Labor Laws of Vietnam Essay

I. Overview

Vietnam is known for being a disciplined, hard-working, and fast-learning population. Traditions emphasizing learning and respect for authority as well as low wages and a high adult literacy rate are often cited by investors as among one of the most attractive aspects of the country’s investment environment (Treutler &Kien, 2010). The Labour Code of Vietnam serves as the main legal base for all the labour matters. It applies to both employees and employers including foreign organizations employing local and foreign staff working on regular basis in Vietnam (Chee &Le, 2008).

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On the other hand, there are also a number of implementing regulations such as Decrees, Decisions, and Circulars, which provide detailed guidelines for implementation the Code. These regulations play useful and significant roles in the Vietnamese legal system, as the government authorities would often refer to them in practice. In this Code, employment in all business entities, including foreign-invested enterprises, should be based on a written employment contract, which contains sections relating to:

* The scope of work
* Working hours
* Rest/breaks
* Recreation time
* Wages
* Place of work
* Terms of contract
* Occupational safety and hygiene,
* Social and medical insurance

II. Preamble

“Labor is the most important activity of man. It creates the material wealth and spiritual values of society. High-productivity, high-quality and high-efficiency labor is the determinant factor of national development. Labor legislation defines the rights and obligations of the employee and the employer, the labor standards and the principles for labor use and management, thus contributing to the promotion of production. Therefore, it plays an important role in social life and in the legal system of the country. Inheriting and developing the labor legislation of our country since 1945, the Labor Code institutionalizes the renewal line of the Communist Party of Vietnam and concretizes the provisions of the 1992 Constitution of the Socialist Republic of Vietnam on labor and on the use and management of labor. The Labor Code protects the right to work, the interests and other rights of the employee.

At the same time it protects the legitimate rights and interests of the employer, thus creating conditions for the establishment of harmonious and stable labor relations, helping to develop the creativeness and talent of the intellectual and manual workers as well as of the labor managers, in order to achieve high productivity, quality and social progress in labor, production and service, efficient use and management of labor, thus contributing to the industrialization and modernization of the country in the cause of bringing prosperity to the people and strength to the nation and building a just and civilized society.”

III. Main Sources of Labor Law

* The Labor Code * The Law on Sending Vietnamese Laborers to Work Overseas * Government decrees, ministerial circulars and decisions, provincial decisions and guidelines * Collective labor agreements, company rules, individual contracts * The Supreme Court’s annual practice summaries and guidelines IV. Special Hiring Considerations

A. Hiring Non-Citizens

* Generally, if an expatriate wants to work in Vietnam for three months or longer, he/she must obtain a work permit. Vietnamese employers are required to provide support and submit application documents for the work permit.

B. Hiring Specified Categories of Individuals

* Employers are prohibited from employing female employees, pregnant employees, child employees, and old employees for hazardous and hard work that may cause health problems. * Normally, the minimum working age is 15. There is no restriction on the maximum working age. The daily working hours of senior workers (over 60 for men or over 55 for women), however, should be reduced.

C. Outsourcing and/or Subcontracting

* The Labor Code contains an inflexible provision stating that a labor contract must be directly entered into by an employer and an employee. In addition, the tasks stipulated in the labor contract must be carried out by the employee under his/her labor contract; the transfer of such tasks to another person must be approved by the employer. In practice, if an employer wishes to use a labor outsourcing service, he/she will not enter into a direct labor contract with workers, but will enter into a labor outsourcing service agreement with the service provider. Therefore, there is no clear definition of outsourcing or subcontracting under the Vietnamese Labor Code.

V. Basic Employment Terms

* A labor contract must be written in Vietnamese or in both Vietnamese and the foreign language that is applicable to the employer and employee. Contracts for temporary jobs lasting less than three months or for domestic helper work do not need to be in writing and can be oral.

A. Working Hours and Rest Hours

* The maximum working hours are eight hours per day or 48 hours per week for normal working conditions. Daily working hours must be reduced by one or two hours for employees subject to extremely heavy, dangerous, or toxic working conditions. Employees must take a rest period of a minimum of 24 consecutive hours per week. There are also various compulsory daily and weekly rest periods and breaks that must be observed.

B. Wages

* Employees may not earn an amount below the minimum salary level, which is reviewed from time to time. Different minimum levels exist and depend on the location of the workplace.

