Understanding Vietnam Labour Law for foreigners

As Vietnam continues to attract foreign investment and talents, it becomes increasingly essential for both employers and employees to comprehend the intricacies of Vietnam labour Law. This article aims to provide a comprehensive overview of key aspects of Vietnam's labour regulations, helping businesses gain a better understanding of this market before investing - especially foreign enterprises.

Foreign businesses need to understand Vietnamese labour law thoroughly

 

Importance of understanding Vietnam labour law

Understanding Vietnam labour Law is essential for fostering a harmonious and productive work environment, ensuring legal compliance, protecting the rights of workers and promoting the sustainable growth of businesses.

For businesses

Adhering to Vietnam labour Law ensures that businesses operate within the legal framework, reducing the risk of fines, penalties or legal disputes. Vietnam labour Law establishes guidelines for fair treatment and equality in the workplace. By understanding these Vietnam labour Law, businesses can create a positive work environment that respects the rights and dignity of employees.

Compliance with Vietnam labour Law enhances a company's reputation and credibility in the eyes of stakeholders, including customers, investors, and the public. Conversely, violations of Vietnam labour Law can tarnish a company's image and lead to reputational damage, affecting its long-term success and profitability.

For employee

Knowledge of Vietnam labour Law empowers employees to assert their rights and negotiate favorable employment terms. By understanding their legal entitlements, employees can advocate for better working conditions, fair compensation and adequate benefits. Likewise, employees can advocate for fair treatment and address any instances of discrimination or exploitation.

In conclusion, understanding of Vietnam labour law facilitates the resolution of disputes between employers and employees. Both parties can reference legal provisions to address grievances or conflicts, promoting smoother conflict resolution processes and reducing tensions in the workplace.

Understanding Vietnam labour law is essential for both company and employees

Vietnam Employment Law on Labour Contracts

Generally, foreigners working in Vietnam must comply with Vietnamese labour regulations, unless there's an international treaty objecting to it. If a labour contract is signed with a Vietnam-based entity, Vietnamese Labour Law applies, regardless of the parties' choice.

Foreign Employees

When it comes to employing foreign nationals in Vietnam, understanding the nuances of Vietnam labour laws is essential for both employers and employees. 

Visa

In Vietnam, a visa is a crucial document for foreigners entering the country for various purposes, including employment. There are several types of visas relevant to employment and business activities:

• Business Visa: Designed for foreigners entering Vietnam for business purposes. The common validity of a multiple-entry business visa is three months.

• Family Visa: Intended for direct family members of foreign workers in Vietnam, with a maximum validity of 12 months on a case-by-case basis.

• Investment Visa: Reserved for foreign investors listed in the Enterprise Registration Certificate and the Investment Registration Certificate. The validity of this visa depends on the investment value, ranging from one to ten years.

Temporary Residence Card (TRC)

For foreign workers intending to stay in Vietnam for an extended period, a Temporary Residence Card (TRC) serves as a replacement for a visa. The TRC can be obtained if the foreigner holds a valid work permit, Law Practice Registration, or an Investment Registration Certificate with an investment value exceeding three billion VND.

Temporary Residence Card is important for foreigners wishing to reside long-term in Vietnam

Foreigners Requiring a Work Permit

In Vietnam, most foreign individuals require a Work Permit issued by the Department of Labour - Invalids, and Social Affairs (DOLISA) before engaging in any employment activities. There are specific criteria for different categories of employees:

• Managers/CEOs: Must hold managerial positions or be CEOs appointed by the company, with certain qualifications and experience requirements.

• Specialists: Need to possess relevant work experience and educational qualifications.

• Technicians: Require technical training or specialized training, along with work experience in the trained field.

Application Process for a Work Permit

The process of obtaining a work permit involves several steps:

• Registration of the need for using Foreign Employees: The employer must report the need for employing foreign workers to the local DOLISA.

• Application for work permit: Requires submission of various documents, including an application form, criminal record, health check, and experience/educational qualifications.

• Submission of Labour Contract: In cases of recruitment, the signed labor contract must be submitted to the labor authority within five working days from the date of signing.

Exemptions for Foreigners

Certain exemptions exist for foreign individuals in Vietnam, including:

• Short-term assignments for less than 30 days per time, up to three times a year.

• Internal transfer within specific service industries, subject to certain conditions.

• Investors or members of the Board of Directors meeting specific capital requirements.

• Lawyers with a Foreign Registered Lawyer License.

• Individuals currently studying overseas under a traineeship program.

• Foreigners marrying Vietnamese citizens.

