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
- 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
- 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
- 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
- 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 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
- 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
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
- 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
- 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
- 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
- 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
- on holidays, an amount at least equal to 300% of the normal
- at night, an amount at least equal to 130% of the wage for
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
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
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
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;
- 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.
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.
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
Le Mai Thanh
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
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