Tilleke & Gibbins

1

GENERAL PRINCIPLES

Forums For Adjudicating Employment Disputes

Depending on its nature, a labour dispute in Vietnam may be settled by a labour conciliator, a labour arbitration council, and/or the court.

In particular, for individual labour disputes (i.e. disputes between an individual employee and his/her employer), the competent authorities for dispute settlement include labour conciliators, labour arbitration councils, and the court. Except for certain cases, such as those involving dismissal or unilateral termination, or payment of compensation or severance to an employee, for which mediation is not mandatory, individual labour disputes must be first settled by a labour conciliator appointed by the local labour authority. If either of the parties does not agree to the solution proposed by the conciliator or either party fails to comply with the conciliation agreement, then it may submit the dispute to the labour arbitration council (subject to the consent of the other party) or the court.

For collective labour disputes (i.e. disputes between the employees as a group and the employer), if a dispute is considered to be regarding existing rights (i.e. a dispute as to the performance of rights and obligations of the parties under the collective labour agreement or labour laws), then the competent authorities for dispute settlement include labour conciliators, labour arbitration councils, and the court. The dispute must be first settled by a labour conciliator. If a mutual agreement as suggested by the conciliator cannot be achieved, then either party may submit the dispute to the court. The parties may also mutually agree to submit the dispute to the labour arbitration council. If the parties elect to submit their dispute to a tribunal under the labour arbitration council, and it finds that the employer has violated the law, the tribunal will not make a settlement decision but will instead issue a record and transfer the documents to a competent authority for settlement as prescribed by law.

If a collective labour dispute involves benefits (i.e. a dispute arising from a demand of either of the parties that is not yet stipulated under the labour laws or the collective labour agreement, such as a dispute as to the demand of the employees for a salary raise or reduction of working hours etc.) the competent authorities for dispute settlement include labour conciliators and labour arbitration councils. The dispute shall initially be settled by way of conciliation through a labour conciliator. If conciliation fails, then the parties may mutually submit the dispute to the labour arbitration council for settlement or the employees’ representative organisation may organise a strike. The authorised representatives of the two (2) disputing parties must be present at the session resolving a collective labour dispute about benefits. If necessary, the labour arbitration council can invite representatives of other concerned bodies and organisations to attend the session. At the dispute resolution meeting, the arbitration tribunal shall specify the issues raised by the parties and each party shall have the opportunity to present its position. After studying the case file and collecting evidence, the arbitration tribunal will issue a decision on the dispute and send it to the parties. If the tribunal fails to issue a decision or the employer fails to implement it, the employees may go on strike.


The Main Sources Of Employment Law

The main sources of employment law in Vietnam are the Labour Code 2019 (effective from 1 January 2021), the Law on Work, the Law on Vietnamese Labourers Working Overseas Under Contract, the Law on Social Insurance, government decrees, ministerial circulars, and guiding documents issued and to be issued to guide the new Labour Code 2019.


National Law And Employees Working For Foreign Companies

Except for those foreign individuals working in Vietnam under an intra-company transfer regime (i.e. a foreign parent company assigns its employee to work at its Vietnam-based subsidiary under an offshore contract), Vietnamese labour laws apply to all individuals physically present in Vietnam working for Vietnam-based organisations (including foreign-invested enterprises).


National Law And Employees Of National Companies Working In Another Jurisdiction

Normally, Vietnamese labour law is applied when Vietnamese companies send their employees to work overseas. Technically, the employment contract does not need to specifically address this issue.


Data privacy

If an employer collects, processes, uses, stores, or transfers personal information of its employees and job applicants, it is subject to Vietnam’s data protection and privacy regulations. Specifically, the Vietnamese Government issued the Personal Data Protection Decree (“PDPD”) on 17 April 2023, which is considered a “ground-breaking” legal instrument as it sets out the very first comprehensive legal framework for the protection of personal data in Vietnam. The PDPD takes effect from 1 July 2023 and affects all local and foreign-invested enterprises, which directly participate in or relate to personal data processing activities in Vietnam.

The PDPD defines personal data as information in the form of symbols, letters, numbers, images, sounds or the like on an electronic medium that is associated with a particular person or helps to identify a particular person, and is categorised into two groups: (a) basic personal data, and (b) sensitive personal data. It requires the personal data controller (e.g., the employer) to notify and get consent from the data subject (e.g., the employee) before conducting data processing (unless otherwise stipulated by law) with certain required information such as the purposes and methods of processing, the types of personal data to be processed, organizations and/or individuals permitted to process the personal data, rights and obligations of data subject, unexpected consequences and/or damages, the start time and the end time of personal data processing.

Normally, the notification and consent to the processing of employees’ personal data with the required information under the PDPD can be provided in the relevant labour contract. Alternatively, the employer may prepare a separate employee privacy notice for the employee to give consent and sign off.

