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Vietnam’s New Labor Code: Notable Changes Effective from January 1, 2021

Vietnam’s National Assembly recently updated the country’s labor law, seeking to harmonize the interests of employees and employers. Labor Code 2019, which came into effect on January 1, 2021, changes how employers and employees relate to one another, in the following ways:

How employees are defined

The previous Labor Code (2012) covered labor relations between employers and employees. The New Labor Code (2019) expands the scope to include people who do not possess a labor contract, classifying people as employees if:

  • They’ve agreed to perform a job,
  • They’re receiving monetary payment, and
  • They’re working under the supervision of an employer.

Increase in public holidays

The New Labor Code (2019) adds a new public holiday next to Independence Day, which may be either September 1st or 3rd, depending on the year. Public holidays are now New Year’s Day (1 day), Lunar New Year (5 days), Reunification Day (1 day, April 30), International Labor Day (1 day, May 1), Independence Day (2 days, September 2 and one additional day), and Hung King’s death anniversary (1 day, March 10 of the lunar calendar).

Labor contracts may be electronic

The New Labor Code 2019 permits labor contracts to be made via electronic methods, and they will have the same validity as written contracts.

Initially, this will apply to contracts of under one month (with exceptions for employees under 15, maids, and individuals over 18 who lack capacity).

Limited term work now becomes definite term contracts

The category of seasonal or work terms of under 12 months have been removed and amended to be contracts with a maximum term not exceeding 36 months (without establishing a minimum time).

The New Labor Code 2019 permits 2 types of labor contracts:

  1. Indefinite term, and
  2. Definite term under 36 months.

Seasonal job contracts under 12 months are now defined as definite term contracts.

Employees may enter multiple labor contracts with different employers but can only conclude one concurrent labor contract with each employer.

Definite term labor contracts may be signed multiple times by directors having state capital, elderly employees, foreign employees, and members of executive boards of representative organizations.

Overtime increased

The New Labor Code 2019 increases the amount of monthly overtime hours which may be taken from 30 to 40, and details specific instances when employees are permitted to work overtime.

Employers must now ensure overtime working hours of employees do not exceed 50% of the normal daily working hours, not exceeding 12 hour per day.

Hours cannot exceed 40 hours per month and 200 hours per year.

An exception exists permitting 300 hours per year in work related to manufacturing/processing of electric and electronic products and labor of individuals with high technical qualifications.

Termination of contracts

Under the New Labor Code 2019, employees have the right to terminate a contract unilaterally and without cause – if they provide advance notice per their employment contract.

The new law provides more clarity for employers and employees in contract termination, in particular:

  • Extension of a labor contract for trade union officials without specialization and where their contract has expired.
  • Labor contracts may not be terminated unilaterally by employers or employees where employees are reaching the age of retirement.
  • Employers can unilaterally terminate a labor contract after an employee fails to complete their scope of work under the contract and has been warned, in writing, at least twice in 60 days.
  • Employees (under special circumstances – e.g., maltreatment, sexual harassment, coercive labor, where employers fail to make timely or full salary payments) are not required to give advance notice before unilaterally terminating their labor contract.
  • Employees now entitled to receive termination benefits of 14 working days pay (instead of 7).
  • Foreign employees can be terminated when their work permit expires or when termination results from a court decision or decision of a relevant authority.

Employee probation periods

  • Employee probationary periods must be based on the nature and complexity of the job – and can only apply once for each job, and not exceed these maximum terms:
  • For management jobs (general manager or higher) – 180 days.
  • For jobs requiring university level professional and technical qualifications – 60 days.
  • For jobs requiring professional secondary legal, technical workers and skilled employees, with professional and technical qualifications – 30 days.
  • For other types of jobs – 6 days.

Employee wages

Business will still need to ensure under the New Labor Code 2019 that employees receive a minimum living standard for their employees – and be proactive in developing wage scales, labor, and payroll norms – in consultation and agreement with employees. Registering these schemes with authorities is optional.

Social insurance cards

Social insurance cards will replace the social insurance book which all employees currently are entitled to.

Work permits

Foreigners working in Vietnam can secure a two-year work permit and extend their work permits once for a maximum additional two-year term. After expiration, workers can apply for a new permit.

Foreigners married to Vietnamese citizens may apply for exemption from securing a work permit.

Retirement

Retirement age for men under the New Labor Code 2019 is now 62 for men and 60 for women (previously 60 for men and 55 for women).

Unsure how to navigate Vietnam’s New Labor Code? GoGlobal can help

The international PEO services model enables companies to hire compliantly, quickly, and affordably almost anywhere, while avoiding the pitfalls and risks of hiring contractors. As an international PEO services company present in 17 APAC countries, we are well placed to help your company adapt to Vietnam’s New Labor Code 2019. Please contact us to discuss how GoGlobal can help you.

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