Vietnam

On 20 November 2019, the National Assembly of Vietnam adopted a new labor code amending and supplementing several existing provisions on termination, public holiday, overtime, retirement age, employment contract and other matters that are generally employee-friendly.

The new labor code is expected to enter into effect on 1 January 2021.

Background

The new labor code (No.45/2019/QH14), which will replace the current Labor Code of 2012, was finally adopted after a long amendment process.

Key details

The main changes of the new labor code include:

Definition of employees:

The definition of an employee has been expanded to include only a few factors, regardless of how they are classified under an employment contract. Anyone will be considered as an employee if:

  • They have a job.
  • Are getting paid for that job.
  • Are under the supervision of an employer.

Employment contracts:

  • The validity of labor electronic contracts will be recognized.
  • The only permitted employment contracts will be:
    • Definite-term employment contract with a term of 36 months or less, which can currently be signed multiple times only for directors of companies where the majority shareholder is the government, foreigners, and members of executive boards of unions.
      • On 1 January 2021, elderly employees will be allowed to have more than two consecutive definite-term employment contracts.
    • Indefinite-term employment contract (does not apply to expats).
  • Fixed-task and seasonal contracts will no longer be permitted.

Probationary period: High-level managers will have a longer probationary period of 180 days (instead of the current 60 days) to better evaluate their qualifications. In addition, if employment continues past the expiration of the probationary period, the employee will be deemed to have passed the probation and the employer will be mandated to sign an indefinite term employment contract with the employee.

Retirement ages: The social security normal retirement age will gradually increase from age 60 to age 62 for men by 2028 and from age 55 to 60 for women by 2035. Starting 1 January 2021, retirement ages will rise incrementally by three months per year for men and four months per year for women until the targeted dates. Employees doing heavy or dangerous work will be able to retire no earlier than five years before the normal social security retirement age.

Overtime: The new labor code increases the monthly overtime limit from 30 to 40 hours.

Termination: Currently, employees are entitled to terminate their employment contract for cause, so long as they provide prior notice to their employer. Under the new labor code, employees can immediately terminate their employment contract without prior notice when:

  • Working conditions agreed in the labor contract are no longer ensured or when the employee is not assigned in the correct position or location.
  • The employer fails to pay salary on time.
  • The employee reaches retirement age.
  • The employee is mistreated, sexually harassed, or in case of pregnancy, on doctor’s orders.

In addition, the new labor code introduces the following new grounds for an employer to terminate an employee’s employment contract:

  • When the employee reaches normal retirement age.
  • When the employee is absent from work for five working days within a period of one month without justified reasons.
  • If the employee provided false information during the recruitment process.

Annual leave: Under the new labor code, an employee will be entitled to payment of untaken annual leave days only in the case of employment termination or job loss. Currently, employees are entitled to such payment regardless of the reason.

Public holiday: The new labor code adds an additional day off to the national independence holiday on 2 September. The additional day may be on 1 or 3 September. The schedule of national independence holidays will be decided annually by the Prime Minister of Vietnam.

Independent unions: On 1 January 2021, employees will be allowed to join employee representative organizations that are independent from the state general confederation of labor, which is currently the only recognized representative organization for workers. To be eligible, independent employee representative organizations must first register with the state.

Work permits: The terms of foreigners’ work permits are limited to a maximum of two years. Currently, there is no limit on the number of times foreigners can renew their work permits. On 1 January 2021, expats will be allowed to renew their two-year work permit only once. If they wish to continue working in Vietnam after the expiration of their extended work permit, expats must apply for a new work permit.

Sexual harassment and discrimination: The new labor code introduces new provisions to protect employees from sexual harassment and discrimination in the workplace, which will be grounds for dismissal on the part of the perpetrator. Upcoming implementing decrees and circulars are expected to clarify how they will be implemented in practice.

In addition, the new labor code removes the list of prohibited jobs for female employees. Employers may now hire female employees for any job so long as they provide them with any protective material needed to enable them to continue their childbearing and parenting functions. 

Also, under the new labor code, female employees whose jobs require the performance of heavy work while pregnant or raising a child under 12 months, will be entitled to lighter work duty or to have their daily working time reduced by one hour. Currently, this requirement applies only to women upon reaching the seventh month of pregnancy.

Next steps

Employers should review their current policies and procedures to ensure compliance within the timeline. Employers should also be aware that various decrees and circulars implementing the new labor code will be issued in the coming months and monitor for them.