hours are limited to 8 hours per day and would be, 40 hours per week in the nearest future (now 48 hours per week). Working hours may be extended by mutual agreements, but total daily overtime must be in no case over four hours; in case of working hours are calculated per week, normal working hours and additional working hours per day shall not exceed 12 hours; and total annual overtime must not exceed now 200 hours, or 300 hours in special cases of the enterprises, business, production units producing or processing export goods including: Textile, garment, leather, footwear and processing aquatic products, have to settle urgent mission which cannot be delayed by pressing and necessary requirement or by seasonal characteristics of production or by unforeseen factors.
Subject to the nature of jobs, employees are entitled to have 12, 14 or 16 day annual leave. Female employees are entitled also to maternity leave of at least four or six months, as the case may be, with an allowance equal to 100% of salary.
Salary rates must conform to the collective labour agreement (if any) and must not be less than the legally-regulated minimum regional wage rates. There are currently four levels applicable to employees working for foreign capital enterprises, which come down from VND2,000,000 (about US$95) in the inners and the mains of suburb of Hanoi, HCMC and Hai Phong, Bien Hoa City and some rural districts of Dong Nai Province, Thu Dau Mot Town and some rural districts of Binh Duong Province, and Vung Tau City; VND1,780,000 (about US$85) in the remaining of suburb of Hanoi, HCMC and Hai Phong, and the inner of some smaller cities including Hai Duong, Hung Yen, Vinh Yen, Bac Ninh, Ha Long, Mong Cai, Thai Nguyen, Viet Tri, Ninh Binh, Hue, Nha Trang, Ba Ria, Da Lat, Bao Loc, Phan Thiet, Tan An, My Tho, Can Tho, Rach Gia, Long Xuyen, Ca Mau, and some tows including Phuc Yen, Tu Son, Cam Ranh, Long Khanh, etc.; VND1,550,000 (about US$74) in the other cities and towns, to VND1,400,000 (about US$67) in the rest.
17.5 Collective Labour Agreement
Representatives of both employers and employees in a foreign capital enterprise may negotiate and sign a collective agreement. The labour collective's representative is the executive committee of the enterprise's grass-root trade union or a temporary trade union organization.
A collective labour agreement must cover all matters such as job and job security; working hours and rest breaks; wages, wage-indexing allowances and bonuses; labour quotas; occupational safety and hygiene; social insurance; and others. A collective labour agreement shall have the validity depending on agreement between the employer and the labour collective’s representative. A collective labour agreement shall only be signed if the negotiated content of such agreement is approved by more than fifty (50) per cent of the members of the labour collective. A copy of the collective labour agreement must be submitted to provincial/municipal labour department for registration within 10 days from the signing date; enterprises in export-processing zones, industrial parks or high-tech parks (referred collectively to as industrial parks) shall make registration at the Industrial Park Management Boards under the authorization of the provincial/municipal labour departments where such Management Boards are headquartered.
The term of the collective labour agreement may be extended from one to three years. When an enterprise signs a collective agreement for the first time, the duration of the collective agreement may be less than one year.
17.6 Internal Working Rules
Foreign capital enterprises employing ten (10) or more employees must have their written internal working rules registered with provincial labour department. Internal working rules must include compulsory items such as working hours and rest breaks; rules and order of the enterprise; occupational safety and hygiene in the work places; protection of assets and confidentiality of technology and business secrets of the enterprise; conduct which is in breach of labour rules and penalties imposed for those breaches, and responsibility for damage; etc.
Internal working rules shall be the legal basis for employees to follow and for employer to apply disciplines in case of breaches by employees.
17.7 Social, Healthcare and Unemployment Insurance
They have recently been merged into one system being managed by Social insurance organization. Social insurance covers illness, pregnancy, retirement, death, occupational accidents and diseases, and unemployment.
Foreign capital enterprises are required to comply with the social insurance scheme, at least with respect to Vietnamese employees. In general, employers must pay to the social insurance fund, now equal to 17% of the total wages which will be increased by 1% for every two years till 18% as from 1 January 2014 onward and employees will make a monthly payment of 7% of the total wages which will be increased by 1% for every two years up to 8% as from 1 January 2014 onward.
With respect to health insurance, both sides of employer and employees including foreigners have to pay to the health insurance, of which 3% of total wages are paid by employers and 1.5% of the total wages are paid by employees.
Unemployment insurance is effective from 1 January 2009, which requires 1% to be paid by the employer and another 1% to be paid by the employee. Having benefit from this type of insurance, the employee shall not be beneficial in terms of time for calculation of the severance allowance when the employment relation is terminated, from 1 January 2009 (i.e. all severance allowance if any shall be calculated up to 31 December 2008 as the last date for that).
17.8 Labour Disputes
It should be first noted that Vietnamese laws allow employees to strike works against employers. Attempts must be made to settle labour disputes through amicable negotiation between the employer and employee. If the dispute can not be settled through negotiation, the parties may refer the dispute to a grass-root labour conciliation council comprising an equal number of representatives from each side, or a labour conciliator assigned by local labour agency.
Failing all, the dispute can be referred to the local court for final settlement.
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