C. Working Place/Location

* An employee’s place of work must be stated in the labor contract. Mobility clauses can be included in employees’ labor contracts, if necessary. Where a job requires travel to other temporary locations, it is normal for employers to reimburse all reasonable travel expenses. D. Duration of the Contract

* Under the Labor Code of Vietnam there are three types of labor contracts:
* An indefinite-term labor contract * A fixed-term labor contract with duration of 12 to 36 months * A labor contract for a specific or seasonal job of less than 12 months E. Conditions on Occupational Safety and Hygiene * Employers are required to provide employees with sufficient protective equipment to ensure occupational safety and hygiene and to improve working conditions in the workplace. Employees must comply with occupational safety and hygiene regulations and the internal labor rules of employers.

VI. Social Insurance and Leave

* Compulsory Social Insurance applies to enterprises, entities, and organizations that employ employees under indefinite-term labor contracts or under definite-term labor contracts with a duration of three months or more. Both employees and employers are required to contribute to the social insurance fund at statutory rates. The social insurance fund pays allowances for sick leave, maternity leave, work-related accidents, occupational disease, and pensions.

A. Sick Leave

* Employees who suffer from illness and/or disability or take leave in accordance with a doctor’s order receive an allowance paid by the social insurance fund, provided that they submit the required documentation evidencing their leave. The sick leave allowance is based on the employee’s salary used to calculate the social insurance premium. The maximum entitlement is: * 30 days per year (if the employee contributes to the social insurance fund for less than 15 years) * 40 days per year (if the employee contributes to the social insurance fund for between 15 and 30 years) * 60 days per year (if the employee contributes to the social insurance fund for more than 30 years).

B. Maternity Leave

* Employers must allow pregnant workers to have their health checked regularly. A female employee (who works in normal working conditions) is normally entitled to take four months’ maternity leave. If the female employee works in heavy and/or harmful working conditions or works in a remote location, she is entitled to take up to six months’ maternity leave. Where an employee gives birth to more than one child at one time, she is entitled to take an additional 30days’ leave for every additional child calculated from the second child onwards. The employee will receive a maternity allowance from the social insurance fund during maternity leave.

C. Accidents at Work

* Work-related accidents are defined as accidents that injure any bodily parts or functions of an employee or cause the employee’s death during the process of working and closely relate to work performance or labor activity. An employee who is injured in a work-related accident must be immediately treated and be fully attended to.

The employer must take full responsibility for the occurrence of the work-related accident. During the period in which an employee is absent from work for medical treatment related to a work-related accident or occupational disease, the employer must pay the employee his/her full salary and expenses for the treatment. After the treatment, the employee will be examined and assigned a category of injury, which depends on the reduction of his/her ability to work due to the work-related accident or disease. The employee will be entitled to a social insurance benefit paid as a lump sum or in monthly installments by the social insurance fund.

D. Pension Plans

* There is no scheme for pension plans under Vietnamese Labor Law. Both employers and employees are required to contribute to the compulsory social insurance fund that payspensions to employees when they retire.

E. Absence for Military or Public Service Duties

* Employees are entitled to suspend performing their duties under labor contracts if they are required to carry out military service or other public civic obligations. Employers are required to reemploy the employees at the end of the suspension period.

VII. Rights of the Employees

A. Harassment/Discrimination/Equal Pay

* Employees have the right to work without being discriminated against on the basis of their gender, nationality, social class, beliefs, or religion. Moreover, employers are strictly prohibited from discriminatory behavior toward female employees or conduct that degrades female employees’ dignity and honor. Employers must implement the principle of gender equality in regard to recruitment, utilization, wage, and wage increase.

B. Work Councils or Trade Unions

* Employers are required to facilitate the establishment of a trade union organization within their company. A company’s trade union should be established within a company within six months after the company is set up and put into operation. The obligation for establishing a trade union organization within a company falls on the local trade union or industry trade union, not the employer. The main function of a trade union organization is to represent and protect employees’ legal rights and interests. Therefore, most decisions relating to employee benefits should involve the trade union representative, such as execution of a collective labor agreement, decisions regarding labor discipline, and termination of labor contracts. Any act that obstructs the establishment and activities of an enterprise’s trade union is strictly prohibited.

C. Employees’ Right to Strike

* Employees may voluntarily go on strike. However, strikes must be organized and led by the executive committee of the company’s trade union or representatives of employees. Employees must also adhere to statutory procedures and steps for the organization of strikes. Strikes are prohibited at businesses that supply certain types of products and services and at enterprises that are essential for the national economy or for national defense and security.