2

HIRING THE EMPLOYEE

Legal Requirements As To The Form Of Agreement

A labour contract must be in writing and executed before the employee starts to work. Contracts for temporary jobs which last for a term of less than one (1) month do not need to be in writing and can be oral. A labour contract must be written in Vietnamese or in both Vietnamese and another foreign language if the employee is an expatriate.

A labour contract should include the following material terms: (i) work to be performed; (ii) working hours and rest hours; (iii) wages; (iv) working place/location; (v) duration of contract; (vi) conditions on occupational safety and hygiene; (vii) statutory insurance for the employee; and (viii) training and skills improvement for the employee.


Mandatory Requirements
  • Trial Period

    • There is no compulsory obligation to provide trial periods, otherwise known as ‘probationary periods’, when engaging new employees, but it is common in practice to do so. An applicable probationary period is maximum of 180 calendar days for the position of enterprise executive prescribed by the Law on Enterprises and the Law on Management and Use of State Investment in Enterprises; 60 calendar days for jobs requiring a college degree or more; 30 calendar days for jobs requiring vocational qualifications or technical workers and professional staff; and six (6) business days for other types of work. Employees must be paid at least 85% of their normal salary during the trial period.

  • Hours Of Work

    • The maximum working hours are eight (8) hours per day and 48 hours per week for normal working conditions. Working hours may be on an hourly, daily, or weekly basis, depending on the employer’s needs. If on a weekly basis, the regular working hours must not exceed 10 hours a day and 48 hours a week. Nightshift work hours are from 22h00 to 06h00 of the subsequent day.

  • Special Rules For Part-time Work

    • There is only one (1) provision specifically providing for part-time workers, according to which part-time employees are entitled to a wage and are entitled to equal opportunities and to non-discrimination and assured labour safety and hygiene.

  • Earnings

    • Vietnamese labour laws require that the salary payable to employees must at least be equal to the regional minimum salary declared by the Government from time to time. The regional minimum salary in 2023 applicable to non-state-owned enterprises is divided into four regions corresponding to four wage levels: VND 3,250,000, VND 3,640,000, VND 4,160,000 and VND 4,680,000, depending on the geographical area. This salary level is typically adjusted annually.

  • Holidays/Rest Periods

    • There is a requirement that employees must be entitled to a rest period of a minimum of 24 consecutive hours per week. There are also various compulsory daily and weekly rest periods and/or breaks which must be observed. For instance, an employee who works for six (6) hours consecutively is entitled to a break of at least 30 minutes. If the employee works at night, the minimum break is 45 minutes. Employees working on shifts are entitled to a break of at least 12 hours before changing to a different shift.

    Employees are entitled to 12 to 16 annual leave days with pay, depending on the type of work in which they are engaged. In addition, there are 11 public holidays per annum in Vietnam.

  • Minimum/Maximum Age

    • The normal age for lawful employment is 18. In special cases, employers may employ minors who are as young as 13, subject to the satisfaction of certain conditions such as the nature of work and the prior acceptance of the guardian of the employee.

    The Labour Code 2019 raises the retirement ages of employees in normal working conditions from the previous 60 to 62 for males, and from 55 to 60 for females. These changes are being phased in gradually and will reach the designated ages by 2028 for males and 2035 for females.

    The retirement ages of employees who suffer from work capacity reduction; doing laborious, toxic, or dangerous work; or working in highly disadvantaged areas may be younger by up to five (5) years than the normal retirement ages unless otherwise prescribed by law. Retirement ages of skilled employees and employees in certain special cases may be older by up to five (5) years than the normal retirement ages unless otherwise prescribed by law.

  • Illness/Disability

    • Employees who suffer from illness and/or disability and take leave in accordance with doctor’s orders shall receive a monthly allowance paid by the social insurance fund of Vietnam. Depending on the type of work and nature of the illness or disability, the length of time for the allowance varies. The allowance is equal to 75% of the employee’s regular wage, subject to a cap of 20 times the basic minimum wage (at the time of writing, the capped amount was VND 36 million per month).

  • Location Of Work/Mobility

    • An employee’s place of work must be set out in the labour contract in order to comply with statutory requirements. Mobility clauses can be included in the employee’s labour contract, if necessary. Where a job requires travel to another temporary location, it is customary for the employer to reimburse all reasonable travel expenses.

  • Pension Plans

    • Both employers and employees are required to contribute to the compulsory social insurance fund that shall pay a pension to employees when they retire.

  • Parental Rights (Pregnancy/ Maternity/ Paternity/ Adoption)

    • Employers must allow pregnant employees to have their health checked regularly. Female employees are entitled to take six (6) months of maternity leave. Male employees are permitted to take five (5) to 14 business days of paternity leave, depending on the circumstances of the birth.

