This content is from: Local Insights

Vietnam: Draft labour law

The new Labour Code is scheduled to be enacted in 2018 or 2019. The latest version of the draft law presented for solicitation of public opinion from April to June 2017 introduces some notable changes proposed by the government.

One of the most important positive changes is the government's proposal to dramatically increase the maximum permissible overtime from the existing limit of 200 hours to 400 hours per year. This existing limit has been criticised by foreign investors as too short compared to other Southeast Asian countries and as being unrealistic. Many companies in Vietnam find it difficult to comply with this limit, not only for their business demands, but also for their workers' demands to work longer to earn more money. If the company rejects such demands from its employees, workers can easily move to another company that does allow them to work longer hours. The proposed change is good news for both employees and employers, and will contribute to increasing the number of orders from foreign companies. Foreign companies are highly conscious of corporate social responsibility and are unlikely to deal with companies that violate labour regulations.

Another good move is the simplification of the work permit procedure. At present, employers must have written consent from the competent state authority to employ foreign workers, which is a condition that precedes applying for work permits. Under the draft law, however, this requirement is abolished except for certain sectors.

However, one of the proposals detrimental to foreign investors is the one that proposes to substantially increase overtime payments. The existing proposal is expected to severely hamper the government's efforts to boost the competitiveness of Vietnam's labour market and achieve annual increases in minimum wage.

Another notable point is that unilateral termination of labour contracts by the employer remains unchanged and quite difficult even under the draft law. This issue remains one of the biggest bottlenecks to attract foreign investors.

It's worth noting that the matters mentioned above are just proposals at that stage, as there are expected to be further discussions on the draft.

Kazuhide Ohya and Mai Thi Ngoc Anh

Nishimura & Asahi
Room 903A Sun Wah Tower
115 Nguyen Hue, District 1
Ho Chi Minh City, Vietnam
T: +84 28 38214432

© 2021 Euromoney Institutional Investor PLC. For help please see our FAQs.

Instant access to all of our content. Membership Options | 30 Day Trial