Vietnam's employment framework guide: SEA's new emerging market

Vietnam's economy has been growing rapidly and attracting foreign companies in various sectors, such as manufacturing, technology, tourism, and services. However, for companies to operate in Vietnam, they must understand the country's employment laws and regulations. These include important factors such as contracts, working hours, employee benefits, termination, and dispute resolution.

This guide will provide you with a detailed understanding of employment in Vietnam with legal framework, helping you navigate the system, reduce legal risks, and maintain a positive employer-employee relationship. In addition, we will cover the regulations surrounding remote work in Vietnam, which is becoming increasingly popular. You will gain valuable insights into how remote work is regulated and practiced in Vietnam, ensuring you are up-to-date and compliant with the latest developments.

Overview of Employment in Vietnam

Employment Contracts and Terms

Under Vietnam labour law, an employment contract is a legally binding agreement between an employer and an employee. It is mandatory for all employers in Vietnam to have written employment contracts, except for temporary work lasting less than one month, which can be oral agreements.

An employment contract should include the employee's full name, date of birth, gender, residence address, and identification details. It should also specify the employer's name, address, and the person signing the contract on their behalf. Additionally, the contract should cover aspects such as:

• Basic pay
• Payment methods
• Allowances
• Potential wage increases 
• Job Responsibilities
• Contract duration
• Work location
• Working hours
• Breaks
• Holidays
• Training opportunities
• Insurance coverage for health, social security, and unemployment.

There are two main types of employment contracts in Vietnam: open-ended contracts and fixed-term contracts. Open-ended contracts have no fixed end date and continue until either party decides to terminate them. On the other hand, fixed-term contracts have a minimum duration of time, ranging up to 36 months.

It's important to note that employment contracts should be directly established with the employing company and not with a group company.

In Vietnamese labor law, only the conditions for terminating an employment contract are automatically implied. This is because the termination process is strictly regulated.

If an employer intends to change or modify the terms of an existing employment contract, they must notify the employee at least three working days in advance and obtain their consent. However, if both parties cannot agree on the new terms, the original signed employment contract remains in effect.

Employee Rights

Employee Wages and Benefits

The minimum wage in Vietnam varies depending on the region and sector. 

Employers must pay their employees at least 7% higher than the regional minimum salary, and also provide them with,

• Social insurance

• Employees have to pay an 8% rate
• Employers have to contribute 17.5% 

• Health insurance

• Employees contribute 1.5%
• Employers contribute 3%

• Unemployment insurance contributions

• Employees contribute 1%
• Employers contribute 1%

In addition to the minimum wage, employees are entitled to various allowances and bonuses, such as:

• Overtime pay
• Seniority pay
• Hardship allowance
• Productivity bonus
• Annual bonus. 

The trend of hiring remote talents in Vietnam has been increasing, thanks in part to the Vietnamese government's initiatives to attract its overseas population. This has resulted in a significant number of returnees, who are often individuals originally from Vietnam and have lived or studied overseas, particularly in Western countries, and have now returned to work in Vietnam. These returnees possess language skills and international exposure that make them highly desirable for remote work.

To attract and retain top remote talent, companies should consider providing a stipend to cover work equipment such as laptops, reimbursements for business expenses, and the option to work from a co-working space if desired.

Working Hours and Leave Entitlements

In Vietnam, the standard working hours are eight hours per day and 48 hours per week. Employees have the option to work overtime, which is limited to a maximum of 50% of the normal working hours per day, 30 hours per month, and 200 hours per year. However, in certain situations such as seasonal or urgent work, employees can work up to 300 hours of overtime per year with approval from the labor authorities.

For overtime work to take place, both the employer and the employee must agree and document the agreement in writing. Overtime hours must be compensated at a higher rate compared to regular working hours. The overtime rate should be at least 150% of the normal rate for weekdays, 200% for weekends, and 300% for public holidays.

Employees are entitled to overtime pay as follows:

• At least one-and-a-half times the regular hourly pay ray for extra hours worked on normal working days.
• At least two times the regular hourly rate for extra hours worked during the weekend.
• At least three times the regular hourly rate. This is for extra hours worked during annual paid leaves and public holidays.

Employees working the night shift are entitled to an additional 30% of their regular salary. This applies to any night work completed

If you are looking for remote jobs near you, you might wonder how to comply with your company policies while working from home. Remote work can pose some challenges to compliance and adherence, especially regarding the Vietnam Labor Code.

To overcome these challenges, you need to follow some best practices for remote work compliance. First, you need to understand the Internal Working Regulations, Labor Regulations, and other rules that apply to your remote work situation. These rules should be specific and consistent for remote work, and should not conflict with each other or with the law.