  • Compulsory Terms

    • The Labour Code requires a labour contract to include the following material provisions: (i) Name and address of the employer and the position and name of the employer’s legal representative; (ii) full name, date of birth, gender, residential address, telephone number, email address, and the number of ID Card or other legal document of the employee; (iii) work to be performed and work location; (iv) term of the labour contract; (v) salary/wage rate, method and time of salary payment, allowance and other additional payment; (vi) regime for salary increase; (vii) working hours and rest hours; (viii) personal protective equipment for the employee; (ix) social, medical and unemployment insurance; and (x) training.

  • Non-Compulsory Terms

    • Employers and employees are free to agree on any other terms in addition to the compulsory provisions, provided that these additional provisions are no less favourable than what is statutorily required and are not contrary to the law or social morals.


Types Of Agreement

Under Vietnamese labour laws, there are two (2) types of labour contracts: (i) Indefinite-term labour contracts and (ii) fixed-term labour contracts with a duration of up to 36 months.


Secrecy/Confidentiality

The Labour Code allows for covenants on confidentiality of business and technology secrets via provisions in the labour contract or a separate agreement. Such covenants may include payment of compensation if the employee breaches the confidentiality agreement.


Ownership of Inventions/Other Intellectual Property (IP) Rights

The ownership of inventions and other IP rights generated by the employee in the course of employment shall belong to the employer except if there is an agreement which states otherwise between the employee and the employer. However, the employee is entitled to remuneration for any inventions unless the employee has explicitly waived this right. To avoid any unexpected dispute that may arise in the future, the labor contract or a relevant agreement should clearly state that the employee’s salary or wages stated in his/her labor contract already include any remuneration for inventions created by the employee during his/her performance of the labor contract with the employer or due to the use of the employer’s resources.


Pre-Employment Considerations

Employment is highly regulated in Vietnam, and the labour laws tend to be employee friendly. In particular, it can be difficult to unilaterally terminate an employee unless specific grounds are met, and strict procedures are followed.

Due to this reason, most employers choose to enter into a definite-term contract of 12 months instead of executing an indefinite-term contract to enable the employers to review the employee’s performance before hiring him/her on a long-term basis. Employers should note, however, that they may only enter into two (2) definite-term contracts before they must enter into an indefinite-term contract with an employee, except for certain special classes of employees, such as foreign employees or employees who are older than the legal retirement age.


Hiring Non-Nationals

All foreign nationals working in Vietnam must have a work permit, regardless of the length of time they intend to work in Vietnam, unless exempted. Vietnamese employers are required to provide support and submit application documents for the work permit. Foreign workers exempted from the work permit requirement include, among others, capital-contributing members or owners of limited liability companies and members of the board of management of shareholding companies (provided the companies have a minimum capital contribution of VND 3 billion), and Heads of Representative Offices of non-governmental organisations.


Hiring Specified Categories Of Individuals

Employers are prohibited from hiring female employees, pregnant employees, child employees, disabled workers, and senior employees for hazardous and hard work that may cause health problems.


Outsourcing And/Or Sub-Contracting/Temporary Agency Work

Labour outsourcing is considered a conditional business in Vietnam. As such, labour outsourcing is permitted only for certain types of work and the labour lessor must be licensed to conduct labour outsourcing. In addition, a deposit is required for carrying out the business. The Labour Code provides general principles for this service. For example, the labour lessor is required to pay salary to a contractor at least equal to the salary the lessee would pay for its own employee who has the same level and same job, and the maximum term for outsourcing is 12 months. Labour outsourcing is also limited to only 20 types of jobs set out on a specific list promulgated by the government.

3

MAINTAINING THE EMPLOYEE RELATIONSHIP

Changes To The Contract

In general, a labour contract must be made in writing and signed by both the employee and employer prior to the employee’s start of work. Therefore, any change to the content of a labour contract must also be made in writing and signed by both parties (except for cases where the change brings more benefits to the employee, such as salary increase etc.). The party proposing the change to the contract must provide at least three (3) business days’ written notice of the proposed change to the other party, and if the other party agrees, the change can be in the form of an addendum appended to the original labour contract or set out in a new labour contract. Any changes to the duration of the labour contract must be set out in a new contract, and the law prohibits the parties from making this amendment through an addendum. Nevertheless, the law also allows the employer to temporarily change the terms and conditions of a labour contract for a limited period of time under certain circumstances. In particular, in cases of force majeure or due to the employer’s business demand, the employer may temporarily assign an employee to do work other than that specified in the labour contract, subject to the satisfaction of the requirements as to the time of the assignment not exceeding 60 calendar days in one (1) year and the new salary being at least 85% of the current salary.


Change In Ownership Of The Business

Where there is a merger, consolidation, division, separation, or transfer of ownership, or change in the right to manage, or change in the right to use assets, there must be a plan for labour usage. The employer must consult with the employees’ representative organisation (if any) about this plan before it is implemented. If a labour contract is terminated under these circumstances, an employee who is let go, but who has worked for the former employer for 12 months or longer, shall be entitled to receive a job-loss allowance equal to one (1) month’s salary for each working year (for which the employee has not already received unemployment benefits in accordance with the Law on Work) but no less than two (2) months’ salary.


