On November 20 2019, the Vietnam National Assembly
adopted a new Labour Code, which will come into effect on
January 1 2021.
The new Labour Code is considerably impacted by Vietnam's
commitments under new-generation free trade agreements,
including: the Comprehensive and Progressive Agreement for
Trans-Pacific Partnership, the Free Trade Agreement between the
EU and Vietnam, and Vietnam's commitments as a member of
International Labour Organization (ILO).
The following is an overview of the key points that have
been added to the new Labour Code.
Expansion of entities governed
For the first time, people who are working without labour
relations (i.e. without labour contracts), who reportedly
account for a major part of the labor force in Vietnam, will
become 'applicable entities' under the Labour Code (meaning
that they will be among the entities governed by the code).
This represents an attempt by lawmakers to improve the working
conditions and social welfare of these targeted labourers.
However, it is a cautious move, as a number of provisions of
the Labour Code will be applicable to these workers, as the
government's guidance documents will further specify.
Under the Labour Code, the term 'labour contract' will refer
broadly to any and all agreements, whether labeled as labour
contracts or as something else, which contain terms describing
the work/job to be done, salary, remuneration, and designate
management and supervision by one party; this is an attempt by
lawmakers to address a practice whereby various arrangements
are designed to avoid or minimise protection of employees'
statutory interests, such as services supply agreements, agency
contracts, and consulting contracts.
There will be only two types of labour contract: definite
term labour contracts (with a 36-month maximum), and indefinite
term labour contracts. Seasonal and short-term (12-month
maximum) labour contracts will no longer be available for use
under the new Labour Code. The legislators now deem these
contract forms to be the same as a definite term labour
Currently, the term of a labour contract may be amended
(extended) once by means of an appendix to the relevant
contract, provided that the amendment/extension does not change
the contract's type. However, amendment/extension of a labour
contract term by means of an appendix will no longer be allowed
after the effective date of the new Labour Code.
Employers' and employees' rights to terminate
labour contracts unilaterally
Under the Labour Code, an employee may terminate a labour
contract unilaterally, by means of a notice properly given in
advance. However, advance notice will not be required if the
employee is maltreated or sexually harassed at the workplace,
when the salary is not paid in full or on time, when the
employee reaches retirement age, or in other statutory
Employers' rights to unilaterally terminate labour contracts
are still limited, although the Labour Code does introduce some
new situations whereby employers will be entitled to terminate
labour contracts, including when: (i) employees reach
retirement age; (ii) employees take five or more consecutive
days off of their own accord without proper reasons; and (iii)
employees have provided untruthful information when entering
into labour contracts, in a manner that affects the employees'
A probationary period of up to 180 months is newly provided
for managerial positions in enterprises, as defined by the Laws
on Enterprises, and Laws on Management of State-Owned
In addition, the Labour Code explicitly provides that a
probationary period can be included in a labour contract,
whereby termination of probation by any party will terminate
the signed labour contract.
Normal working time and overtime
The legislators approved no changes to normal working hours,
due to concerns about the potential impact of a change in
working hours on economic growth, the country's
competitiveness, and domestic enterprises, as well as low
actual labour productivity.
The overtime limit of 200 hours per year will remain
unchanged; however, there will be some new situations whereby
an employer may arrange for employees to work up to 300 hours
of overtime, such as: (a) where urgent jobs cannot be delayed
due to the seasonality or the timing of raw materials; (b) in
situations involving production and processing for export of
electrical products, electronic products, and salt products; or
(c) in jobs requiring high levels of professional or technical
qualifications, but where the labour market cannot sufficiently
and promptly supply employees.
The retirement age for employees who work in normal working
conditions shall be raised gradually from 60 to 62 years for
males (by 2028), and from 55 to 60 years for females (by
Foreigners working in Vietnam
It is explicitly allowed under the Labour Code for
Vietnamese employers and foreign employees to enter into
multiple labour contracts with a definite term not exceeding
the term of their work permits.
There will be additional requirements for employees to be
exempt from work permits. Specifically, foreigners who are
owners or members of a limited liability company or the
chairman or members of the board of management of a joint stock
company will be exempt from work permit requirements, subject
to the satisfaction of a new requirement on the minimum amount
of contributed capital, to be prescribed by the government.
The term of a work permit under the Labour Code is a maximum
of two years, and can be extended only once, for another
maximum two-year term.
Representative organisations of
For the first time, the Labour Code introduces a
representative organisation of employees, which is independent
from the Vietnam General Confederation of Labour. This
representative organisation and trade union shall have equal
rights and obligations to represent and protect employees'
legitimate rights and benefits in labour relations.
Notably, consultation with or the presence of a
representative organisation of employees will not always be
required to formulate internal labour rules, wage scales and
wage tables, and bonus policies, or to impose disciplinary
actions against a breaching employee, if a representative
organisation of employees is not established at the workplace.
This move will help to simplify relevant procedures in
workplaces which have a limited number of employees.
Labour disputes and strikes
Parties to individual labour disputes will be allowed to
resolve their disputes at the labour arbitration council, as an
alternative to traditional court proceedings. Arbitration
procedures for dispute resolution are generally faster and
simpler than going to court; however, labour arbitral awards
are not final.
The parties to collective labour disputes regarding
interests can follow the process of statutory steps for a
labour strike if the disputes are not successfully settled by a
labour conciliator, without the requirement to undergo another
dispute resolution procedure through the labour arbitration
||Mai Thi Ngoc Anh
||Ha Hoang Loc