Foreign Employees have to comply with Vietnamese labor regulations

Probation period

Implementing a probation period is a crucial part of Vietnam labour Law. The duration of a probationary period is agreed upon based on the nature of the work and the job position. Specifically, probationary periods may last as follows:

• Up to 180 days for managerial positions within an enterprise.

• Up to 60 days for positions requiring a college level or higher specialized or technical expertise.

• Up to 30 days for positions in industries or trades requiring intermediate level skills or professional staff.

• Up to six working days for any other position not requiring training.

The probation period can be included in either the labor contract or in a separate probation agreement. During the probationary period, the probationary salary is negotiated but cannot be lower than 85% of the ordinary salary for the job. Either party may terminate the employment relationship during the probationary period without prior notice or compensation.

Working Hours, Rest Breaks, Holidays, Overtime

Understanding key aspects such as working hours, rest breaks, holidays and overtime is essential for ensuring compliance and fostering a conducive work environment. 

Working Hours

• Employees typically work 8 hours per day and 48 hours per week.

• The government encourages a 40-hour workweek.

Rest Breaks

• Employees are entitled to at least a 30-minute break during the workday, or a 45-minute break during night shifts.

• Rest breaks are included in the working hours for continuous shifts lasting at least 6 consecutive hours.

Holidays

• Employees receive 12 days of paid leave annually, with an additional day added for every 5 years of employment.

• There are 11 public holidays, and foreign employees may also get a day off for 1 traditional public holiday and 1 national day of their country.

• Additional days off are granted for special occasions like marriage or death.

Overtime

• Overtime work is limited to not more than 12 hours per day, 40 hours per month, and 200 hours per year (some sectors allow up to 300 hours per year with permission).

• Overtime pay is at least 150% of the regular hourly wage on normal workdays, 200% on weekly days off, and 300% on public holidays or paid days off.

Employees will be paid additional wages for overtime work

Minimum Wages

According to Government Decree No. 38/2022/ND-CP issued on June 12, 2022, minimum wage standards are specified for laborers under labor contracts. These minimum wage standards apply to various categories, including employees covered by the Labor Code, as well as employers defined by the Labor Code, such as enterprises, organizations, cooperatives, households, individuals, and other relevant entities involved in employing laborers.

The minimum basic salary in Vietnam varies across different regions, categorized into four zones:

• Zone I: 4,680,000 VND per month, or 22,500 VND per hour for part-time jobs.

• Zone II: 4,160,000 VND per month, or 20,000 VND per hour for part-time jobs.

• Zone III: 3,640,000 VND per month, or 17,500 VND per hour for part-time jobs.

• Zone IV: 3,250,000 VND per month, or 15,600 VND per hour for part-time jobs.

>>> See more: Expat salary in Vietnam

Salary During Sickness and Maternity/Paternity Leave

Employers are not obliged to pay salaries to employees on sick leave or maternity leave. Instead, salary during these periods is covered by the social insurance fund. Maternity leave spans six months and a female employee can only be dismissed if the enterprise ceases operations during this time, no other reasons for dismissal are recognized. Paternity leave is also provided, ranging from 5 to 14 working days, depending on the number of children born and the circumstances of the birth.

Potential Bonus Schemes

In Vietnam, it's common practice to give employees a 13th-month salary, often referred to as Tet bonus, during the Lunar New Year. The amount of this bonus can depend on both the employee's performance and the company's performance.

International investors often offer additional private health insurance as part of their benefits package. Team outings and company trips are also standard perks expected by employees, especially in a country where employee turnover is high like Vietnam. These outings are usually considered important for team bonding and morale.

Company outings and trips are eagerly anticipated by employees and seen as rewards

Internal Labour Rules (ILR’s)

Based on Vietnam labour Law, for enterprises with 10 or more employees, registering written ILRs with DOLISA is required. These rules comprehensively cover the working environment. However, for employers with fewer than 10 employees, ILRs are optional, though they must still incorporate labor discipline and material responsibility clauses into their labor contracts. Well-crafted ILRs are essential as they empower employers to take disciplinary measures or terminate contracts due to poor performance. Breaching ILRs can lead to disciplinary action, with a window of 6 to 12 months for addressing violations.

Labour Discipline

In Vietnam, labour discipline is regulated to ensure compliance with workplace rules. Various disciplinary measures are implemented based on the severity of the violation.

Procedures of Labour Discipline

The procedures for addressing violations of labour discipline must adhere strictly to regulations outlined in employment laws. These procedures involve holding documented meetings where the employer presents evidence of the employee's fault. It also includes the involvement of employee-representative organizations and granting employees the right to defend themselves or seek legal representation.

Health and Safety Obligations

Employers in Vietnam are required to comply with occupational safety and hygiene laws. They must establish internal rules and procedures based on national standards to ensure workplace safety. Additionally, employers must contribute to basic state health insurance for employees and provide regular health checks. Many international companies also offer additional private health insurance for enhanced coverage.