Social Security Contributions

Employers and employees must contribute to compulsory social insurance, health insurance and/or unemployment insurance (“SHUI”) funds on a monthly basis with the rates set out in the table below. Employers in Vietnam must deduct employees' contributions for submission, and also make employer’s contributions to the Social Insurance Fund.

(i) For Vietnamese employees, the contributions as a percentage of the employee’s salary are presented in the table below:


Social Insurance Health Insurance Unemployment Insurance Labour Accident and Occupational Disease Insurance Total
  Vietnamese Employee       8%   1.5%       1%   0%       10.5%
  Employer       17%   3%       1%   0.5%       21.5%
  Total       25%   4.5%       2%   0.5%       32%

(ii) Foreigners who sign labour contracts with a Vietnamese employer must contribute to compulsory insurance as outlined below:


Social Insurance Health Insurance Unemployment Insurance Labour Accident and Occupational Disease Insurance Total
  Foreign Employee       8%   4.5%       Not applicable%   0.5%       9.5%
  Employer       17%   3%       Not applicable   0.5%       20.5%
  Total       25%   4.5%       Not applicable   0.5%       30%

If an employee is not subject to one of the forms of compulsory insurance (e.g., foreign expatriates), the employer must pay the employee an amount equal to the compulsory SHUI contribution in addition to the agreed-upon salary at the time of salary payment.


Accidents At Work

In the event of an accident at work, the employer must generally perform the following:

  • Promptly provide first-aid and emergency care for employees suffering from occupational accidents;
  • Notify the labour authority of the occupational accident if it results in fatalities or serious injuries to at least two employees;
  • Keep the scene of fatal or serious occupational accidents intact;
  • Form an investigation team of the employer to investigate occupational accidents causing minor injuries or serious injuries to one employee under their management; or provide documents and items relating to the accidents as required by the investigation team of the labour authority for fatal accidents or accidents that cause serious injuries to at least two employees;
  • Notify all employees of the information about occupational accidents ;
  • Finalize and retain a dossier of occupational accidents during the period of 5 years for fatal occupational accidents or until the victim’s retirement for other occupational accidents;
  • Pay expenses for the occupational accident investigation;
  • Pay full salary, compensation and allowance to employees suffering from occupational accidents during their leave for medical treatment and working function rehabilitation;
  • Take remedial measures and settle consequences of the occupational accidents; implement and report on the result of implementation of recommendations specified in the record of occupational accident investigation; handle persons at fault in the occupational accidents;
  • Assign appropriate work to employees suffering from occupational accidents after they return to work from medical treatment and function rehabilitation.

Discipline And Grievance

In order to hold a disciplinary hearing, the following main procedural steps must be followed:


No. Step Description
  1       Prepare a violation record.   Based on the evidence gathered to-date, the employer should prepare a formal violation record and notify the accused employee and a trade union representative (if the accused employee is a member).
  2       The employer provides notice of the disciplinary hearing to the employee and the representative organization of the employees.   At least five working days before the disciplinary hearing, the employer must notify the employee and the trade union (if the accused employee is a member) (“Mandatory Participants ”) of the contents, time and location of the hearing. The notice must also state the full name of the employee and his/her alleged violations. The employer must have evidence that these participants have received notice of the disciplinary hearing before proceeding.
  3       The Mandatory Participants confirm their participation with the employer.   The Mandatory Participants must confirm their participation with the employer. In case any of the Mandatory Participants cannot participate in the hearing at the time set out in the employer’s initial notice, the parties should try to arrange another time or place for the hearing. If an agreement cannot be reached, the employer should make the final decision.
  4       The employer conducts the disciplinary hearing.   The employer holds the disciplinary hearing at the place and time indicated in the notice or as agreed upon by the parties. If one of the Mandatory Participants fails to attend, the employer may still proceed with the hearing.
  5       The hearing must be recorded in writing and signed by all attendees.   Written minutes recording the contents of the disciplinary hearing are drafted and signed by everyone in attendance. In case a person refuses to sign the minutes, the minute-taker must specify the person’s full name and reasons for refusing to sign in the minutes.
  6       The employer issues a disciplinary decision   After the hearing, the employer will issue a disciplinary decision and send it to the Mandatory Participants. This may be done at any point after the hearing, however, it must be within the limitation period for applying disciplinary action.

If the accused employee or complainant disagrees with the outcome of the disciplinary hearing, the employees may address their grievance by: (i) making a labour complaint, (ii) making a labour denunciation or (iii) commencing legal proceedings in the labour court.


Harassment/Discrimination/Equal pay

Harassment

General, non-sexual harassment is not addressed in detail in the Labour Code, and employers are simply prohibited from “maltreating employees”, but no details are provided.

