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.

Labour Contract

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.

Working Hours

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.

Retirement Ages

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.