Vietnam

Vietnam is considered as a potential labour market with a rich, diligent, and intelligent labour resource capable of quickly receiving new knowledge and advanced technologies. Furthermore, Vietnam promotes and gives favourable conditions to activities and businesses that create new jobs and attract labour.

Vietnamese labour legislation

The legislative basis for labour issues of Vietnamese nationals and foreigners in Vietnam can be found in the Labour Code of Vietnam (the Labour Code) which was passed by the National Assembly on June 23 1994, took effect on January 1 1995 and was then amended on April 2 2002. The Labour Code applies to all labourers, organizations and other employers in of all economic sectors.

Besides the Labour Code, the main legal documents governing labour matters involving foreigners in private entities and venture capital include:

• Decree 114/2002/ND-CP of the government dated December 31 2002 providing the details, and guiding the implementation, of a number of articles of the Labour Code relating to wages (Decree 114);
• Circular 14/2003/TT-BLDTBXH of the Ministry of Labour, War Invalids and Social Affairs, dated May 30 2003 guiding the implementation of Decree 114 (Circular 114).
• Decree No 12/CP of the government dated January 26 1995 providing regulations on Social Insurance (Decree 12);
• Decree 01/2003/ND-CP of the government dated January 09 2003 amending and supplementing a number of articles of Decree 12;
• Decree 41/CP of the government dated July 06 2003 providing details and guiding the implementation of a number of articles of the Labour Code relating to Labour Discipline and Material Liability (Decree 41);
• Decree 33/2003/ND-CP of the government dated April 2 2003 amending and supplementing a number of articles of Decree 41;
• Decree 44/2003/ND-CP of the government dated May 09 2003 providing details and guiding the implementation of a number of articles of the Labour Code relating to labour contracts (Decree 44);
• Decree 105/2003/ND-CP of the government dated September 17 2003 providing details and guiding the implementation of a number of articles of the Labour Code relating to recruitment and management of foreign employees in Vietnam (Decree 105);
• The Law on Foreign Investment in Vietnam of 1996, which was amended and supplemented in 2000;
• Decree 24/2000/ND-CP of the government dated July 31 2000 guiding the implementation of the Law on Foreign Investment in Vietnam, as amended by Governmental Decree 27/2002/ND-CP dated March 19 2003 (Decree 24).

Employment and labour management

Recruitment. Enterprises with foreign investment capital may directly recruit Vietnamese and foreign employees (art 83.1, Decree 24). Where works requiring high technical or managerial qualifications which Vietnamese labourers have not yet been able to obtain, enterprises may recruit foreign employees (art 132, the Labour Code). The total number of foreign employees working in that enterprise shall not exceed 3% of the total employees in said enterprise. The maximum number of foreign employees shall not exceed 50. Each enterprise can hire at least one foreign employee.

Foreigners who wish to work in Vietnam must:

• be at least 18 years of age;
• be healthy enough to meet the requirements of the job;
• have a high professional level, such as engineers or equivalent degrees, with substantive experiences in the works, administration and management that Vietnamese labourers have not yet been able to perform;
• have no criminal record, not been prosecuted for criminal liabilities, and not been criminally punished; and
• obtain a work permit from a Vietnamese competent authority (applicable to a foreign labourer working in Vietnam for three full months or longer).

But a work permit does not apply to foreigners who are members of a board of management or a board of directors of enterprises with foreign investment capital, nor is it applicable to foreigners working in Vietnam to perform contracts (other than labour contracts) between a Vietnamese party and foreign party.

Wages. Employees are entitled to a wage based on the agreement reached with the employer, but not lower than the minimum wage prescribed by the government. The minimum wage (applicable in enterprises with foreign investment capital inside Hanoi and Ho Chi Minh City) for employees who perform simple jobs without training shall not be lower than D626,000 a month (about $40). In certain instances, the wage may be less than the above minimum but not lower than D417,000 a month, depending where the enterprise is (Part II.1 Circular 14).

For Vietnamese who have an income of more than D3 million a month ($192), the rate of income tax is 10%, 20%, 30%, 40% or 50% depending on their specific total income; for after tax income of more than D15 million a month ($960), the income tax rate on that after tax income is 30%. For foreigners who have an income of more than D8 million a month ($512), the rate of income tax is 10%, 20%, 30%, 40% or 50% depending on their specific total income (art 10, Ordinance on Income Tax on High Income Earners). Therefore, for a net of income $1,000, an employer must pay such employee either about $1700 or $1100 depending on whether the employee is Vietnamese or a foreigner.

Labour contracts. Employers may conclude any one of the following labour contracts with Vietnamese employees:

• Indefinite term labour contract.
• Definite term labour contract (normally from 12 to 36 months).
• Labour contract for seasonal work or a fixed job with a term under 12 months.

Both the employer and employee have the right to unilaterally terminate the signed labour contract before its expiration in accordance with the Labour Code. Upon termination of the labour contract, and where the employee has been regularly employed in the enterprise for at least one year or more, the employer has to pay the employee a severance allowance at the rate of half a month's salary plus other benefits sub-salary for each year of working (except in the case where the employee is fired due to serious violation of labour discipline).