D. Employees on Strike

* Employers are not required to pay salary or other benefits to employees who participate in a strike. Employers are prohibited, however, from terminating labor contracts or applying labor disciplinary penalties to employees or to organizers of strikes or transferring employees or strike organizers to do other jobs or to work at other locations because of their preparation for or participation in a strike. VIII. Terminating the Employment Contract

A. Procedures for Terminating the Agreement

* Proper legal grounds must exist in order for an employer to terminate a labor contract with an employee, such as performance issues, prolonged illness, a force majeure event, or winding up of the company. Employers are required to follow a number of statutory steps such as sending a warning letter to employees and/or sending advance written notice regarding the termination of employment to employees within a statutory time limit. If an employer fails to prove that there are legal grounds for the termination or fails to follow the proper statutory procedure, a termination may be declared wrongful. In the event of a wrongful termination, employers may be required to reinstate the employee, pay their salary for the period that they were not allowed to work, and pay two months of the employee’s salary as a penalty for the wrongful termination.

B. Types of Termination
i. Employee’s Resignation

* An employee may resign from his/her job without giving any legitimate reason, so long as the employee gives advance notice to the employer (30 working days for termination of a fixed term labor contract or 45 working days for an indefinite labor contract).

ii. Instant Dismissal

* Dismissal is the severest labor disciplinary measure. Employees may be dismissed when they commit an act of gross misconduct such as theft, embezzlement, disclosure of business or technology secrets, or repeatedly commit acts in violation of the employers’ work rules or policies. A disciplinary hearing meeting must be held and a number of statutory procedures must be followed.

iii. Termination on Notice

* An employer may terminate a labor contract by serving advance notice of 30 working days for termination of a fixed term labor contract or 45 working days for an indefinite labor contract. Note that employers must have proper legal grounds for termination (see the above section onprocedures for terminating the agreement).

iv. Termination by Reason of the Employee’s Age

* There are no specific provisions governing the termination of labor contracts based on an employee’s age. The normal retirement age is 60 for men and 55 for women. A retired person will receive his/her pension and/or allowance from the social insurance fund. The Vietnamese Labor Code allows employers to extend labor contracts or enter into a new labor contract with a retired employee.

v. Automatic Termination in Cases of Force Majeure

* Force majeure is one of the legal grounds for employers to terminate labor contracts with employees. Employers are required to send advance notice to employees and a number of procedures should be followed. Employers are also required to pay severance to their employees due to the termination of employment.

vi. Termination by Parties’ Mutual Agreement

* The parties are entirely free to agree to terminate an employment contract on any grounds they desire. Where the parties agree, they are not required to give advance notice of termination. The parties may also waive certain procedures. All the necessary terms, such as employment termination, severance payments, personal income tax, and social insurance, should be finalized and addressed in a document and should be signed by both parties.

C. Severance Payments

* Employers must pay severance to employees who have continually worked for the employer for 12 months or more. There are certain cases in which employers are exempted from paying severance, such as dismissal or retirement. If employees have made contributions to the unemployment insurance fund, employers are not required to pay severance for the duration of time that the employees paid their unemployment insurance premium.

i. Special Tax Provisions and Severance Payments

* Any income earned by an employee in the form of salary, wage, allowance, and bonus is subject to personal income tax (PIT). Severance payments at the minimum statutory level are not subject to PIT, whereas any extra payments are subject to PIT. Employers are required to withhold and pay PIT to taxation authorities.

ii. Allowances Payable to Employees after Termination

* Employers are not required to contribute to any allowances after termination, unless otherwise agreed by the parties in the labor contract and so long as all required severance payments are paid in full.

iii. Time Limits for Claims Following Termination

* The statute of limitations runs one year from the date of the conduct that any party claims breached its rights or benefits, where the claim arises from:

* Disciplinary measures resulting in dismissal
* Unilateral termination of a labor contract
* Compensation for loss and damage or payment of allowances

Duc Manh, N. (n.d.). The Labor Code of the Socialist Republic of Vietnam. Retrieved on February 24, 2013 from english/english/luat_pl/LABOR-CODE.htm Chee, P & Le, D. (2008). Overview of Labour Law in Vietnam. KhattarWong. Retrieved on February 24, 2013 from Treutler, T. J. & Kien, T. T. (2010). An overview of Vietnam Labor Law. Tilleke & Gibbins. Retrieved on February 24, 2013 from (2008). Labor in Vietnam. Vietnam Trade Office in the USA. Retrieved on February 24, 2013 from detail&id=35&lang=English

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