On the other hand, sexual harassment in the workplace is prohibited. Employers must, in their Internal Labor Rules, stipulate detailed sexual harassment prevention and handling procedures in the workplace pursuant to the characteristics of the work and the workplace. The Labour Code includes sexual harassment as a ground for dismissal, and employees who are victims of sexual harassment can terminate their employment contracts with no notice.

Discrimination

Discrimination in employment is prohibited. Employers cannot discriminate in a manner that affects the equality of opportunity for employment on the basis of gender, ethnicity, race, skin colour, nationality, social class, beliefs and religion, HIV infection, age, pregnancy, marital status, opinions, family responsibility, disability, or establishment of or participation in a trade union or an internal employee organisation.

However, positive discrimination based on professional requirements and the sustainment and protection of employment for vulnerable employees is not considered discrimination.

The law does not provide any specific guidelines on the protections from discrimination available to employees. The law provides generally that employees have the right to make a complaint or a "labour denunciation" to the employer or the labour inspectors when there is a basis to suggest that an employer's decisions or behaviour have breached the labour law and infringed an employee's legal rights and interests. Employers may be subject to administrative fines if the labour authority finds they did in fact discriminate against an employee based on a prohibited ground.

Equal pay

The Labour Code states that employers must not discriminate on the basis of gender in paying salaries and must provide equal pay for equal work. Nonetheless, there is little-to-no enforcement on this issue and the gender pay wage gap continues to be an issue in Vietnam.


Compulsory Training Obligations

The employer must provide necessary training and instruction concerning occupational safety and hygiene at work. In particular, the employer has detailed health and safety training requirements under Vietnamese law on occupational safety and hygiene. Training requirements vary depending on the nature of the employee’s position. Health and safety trainers must have certain educational certifications and experience to conduct occupational health and safety training and, generally, the employer engages external health and safety trainers to conduct the required training. If an employer wishes to conduct the training itself, it must register with the labour authority to do so.

In addition, the employer may provide vocational training support for the employees to improve their qualifications and occupational skills according to the employer’s training policies.


Offsetting Earnings

If an employee damages the employer’s assets, the employer may deduct amounts from his/her salary to receive compensation for such damage. If the damage caused by an employee is not serious, not deliberate and is worth less than 10 months’ region-based minimum wage, the maximum compensation an employee can be made to provide is three months’ salary. Any monthly deduction is capped at 30% of the net monthly salary of the employee. However, in other cases, the employee must compensate for the damage or loss of assets/equipment in full or in part at the market price, or as stipulated in the internal labour regulations or the responsibility contract (if any).


Payments For Maternity And Disability Leave

Maternity leave

Employees are entitled to maternity leave allowance paid by the State social insurance fund provided they have contributed to social insurance for at least six of the 12 months prior to their infant’s birth.

Maternity leave allowance is equal to 100% of the employee’s salary, capped at 20 times the basic minimum wage. Presently, the basic minimum wage is VND 1.8 million, so the cap is VND 36 million per month from July 2023 (at the time of writing).

The employer applies to the social insurance authority on the employee’s behalf, liaises with the authority to collect the maternity allowance and then distributes it to the employee. Employers are not required to pay the employee anything during the maternity leave period, and during this time the parties cease their participation in statutory insurance.

Disability leave

In the event of absence from work owing to sickness, employees are entitled to payment from the Social Insurance Fund (up to 70 days of leave). Employees are also entitled to payments from the Social Insurance Fund in the event of sickness of their child/children under 7 years old (up to 20 days of leave), depending on the years of social insurance contribution of the employee. The rate covered by the Social Insurance Fund during such sick leave is up to 75% of the employee’s salary on which social insurance premiums were based in the month preceding their leave (currently capped at VND 36 million from July 2023 at the time of writing) (“Capped Salary”).

In addition, employees infected with a disease requiring long-term treatment, as promulgated by the Ministry of Health, are entitled to a maximum of 180 days or for the period of social insurance contribution of the employee if the employee needs more time for treatment, including public holidays and weekly days off. For the first 180 days, the rate covered is 75% of the employee’s Capped Salary. From the 181st day and onward, the paid sick leave regime will be reduced to 50%–65% of the employee’s Capped Salary.


Compulsory Insurance

Please refer to our response to question 17 above.


Absence For Military Or Public Service Duties

Employees are entitled to suspend performing their duties under labour contracts if they are required to carry out military service or other public civic obligations. Employers are required to re-employ the employees at the end of the suspension period.


Works Councils or Trade Unions

A trade union is defined under Vietnamese law as the body that represents and protects the employees. Generally, the trade union is delegated to participate in, negotiate, sign, and supervise the implementation of collective labour agreements, wage scales, payrolls, internal labour rules etc.; to assist in resolution of labour disputes, and to discuss and cooperate with the employer to formulate a harmonious, stable, and progressive labour relationship within enterprises.