Second, you need to make sure that your remote work rules are aligned with the Vietnam Labor Code. This will help you avoid any legal issues or disputes that might arise from your remote work arrangement. You should also be aware of the rights and obligations that you have as a remote worker under the law.

By following these steps, you can ensure that your remote work is compliant and adherent to your company policies and the Vietnam Labor Code. This will help you enjoy the benefits of remote work without compromising your legal status or your performance.

Employment Issues

Termination and Redundancy

Vietnam’s termination and redundancy policy is similar to that of other countries, like the United States and Singapore. 

In Vietnam, both parties of the employment contract can terminate the contract single-handedly. Advance notice must be provided by both parties, however, the notice period differs according to the contract duration.

Here is some common basis for an employment contract to be terminated single-handedly. 

Employers have the responsibility of compensating employees who have worked continuously for them for a minimum of 12 months in the event of redundancy. This may be due to changes in the company's structure, technology, economic reasons, division, separation, consolidation, merger, sale, lease, change in business type, transfer of ownership, or right to use enterprise or cooperative assets. 

If an employer intends to make redundancies of two or more employees, they must create a "labor usage plan", consult with the Vietnam General Confederation of Labour (VGCL) on the plan, and submit the plan to the local labor authority. Every redundant employee who has worked for the employer for at least 12 months is entitled to a redundancy allowance of no less than two months' pay.

Dispute Resolution and Enforcement

A labor dispute refers to a disagreement concerning the rights, obligations, and benefits that arise between parties in a labor relationship. 

In Vietnam, there are 2 types of labor disputes: individual disputes between both parties and collective disputes between labor collective and employer. It is encouraged that both parties engage in direct negotiations to resolve disputes and reach a mutually agreeable decision. However, if a labor dispute requires legal intervention, a three-step process is followed to resolve it, which includes negotiation, reconciliation, and court judgment.

1. Negotiation: 

The aim of negotiating is to find a mutually beneficial solution that addresses the interests of both parties, stabilizes production and business, and ensures social order and safety.

2. Reconciliation: 

Labor disputes in Vietnam are resolved based on principles such as mutual respect for the rights and benefits of both parties, consideration of social interests, and compliance with the law. Disputes must be resolved by authorized agencies or individuals if one party refuses to negotiate, if previous negotiations have failed, or if one party fails to implement the agreement. 

For individual labor disputes, conciliation procedures with a labor conciliator are required before filing a petition with the court, however, some disputes do not require conciliation, such as those related to disciplinary measures or compensation payment. The labor conciliator guides negotiations, prepares a written agreement if a settlement is reached, and provides a proposal if a settlement cannot be reached. In the case of unsuccessful conciliation, a statement is prepared. 

In collective labor disputes, the order of conciliation is similar, and if it fails, the parties may petition for resolution by the district people's committee or the labor arbitration council.

3. Court Judgment:

Labor disputes may be resolved by the court through labor dispute resolution upon petition by one of the parties if one party refuses to conduct negotiation if previous negotiations have failed, or if one party fails to implement the agreement. 

The most significant advantage of this dispute resolution method is that state coercive measures ensure that the court's decisions on labor disputes are enforced.

Conclusion:

As Vietnam emerges as a key player in Southeast Asia's rapidly growing economy, companies seeking to expand into this market must understand the country's employment framework. To gain a comprehensive understanding of the employment framework in Vietnam, the key issues like employment contracts and terms, wages and benefits, working hours and leave entitlements, termination and redundancy, dispute resolution, and enforcement have been explained in detail. Should more information be required, companies are encouraged to consult companies providing HR services for reliable and up-to-date information. 

Aniday provides a comprehensive range of services to meet your staffing needs. In addition to our hiring services, we also offer payroll services to simplify your payroll processes and ensure compliance with local regulations. Our team is well-versed in the complexities of local regulations, so you can trust us to handle all aspects of your payroll needs. Whether or not you have an entity in Vietnam, we are always ready to help. In addition to our payroll services, we offer hiring services through our network of headhunters and a centralized talent pool to help you find the best candidates for your business.

If you are looking for remote work opportunities in Vietnam, Aniday can help you as well. We have access to a wide range of remote work positions across various industries and sectors. Whether you are looking for full-time or part-time remote work, we can match you with the right employer and role. Remote work is becoming more popular and convenient in Vietnam, as the country has a robust internet infrastructure and a vibrant digital economy. With Aniday, you can enjoy the benefits of remote work while working for reputable companies in Vietnam.

Do not hesitate to contact us at [email protected] for further assistance.