In cases where, as a result of structural or technological changes or an enterprise's transaction (such as a merger or disbandment), employees who have been regularly employed by the undertaking for one year become redundant, the employer has the responsibility to pay the employee an allowance at the rate of one month's salary for each year of working, the minimum being equivalent to two months' wage.

Dismissal shall be applied as a disciplinary measure only to:

• An employee who commits an act of theft, embezzlement, disclosure of technological and trade secrets, or other acts that seriously damage the property and interests of the employer.
• An employee who has been delayed a pay rise or transferred to another job as a disciplinary measure or removed from his duties and again applied a disciplinary measure.
• An employee who has been absent without legitimate reasons for a total of five days a month or 20 days a year.

An employer shall not have right to dismiss the female employees or unilaterally terminate the signed labour contract if it is because female employees are married, pregnant, on maternity leave or care for their baby aged less than two months.

Normal working hours shall not exceed eight hours a day or 48 hours a week. The employer and the employee may agree on additional hours to perform the assigned work provided that the total overtime shall not exceed four hours a day or 200 hours a year; except in some specific cases provided by the government, the total overtime shall not exceed 300 hours a year.

Employees performing overtime work shall be paid wages as follows:

• on normal working days, an amount at least equal to 150% of the normal wage;
• on weekends, an amount at least equal to 200% of the normal wage;
• on holidays, an amount at least equal to 300% of the normal wage.
• at night, an amount at least equal to 130% of the wage for day work.

Collective labour agreement. This is a written agreement concluded between a collective of employees and the employer concerning conditions of work, employment and the rights and obligations of each party.

A collective labour agreement is negotiated and concluded by the representative of the employees' collective and the employer on the principles of will, equality and publicity. The representative of the employees' collective is the Executive Committee of the Trade Union. The representative of the employer is the director of the enterprise or a person so authorized by the director in writing.

The content of the collective labour agreement shall not be contrary to the provisions of the labour legislation and the other legislations. Vietnam encourages the implementation of a collective labour agreement creating conditions for employees that are more favourable than those provided in the labour legislation.

Social insurance. Social insurance is mandatory and applicable to enterprises whose employees have a labour contract for at least three-month or longer-term or have an indefinite term labour contract. Employers in such enterprises are responsible for buying social insurance for employees at the rate of 15% of the normal wage. Employees shall also be obligated to deduct from their wages an amount of 5% of the normal wage to supplement this social insurance.

For those employees who have a labour contract for less than three-month term, employers shall be obligated to pay them wages including social insurances.

Trade unions. A trade union may be set up in accordance with the Law on Trade Unions in enterprises that have at least five employees, and the employers must accept such an organization.

Labour disputes. All labour disputes are classified as either personal labour disputes or collective labour .disputes. Disputes shall be settled by direct negotiation through mediation or arbitration with the participating representatives of the trade union and the concerned employer.

Personal labour disputes are disputes between the employee and the employer. For personal labour disputes relating to dismissal, unilateral termination of a labour contract, compensation for damages and loss of employment allowances, relations between pensioners and their employer, and relations between pensioners and social insurance organizations, the parties concerned may bring the cases directly to the People's Courts of competence without mediation.

All other personal labour disputes must be first settled though mediation. If no agreement can be reached, then the dispute shall be brought to the People's Court of competence.

Collective labour disputes are disputes between the employees' collective and the employer. The following authorities are in charge of settling collective labour disputes:

• the enterprise's Council of Mediation or the Mediator of the district's Labour Unit;
• the Council of Labour Arbitration of the province/city; or
• the People's Court.

Collective labour disputes must first be settled through mediation or arbitration. Disputes settled by the Council of Arbitration may be reconsidered by the People's Court upon request of the employee or employer.

Conclusion

In comparison with the former labour legislation, the Vietnamese Labour Code now provides sufficient provisions on the rights and obligations of both employers and employees. In particular, the Labour Code gives a balance of protection for both the employer and the employee (the former labour legislation gave more weight to the rights of employees).

One of the issues concerning the protection of employers and employees rights is the enforcement of their labour rights. However, at present and in practice, some court decisions have not been enforced, thus most labour disputes are settled through mediation and arbitration.

As discussed above, the labour legislation regulates the concrete relationship between the employer and the employee. But some enterprises with foreign investment capital and many Vietnamese employees do not have sufficient knowledge of Vietnamese labour law. Therefore, Vietnamese authorities are now active in educating the public about the Labour Code. 

Author biographies

Nguyen Hoan Thanh

Pham & Associates

Dr Nguyen Hoan Thanh has been a partner at Pham & Associates since 1998. He has a PhD in law. He has acknowledged expertise in business law and international arbitration and is an advocate for both domestic and foreign clients with business interests in Vietnam and abroad. Dr Nguyen is a member of the Vietnamese Lawyer Association, International Bar Association, Asian Patent Attorneys Association and Vietnamese Industrial Property Association.

Le Mai Thanh

Pham & Associates

Le Mai Thanh is active in international private law in Vietnam. She received her Bachelor degree in private international law in 1987 from the Kiev University of International Law and International Relations and her Master's degree in economic and civil law in 1998 from the Vietnamese Institute of the State and Law.

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