Asia Counsel Insights
5 June 2020
Labour Law Focus
From 1 January 2021, the current Labour Code will be replaced in its entirety by a new Labour Code (the “New Labour Code”) passed by the National Assembly on 29 November 2019. Much of the text of the existing code will be retained, but existing provisions on employment relations, probationary employment, mandatory work rules and notice requirements, and other matters are revised on terms generally favourable for employees. This month’s Asia Counsel Insights focuses on the New Labour Code.
All employment must be subject to a labour contract, which may be oral or in writing. The New Labour Code deems that a person is an employee if the following three factors are satisfied:
• a person has a job,
• is paid, and
• working under the supervision and management of another person.
This means that if the above three factors are established then an employment relationship exists and the Labour code will regulate that employment relationship, regardless of the name and form of the agreement (e.g. service agreement, contractor agreement, etc.).
Furthermore, labour e-contracts established in the form of data messages are now recognized under the New Labour Code. This will have a particular impact in the technology sector and shared economy.
Terms of Labour Contracts
There are two types of labour contracts:
Indefinite term contracts and definite term contracts with a maximum term of 36 months. Seasonal labour contracts will no longer be a type of labour contract.
Any amendment of the term of a labour contract using appendices is now restricted.
The New Labour Code provides several exceptions that parties may sign multiple definite term contracts, such as: definite term contracts with foreign employees working in Vietnam, elderly employees, and employees who are members of the management board of the employee’s representative organization and any person being employed to hold the position of the Director/General Director of the enterprises having State capital.
The Code further clarifies that the term of a labour contract concluded with a foreign employee shall not exceed the term of his/her work permit.
The Code provides two new updates on probation:
- The probation period applied to managerial positions of enterprises (as defined by Law on Enterprise) can now reach 180 days, and
- Labour contracts with terms of less than one month cannot have probation periods.
The probation can be implemented through a separate probation agreement or recorded as a part of the labour contract. Either party is entitled to terminate a probationary agreement without giving advance notice and compensation. If the employee’s performance satisfies the agreed requirements, the employer must officially employ the prospective employee upon the completion of such probation period and sign a labour contract.
While working hours and overtime remain unchanged, the monthly overtime working cap of 30 hours per month under the current Labour Code has been increased to 40 hours per month under the New Labour Code.
The New Labour Code also provides a list of specific sectors and circumstances entitled to a 300-hour overtime scheme per year (e.g.: generation and supply of electricity, telecommunications, refinery operation, textile manufacturing, work requiring employees with high technical qualifications or expertise who are not available on the labour market, in cases of, natural disasters, fire, or technical issue of the production line, etc.) that is not provided in the current Labour Code.
The current retirement age provided is 60 for males and 55 for females. Under the New Labour Code, the retirement age will be gradually increased by three months per year for males and four months per year for females, to an eventual 62 years of age for males (effective from 2028) and 60 years of age for females (effective from 2035).
Leave and Public Holidays
The New Labour Code adds one day off to the National Independence Holiday, on 1 or 3 September, resulting in the increase of the total public holidays per year to 11 days.
Furthermore, employees will be entitled to three-days personal leave with full pay upon death of their adoptive father/mother or death of their spouse’s adoptive father/mother, one-day personal leave with full pay upon the marriage of their adopted child and three-days personal leave with full pay upon the death of their adopted child.
Internal Labour Rules (ILR)
The New Labour Code requires additional contents in the ILR, including:
- Prevention of, the sequence and procedures for dealing with sexual harassment in the workplace;
- cases in which an employee may be temporarily transferred to undertake work different from that specified in the labour contract;
- the authorized person to impose disciplinary measures
The New Labour Code provides that the employer is no longer required to consult with the intermediate upper level trade union before issuing the ILR if it does not have a trade union at the grassroots level nor another representative organisation for its employees.
Independent Trade Unions
For the first time, employees are allowed to establish and join an independent representative organization for employees that is not under the state-run Confederation of Labour. The independent union however will still be required to get permission from state authorities to operate. As a result from the removal of immediate upper level trade union from the definition of “Organizations representing the employees at grassroots level” the employer will no longer be required to consult with the immediate upper level trade union on employment provisions and issues if there is no organization representing the employees at grassroots level established by the employees.
Employment of Foreign Employees
There is a notable change under the New Labour Code that foreigners married to Vietnamese and living in the territory of Vietnam are allowed to work in Vietnam without a work permit. The term of the labour contract of a foreign employee shall not exceed the term of his/her work permit. A work permit shall have a maximum term of two years and can only be extended once with a term up to two years. A new work permit is required after the extension. From the above, it can be understood that a foreign employee subject to the work permit requirement can only work for an employer for a maximum term of 4 years on a single work permit. Nonetheless, under the Code, definite term contracts (with a term up to 36 months) with foreign employees can be concluded multiple times. The Code is silent on the term of the labour contract for foreign employees exempt from the work permit requirement and how many times the confirmation of the work permit exemption can be renewed or re-issued. We note that no instrument guiding the New Labour Code is available now, and there may be further official guidance from the relevant authority in this regard in the coming time.
Vietnam Fact Box
The Department of Labor, Invalids and Social Affairs of HCMC (DOLISA) issued an official letter No. 13413/SLDTBXH-VLATLD dated 29 May 2020 requesting companies who employ foreign employees who are investors, technical professionals, highly skilled labor, enterprise managers, or managing directors to submit a list of their foreign employees intending to enter Vietnam to DOLISA. DOLISA will submit the to the People of Committee of HCMC for consideration and approval by 8 June 2020.