The National Assembly of Vietnam adopted the Labour Code 45/2019/QH14 (“New Labour Code 2019”) on 20 November 2019, and which will be effective from 1 January 2021. After many rounds of negotiations, the updated New Labour Code 2019 seeks to harmonise interests between employees and employers, bringing changes to how employers and employees interact with each other. Notable changes found in the New Labour Code 2019 are detailed below.
Client Alert, January 2020 - Changes to the Vietnam Labour Code
ADJUSTMENT TO DEFINITION OF EMPLOYEE
While the Labour Code 2012 stipulates labour standards, rights, obligations, responsibilities of employees and employers engaged in labour relations (and other relations directly related to labour), The New Labour Code 2019 extends the scope and object to individuals who do not necessarily have a labour contract. In the new Code, an individual will be classified as an employee if they meet the following 3 conditions:
- the individual has an agreement to perform a job;
- the individual is receiving monetary payment; and
- the individual is working under the supervision of an employer.
The total number of public holidays and New Year holidays will increase from 10 to 11 days. The New Labour Code 2019 adds one more day adjacent to the Independence Day holiday, which may be 1 September or 3 September, depending on the year. Public holidays therefore will be:
- New Year’s Day: 1 day
- Lunar New Year: 5 days
- Victory Day (30 April): 1 day
- International Labour Day (1 May): 1 day
- Independence Day (2 September, plus 1 further day): 2 days
- Hung King’s death anniversary (10 March of the lunar calendar): 1 day
ELECTRONIC LABOUR CONTRACTS
The New Labour Code 2019 recognises the ability to conclude labour contracts through electronic means, and which will have the same validity in law as a written labour contract. The provision initially applies for contracts under 1 month (with exceptions for employees who are under 15 years old, maids and individuals without capacity over 18 years old).
SEASONAL WORK AND CONTRACT TERMS
Authorities have removed the category of seasonal or work (a specific labour contract with term under 12 months) and amended the definition of definite-term labour contract as a contract with a maximum term not exceeding 36 months (without setting a minimum threshold).
The New Labour Code 2019 prescribes only 2 types of labour contracts: indefinite-term contract and definite-term contract under 36 months. Therefore, the seasonal or specific job contract with a duration under 12 months shall be deemed as definite-term contract.
An employee is able to enter into multiple labour contracts with different employers; however an employee is only entitled to conclude only one concurrent labour contract with each employer. Directors of enterprises having state capital, elderly employees, foreign employees and members of executive boards of representative organisations are permitted to sign definite-term labour contracts multiple times.
The New Labour Code 2019 increases the monthly maximum overtime hours to 40 hours per month, from the present 30 hours, and further details cases where employees are permitted to work overtime. Under the updated provisions, employers must ensure that the number of overtime working hours of the employee does not exceed 50% of the normal working hours per day; the total working hours do not exceed 12 hours per day; overtime hours do not exceed 40 hours per month and the total of overtime working hours do not exceed 200 hours per year.
The current exception where overtime working hours must not exceed 300 hours per year in specified cases (ie, the garment industry) was supplemented in the New Labour Code 2019 with work related to manufacturing/processing of electric and electronic products and labour of individuals with high technical qualifications. However, the base of 200 maximum overtime hours per year stands for other employers.
The New Labour Code 2019 provides employees with the right to unilaterally terminate a contract without cause, provided they give the advance notice according to the prescribed times that correspond to the contract for which they are engaged.
Under the new provisions, employers and employees gain more clarity and tools in the process of contract termination:
- The law removes provisions on the extension of a labour contract for non-specialized trade union officials who are under the trade union term but their labour contract has expired.
- For employees reaching the age of retirement, the conditions on the term of Social Insurance contributions is removed, and the labour contract may be now be terminated unilaterally by either employees or employers.
- Where an employee regularly fails to complete its work scope according to the labour contract and has been warned in writing at least twice within 60 days, the employer shall be entitled to unilaterally terminate the labour contract.
- Under special circumstances, employees are not required to send an advance notice before unilaterally terminating their labour contract, for instance: due to maltreatment, sexual harassment, coercive labour, and when employers fail to make salary payment in full or on time.
- Employees are now entitled to 14 working days pay for termination benefits, instead of 7 days stipulated in the previous Labour Code.
- Foreign employees may be terminated upon their work permit expiration or if the termination is a result of a decision from a court or relevant authority.
The probation period for an employee must be based on the nature and complexity of the job, which can only apply once for each job, and cannot exceed the following maximum terms:
- 180 days for management jobs such as General Manager or higher level (note: we await the formal interpretation of this position as if applies in practice).
- 60 days for jobs which require professional and technical qualification of university level.
- 30 days for jobs which require professional and technical qualifications of intermediate vocational level, professional secondary level, or for technical workers and skilled employees.
- 6 working days for other types of jobs.
While the Labour Code 2012 stipulates that the Government announces a regional minimum wage, in the New Labour Code 2019 the Government only announces the ‘minimum living standard’ of workers and their families. Therefore, despite compliance with paying a published minimum wage, businesses will still have to ensure a minimum living standard for their employees.
In addition, businesses are to be proactive in developing wage scales, payroll and labour norms on the basis of negotiation and agreement with employees. Employers are still required to establish salary schemes and consult with employee representative organisations, however, registration of schemes with the labour authorities is optional.
SOCIAL INSURANCE BOOKS AND CARDS
The Social Insurance book that each employee is currently entitled to will be replaced by a “Social Insurance Card”. We await additional guidance on this subject and the specific implementation date.
WORK PERMIT CHANGES
Foreign individuals working in Vietnam can apply for and obtain Work Permits for a maximum term of two years, before requiring renewal. While the current 2012 Labour Code does not cap the number of Work Permit renewals permitted once issued, under the New Labour Code 2019 foreign individuals working in Vietnam can only extend their Work Permit once for a maximum additional two year term. After the extension period of the Work Permit concludes, foreign individuals will have to formally apply for a new Work Permit.
Under the provisions of the New Labour Code 2019, foreign individuals married to Vietnamese citizens are eligible to apply for a Work Permit Exemption, removing the need for a formal Work Permit application for these individuals.
In the New Labour Code 2019, the retirement age of employees increases to 62 for men and 60 for women, instead of 60 for men and 55 for women in the previous law. At the same time, for specific jobs, the retirement before the above age tier is also stipulated with more clarity.
The New Labour Code 2019 commences into force from 1 January 2021.
For more information about the changes in the New Labour Code 2019 or if you require specific advice on labour and human resources related matters, don’t hesitate to contact the Domicile team.
For further information contact:
Matthew Lourey, Managing Partner
Huynh Thi Bao Tran, Head of Payroll Services