The trade union system consists of the Vietnam General Confederation of Labour and the trade unions at the provincial, district and grassroots levels. Grassroots trade unions are formed upon request of the employees at enterprises with the assistance of, normally, the district-level trade union, provided that there are at least five (5) employees registered as trade union members. A Vietnamese employee working in an enterprise has the right (but not obligation) to establish and join a grassroots trade union and to participate in its activities in accordance with the Law on Trade Unions and Vietnam’s Trade Unions Charter.

Employers are required to facilitate and assist the establishment and operation of the grassroots trade union and, once the grassroots trade union is established, the employer must recognise it and create favourable conditions for its operation. In addition, employers are required to contribute 2% of the payroll amount used as the base salary for social insurance contribution purposes (this base salary is subject to a cap of 20 times the basic minimum wage; at the time of writing, the capped amount was VND 36 million per month), in order to support trade union operations (the Trade Union Fee), while the amount contributed by the employee shall be 1% of his/her salary. Employers are required to contribute the Trade Union Fee even if there is no grassroots trade union at their enterprise.

Under the Labour Code 2019, in addition to the grassroots trade union operating at the employer, the employees may also set up their own organisation to represent their legitimate rights and interests. At the time of writing, the government had not yet released a decree guiding the establishment and operation of employee representative organisations.


Employees’ Right To Strike

Employees may voluntarily go on strike. However, strikes must be organised and led by the employees’ representative organisations. Striking is allowed only in respect of a collective labour dispute regarding new benefits and after such dispute has been heard by a labour conciliator (but in which the parties have disagreed with the proposed agreement by the labour conciliator). Statutory procedures and steps for organisation of strikes must be followed, such as obtaining opinions from the employees or the trade union, issuing a decision to strike, notifying the decision to strike to the employer and the labour authority etc.

Strikes are prohibited at enterprises which supply certain types of products and services that are essential for the national economy for the reason that such strikes may cause threats to the national defence and security of Vietnam.


Employees On Strike

Employers are not required to pay salaries to employees who participate in a strike. However, employers are prohibited from terminating labour contracts or applying labour disciplinary penalties to employees or to organisers of strikes or transferring employees or strike organisers to do other jobs or to work at another location because of their participation in/preparation for a strike.


Employers’ Responsibility For Actions Of Their Employees

Employers are responsible for the acts of their employees in the course of employment, except where employees act outside the scope of their employment.

4

FIRING THE EMPLOYEE

Procedures For Terminating the Agreement

There must be proper legal grounds for an employer to terminate a labour contract with an employee, such as performance issues, prolonged illness, a force majeure event or winding up of the company. Employers are required to follow a number of statutory steps such as sending advance written notice regarding the termination of employment to employees within a statutory time limit.

If an employer does not have legal grounds for the termination or fails to follow the proper statutory procedure, a termination may be declared wrongful and, if so, the employer may be required to reinstate the employee, pay their salary for the period that they were not allowed to work, and pay two (2) months or more of the employee’s salary as a penalty for the wrongful termination.


Instant Dismissal

Under Vietnamese labour law, dismissal is the most severe labour disciplinary measure. Employees may be dismissed when they commit an act of gross misconduct such as theft, embezzlement, using drugs at the workplace, gambling, deliberately injuring another person, sexual harassment, disclosure of business or technology secrets, or repeatedly commit acts in violation of the employer’s work rules or policies. A disciplinary hearing meeting must be held, and a number of statutory procedures must be followed.


Employee's Resignation

Employees are entitled to resign for any reason provided they give the required amount of advance notice (except for certain special circumstances where advance notice is not required), namely:

  • 30 days’ notice for employees with definite-term employment contracts,
  • 45 days’ notice for employees with indefinite-term employment contracts prior to termination of the employment, or
  • 120 days’ notice for employment contracts with contracts for certain special jobs such as aircraft crew, aircraft technical maintenance staff, enterprise manager, crew working on Vietnamese ships operating overseas, etc.

Alternatively, the employer and the employee are entirely free to agree to termination on any grounds they desire. If both parties agree to terminate employment, they are not required to give advance notice. The parties may also waive any procedures.


Termination On Notice

An employee may resign from his/her job without a specified reason, subject to an advance notice of at least 45 working days (for an indefinite-term labour contract) or 30 days (for a definite-term contract from 12 months to 36 months) and three (3) working days (for a definite-term contract of less than 12 months). For termination without notice, there must be statutorily recognised grounds for his/her resignation, such as the employee not being assigned the correct work or workplace as agreed in the labour contract, or the employee was mistreated, sexually harassed or subject to labour coercion etc. In this case, no advance notice is required.

An employer may terminate a labour contract only if there are legal grounds as provided for by the law.


Termination By Reason Of The Employee's Age

Unilateral termination by reason of the employee’s age is not a legal ground under Vietnamese labour laws unless the employee reaches legal retirement age. The legal retirement age under the Labour Code 2019 is 62 for men and 60 for women (though these ages are being gradually phased in). A retired person will receive his/her pension from the social insurance fund. When an employee reaches legal retirement age, the employer is entitled to opt to terminate the labour contract with the employee or to extend the labour contract with such employee. If the labour contract is extended, the senior employee is entitled to reduced working hours in accordance with the provisions of law. Employers may enter into an unlimited number of definite-term contracts with senior employees, whereas in the case of normal employees, employers may only enter into two (2) definite-term contracts.