Enterprises need to organize regular health check-ups for employees

Trade Union in Vietnam

The trade union system in Vietnam operates at multiple levels, ranging from the Vietnam General Confederation of Labour (VGCL) to grassroots unions. These organizations do not participate in business management as in some European countries and are not provided with information on business performance. While not mandatory, enterprises must facilitate the establishment of enterprise-level trade union organizations. The mandatory trade union fee is 2% of the total salary, and employees who join the trade union also contribute a portion of their salary.

Termination of Employment

Termination of employment in Vietnam depends on various factors such as the reason for termination and the type of labor contract, affecting notice periods and severance payments. The Labor Code tends to favor employees, particularly in labor disputes.

Unilateral Termination

• Employers can terminate contracts under specific circumstances, observing applicable notice periods.

• Minimum notice periods vary based on contract type, ranging from three working days to 45 calendar days.

• Termination for reasons such as poor performance or prolonged illness requires adherence to performance assessment criteria.

Bilateral Termination

• Termination agreement is the common option.

• Employees have legal remedies for unlawful termination, including mediation and court reinstatement and compensation.

• Mutual termination agreement should cover termination date, severance payments, leave days, handover and other relevant topics to avoid disputes.

Termination in Vietnam bases on reason and contract type

Taxes and Duties

In Vietnam, taxes and duties play a crucial role in the country's economic landscape, shaping the financial responsibilities of both individuals and businesses.

Personal Income Tax (PIT)

According to Vietnamese tax regulations, individuals qualify as tax residents if they meet one of the following conditions:

• Residing in Vietnam for 183 days or more in either the calendar year or a consecutive 12-month period from the date of first arrival.

• Having a permanent residence in Vietnam and failing to prove tax residence in another country, provided their actual residing days in Vietnam are less than 183 days.

Tax residents are subject to PIT on their worldwide income, encompassing both employment and non-employment earnings. Conversely, tax non-residents are only taxed on income derived from activities related to Vietnam, regardless of their physical presence in the country. The PIT rates in Vietnam vary depending on the individual's tax residency status. For tax residents, employment income is subject to a progressive tax rate of up to 35%, while non-residents face a flat rate of 20%.

Compulsory Benefits

In addition to PIT, Vietnam implements compulsory social insurance, health insurance, unemployment insurance, and trade union fees, forming an integral part of the country's social security framework. Both employers and employees are required to contribute to these schemes based on the monthly salary stipulated in labor contracts.

The contribution rates for compulsory benefits are as follows:

• Social insurance: Employees contribute 8%, while employers contribute 17.5%.

• Health insurance: Employees contribute 1.5%, and employers contribute 3%.

• Unemployment insurance: Both employees and employers contribute 1%.

• Trade union fee: A fee of 2% of the salary fund for social insurance contributions is mandatory for employees.

These contributions are capped at 20 times the common minimum wage for social and health insurance and 20 times the minimum regional wage for unemployment insurance.

Paying taxes is a mandatory obligation that helps ensure financial sustainability and social welfare

Work Permit Violations

Work Permit Violations in Vietnam entail penalties for employers who fail to comply with the regulations regarding work permits for foreign employees. These violations typically involve situations where employers either neglect to apply for work permits for their foreign workers or fail to secure exemptions when required.

The penalties for such violations can be severe. Employers may face administrative fines of up to 150 million VND (approximately 6,500 US Dollars). Additionally, deportation of the foreign employee involved may be enforced.

Aniday - Supporting Businesses and Foreign Workers

A headhunter agency like Aniday can bring numerous benefits to both businesses and foreign individuals regarding Vietnam's labor law:

• Provide information and support regarding the regulations and requirements of Vietnam's labor law for both businesses and foreign employees, helping them understand the legal procedures and responsibilities.

• Assist businesses and foreign employees in the process of obtaining work permits, ensuring full compliance with the regulations and conditions of the labor law.

• Connect foreign employees with job opportunities that align with their skills and experience, while also aiding businesses in seeking and attracting talented individuals from various countries.

• Offer information and advice on labor rights and welfare policies for both businesses and foreign employees, ensuring a clear understanding of the regulations and conditions related to employment in Vietnam.

>>> See more: Aniday's Executive Search Services

Aniday is a reliable partner for both businesses and foreign employees

In summary, Vietnam Labour Law encompasses various aspects crucial for both employers and employees. With professionalism and profound knowledge of the labor market and Vietnam labour law, Aniday can play a crucial role in supporting and creating favorable conditions for both businesses and foreign employees when operating and working in Vietnam.

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