Automatic Termination In Cases Of Force Majeure

Where, as a result of a natural disaster, fire, epidemic or for any other cause of force majeure as prescribed by law, an employer, despite having taken all necessary measures to remedy the problem, still needs to downsize its business, the employer is entitled to early termination of labour contracts with employees. However, the employer is still required to send an advance notice to the employees and follow the statutory procedures for termination. If the employees have been employed for at least 12 months, they shall be entitled to a severance allowance which is currently equivalent to half a month’s salary for each year of service during which the parties did not participate in unemployment insurance. Unemployment insurance was introduced in Vietnam in 2009, so for most Vietnamese employees, only working periods prior to 2009 qualify. However, if the employer and employee have suspended their participation in unemployment insurance at any point during the employment relationship (e.g. for the employee’s maternity leave), severance allowance will be due for this period.


Collective Dismissals

There is no collective dismissal in Vietnam. Rather, the Labour Code allows for mass layoffs. Specifically, an employer may make employees redundant due to, inter alia, changes in structure or technology, the merger or consolidation or cessation of operations of one (1) or several departments or units, or difficulties due to economic conditions.

Changes in structure or technology are further interpreted to include the following cases:

  • Changes of organisational structure or re-organisation of employment/positions;
  • Changes to manufacturing or business processes, technology, machinery, or equipment associated with the employer’s manufacturing or business lines; and
  • Changes to products or product structures.

Difficulties due to economic reasons are defined as an economic crisis or economic depression or where there has been a change in law or state policy restructuring the economy or implementing an international commitment.

Where the changes in structure, technology, or difficulties due to economic reasons lead to the termination of two (2) or more employees, the employer, in conjunction with the employees’ representative organisation (if any) is required to formulate and implement a so-called “labour usage plan”. The employer must also provide at least 30 days’ notice of the termination to the People’s Committee of the province and the employees.


Termination By Parties’ Agreement

The parties are entirely free to agree to termination on any grounds they desire. Where both parties agree to terminate employment, they are not required to give advance notice. The parties may also waive any procedures. However, all the related issues such as employment termination, severance payments, personal income tax, compulsory SHUI etc., should be finalised and addressed in a document, which should be signed by both parties.


Directors Or Other Senior Officers

In addition to being subject to labour law, certain high-ranking employees, such as general directors and members of the board, are subject to Vietnam’s Investment Law of 2020 and Enterprise Law of 2020, as well as the company’s charter (i.e. Articles of Association). The term for the above positions shall not exceed five (5) years but are renewable.

A director or senior officer may have his/her job description set out in the labour contract. However, the functions, duties, obligations, rights, and authority of such employees may also be provided by the relevant law and the company’s charter and/or decisions assigned by general shareholders’ meetings, members’ council, boards etc.


Special Rules For Categories Of Employee

Vietnamese labour laws provide special rules for certain categories of employees, including underage, female, disabled and senior employees. For example, for underage employees (i.e. employees under the age of 18), employers are prohibited from using them in extremely heavy, toxic, or dangerous work or in jobs which adversely affect the personality and health of underage employees, such as in the production and trading of alcohol, tobacco, or other addictive substances; or in casinos, bars, dance halls etc.a. Vietnamese labour laws provide special rules for certain categories of employees, including underage, female, disabled and senior employees. For example, for underage employees (i.e. employees under the age of 18), employers are prohibited from using them in extremely heavy, toxic, or dangerous work or in jobs which adversely affect the personality and health of underage employees, such as in the production and trading of alcohol, tobacco, or other addictive substances; or in casinos, bars, dance halls etc.

Senior employees include people who continue to work after having reached the retirement age. These employees are entitled to reduce the number of working hours in a day or work on a part-time regime. Employers are prohibited from assigning senior employees to heavy, toxic, or dangerous work which might have adverse effects on their health. Employers may enter into an unlimited number of definite-term contracts with senior employees, whereas normally, they may only enter into two (2) definite-term contracts.

Employers are required to ensure suitable working conditions, tools, and equipment appropriate for disabled employees and must take regular care of their health. It is also prohibited to allow a disabled person whose ability to work has been reduced by 51% or more to work overtime or at night. Employers are prohibited from assigning disabled workers to heavy, toxic, or dangerous work.

Female employees are entitled to the most protective rules. Among other rules, employers are required to ensure the implementation of gender equality during the employment relationship with female employees and ensure that female employees have adequate changing rooms, shower facilities and toilets in the workplace. An employer is not permitted to assign a pregnant female employee to do night work, overtime work or to go on a business trip to remote areas from the employee’s seventh month of pregnancy or if the employee is nursing a child under one (1) year old. During the pregnancy, nursing period or maternity leave, the female employee is not subject to labour discipline. After the maternity leave, the female employee is guaranteed her old job upon returning to work. The employer is also prohibited from assigning a female employee to work which has an adverse effect on her ability to bear and raise a child, work involving regular underwater immersion, or regular underground work (mining).


Specific Rules For Companies in Financial Difficulties

There are special rules which apply if a company is in financial difficulty. If a company goes into liquidation, an employer has legal grounds to unilaterally terminate all employees’ labour contracts. However, the employers are required to send an advance notice and pay severance allowance to employees etc.

If the employer is in bankruptcy, the employees shall become unsecured creditors. However, the employees’ interests (salary, allowance, insurance, and other contractual benefits) will be given priority over other unsecured creditors.


Restricting Future Activities

Vietnamese labour laws set forth a basic principle under which employees have the right to work and to freely choose their type of work, and only competent courts have the right to prohibit employees from doing certain jobs. Therefore, while there is no direct legal prohibition, clauses that attempt to restrict the future activities of an employee are likely unenforceable in Vietnam.

In practice, employers often include “unfair competition” or “non-compete” clauses in labour contracts to prevent their former employees from working for their competitors or directly competing with them for a certain period of time after termination. In reality, the enforceability of such agreements will most likely depend on the voluntary compliance of employees.


Whistleblower Laws

There are no legal provisions on whistle-blowers. If an employer wants to provide regulations on whistle-blowers, it will need to do so in its internal labour rules. It will be at the sole discretion of the labour authority to accept such a provision in the internal labour rules.


Special Rules For Garden Leave

Garden leave is not provided for by the laws of Vietnam. The employer may request the employees to take garden leave, provided that the employer pays the employee the salary as agreed in the labour contract.


Severance Payments

Vietnamese labour laws require employers to pay severance to employees for working periods which are not subject to unemployment insurance who have been continually working for the employer for 12 months or more. Unemployment insurance was introduced in 2009, so working periods prior to 2009 are subject to severance allowance. If there are gaps in the parties’ participation in unemployment insurance due to, for example, the employee’s maternity leave, this period will also be subject to severance allowance. For working periods subject to unemployment insurance, the employee will be entitled to payments from the unemployment insurance fund instead of the employer. There are certain cases in which employees are not entitled to severance allowance, such as in the case of dismissal or if the employee illegally resigns. Severance allowance is equal to half a month’s salary per year of service.


Special Tax Provisions And Severance Payments

In Vietnam, any income earned by an employee under the form of salary, wage, allowance, and bonus shall be subject to personal income tax (PIT). Employers, as income-paying organisations, are required to withhold and pay PIT to taxation authorities.

Generally speaking, statutorily allowed severance payment is not subject to PIT. However, any extra payments beyond that shall be subject to PIT.


Allowances Payable To Employees After Termination

Employers are not required to contribute to any allowance that is payable to employees after termination, unless otherwise agreed by the parties in the labour contract, provided that all required severance payments up to the date of termination (where applicable) were fully paid.


Time Limits For Claims Following Termination

In terms of a claim arising from the disciplinary measures resulting in dismissal, or a dispute arising from a unilateral termination of the labour contract or disputes relating to payment of compensation for loss and damage or payment of allowances, the statute of limitations for an individual labour dispute is six (6) months if the dispute is referred to a labour conciliator, nine (9) months if the dispute is referred to a labour arbitration council, and one (1) year if the dispute is referred to the court from the date of occurrence of conduct which any disputing party claims breached its rights or benefits.

5

GENERAL

Specific Matters Which Are Important Or Unique To This Jurisdiction

Labour laws of Vietnam are heavily employee protective. Without carefully worded and registered internal labour rules, dismissal of an employee in Vietnam is practically impossible. Termination in other circumstances also requires careful attention to procedures and documentation. In addition, “at-will” termination is not allowed in Vietnam. An employer may only terminate a labour contract prior to its term under certain specific conditions as set out by the laws. Depending on the grounds for termination, the conditions for severance or job-loss allowance, notice periods and procedures may vary.

The Labour Code 2019 came into effect on 1 January 2021, but not all decrees and circulars have been issued guiding its implementation. To such extent, specific advice must be sought on a case-by-case basis.



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Lien Bich Nguyen
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© 2024, Tilleke & Gibbins. All rights reserved by Tilleke & Gibbins as authors and the owners of the copyright in this chapter. Tilleke & Gibbins have granted to Multilaw non-exclusive worldwide license to use and include this chapter in this guide and to sublicense Lexis Nexis, a division of RELX Inc. and its affiliates certain rights to use and distribute this Guide.

The information in the How to Hire and Fire Guide provides a general overview at the time of publication and is not intended to be a comprehensive review of all legal developments nor should it be taken as opinion or legal advice on the matters covered. It is for general information purposes only and readers should take legal advice from a Multilaw member firm.

Publication Date: May 2024