Under the Labor Code, FICs are allowed to recruit Vietnamese employees directly or through a recruitment centre. Not less than 07 days before recruiting, FICs are required to publicly announce (on either local or central mass media) and post at its head office the recruitment requirements such as a job description, job qualifications, number of laborers to be recruited, the contract term, salary, and working conditions. Within 07 days from the recruitment, FICs are required to provide a list of recruited laborers to the relevant DOLISA.
International or foreign organizations, including any representative offices and branches in Vietnam, are required to recruit Vietnamese employees through a recruitment centre. In the event that the recruitment centre fails to supply the required candidates within 15 days of a recruitment request, the foreign organization is entitled to recruit employees directly.
Foreigners may work in Vietnam in the following forms: (a) pursuant to a labor contract; (b) internal transfer within an enterprise which has a commercial presence in Vietnam; (c) performance of contracts that are economic, commercial, financial, banking, insurance, scientific, cultural, sports, education, or medical health; (d) service providers pursuant to a contract; (e) foreigners (who does not live in Vietnam and who does not receive remuneration from any source in Vietnam) offering services by participating in activities relating to representation of a service supplier in order to negotiate the sale or consumption of services of such supplier, on condition that foreigner does not directly sell such services to the public and does not directly participate in the provision of services; or (f) foreigners representing a foreign non-governmental organization which is permitted to operate in Vietnam.
Foreigners must satisfy all of the following conditions in order to work in Vietnam: (i) be at least 18 years of age; (ii) in good health as necessary to satisfy the job requirements; (iii) either a manager, executive director, or an expert as defined under the law; (iv) not have a criminal record for a national security offence; (v) not currently subject to criminal prosecution or any criminal sentence in accordance with the laws of Vietnam and foreign laws; and (vi) with a work permit issued by the authorized State body of Vietnam if required.
2. Labor Contracts
A labor contract shall, with the exception of contracts with a term of less than 03 months, be in writing and signed directly between an employee and the legal representative of the employer. The contract shall be made on the standard form issued by MOLISA. The contract shall contain the following details: the work to be carried out, working hours and length of breaks, the wage, workplace, term of contract, health and safety provisions, and social insurance. The standard form also allows the employer and employee to agree on other employment terms and conditions.
The contents of a labor contract must be in compliance with the laws of Vietnam and any collective labor agreement of the relevant company.
Types of labor contracts
The Labor Code introduced three types of labor contracts:
• non-fixed term labor contract;
• fixed term labor contract (from 12 to 36 months); and
• “seasonal” labor contract (less than 12 months).
A probationary period can be applied before execution of a labor contract. During the probationary period, either party can terminate the employment contract without prior notice. The probationary period must be:
(a) no more than 60 days for positions requiring college level qualifications;
(b) no more than 30 days for positions requiring secondary level qualifications, or with respect to technicians and trade persons; and
(c) no more than 06 days for manual labor.
3. Termination of Employment
The Labor Code only allows unilateral termination of a labor contract in limited circumstances, irrespective of any mutual agreement or other circumstances. There are different procedures for termination by employers and employees. Generally, a party terminating a labor contract unilaterally must give prior notice of termination to the other party.
Unilateral termination by an employee
An employee who signs a labor contract with a fixed term from 12-36 months, or for seasonal work or a specific task of less than 12 months, is entitled to unilaterally terminate the contract prior to expiration if the employee:
(i) is not assigned to the work, workplace, or working conditions agreed under the labor contract;
(ii) is not paid the full amount or at the time specified in the labor contract;
(iii) is subject to maltreatment or forced labor;
(iv) cannot continue their employment due to adverse personal or family difficulties;
(v) is elected to a full-time position in a representative public office or is appointed to an office in a State body;
(vi) is sick or involved in an accident requiring medical treatment for three consecutive months in respect of a fixed-term labor contract of 12 months to 36 months or a quarter of the contract term in respect of a seasonal job or a specific job with a term of less than 12 months; or
(vii) in the case of female employees, is pregnant and must stop working based on the advice of a doctor.
An employee who signs a non-fixed term labor contract is entitled to unilaterally terminate the contract whenever he/she wishes so provided that 45-day prior notice is duly given to the employer.
Unilateral termination by an employer
During the term of a labor contract, unilateral termination by an employer is permitted in the following circumstances:
(i) the employee regularly fails to perform his contractual duties;
(ii) the employee is dismissed for disciplinary reasons;
(iii) the employee has been sick for an extended period (06 months or 12 months depending on the term of the labor contract);
(iv) the employer is forced to make cuts in the production and workforce due to force majeure events such as fire or natural disaster; or
(v) the company or organization ceases operations.
4. Wages, Overtime Payments, and Statutory Minimums
The Labor Code allows foreign-invested projects to denominate and pay wages to Vietnamese employees in Dong. Salaries for foreigners may be denominated and paid in foreign currency.
The Government decides and publishes a minimum wage which varies depending on geographical regions and types of work. The current minimum wage per month for an employee is VND1,550,000 (approx. USD77), VND1,350,000 (approx. USD68), VND1170,000 (approx. USD59) and VND1100,000 (approx. USD55) in four different zones. By 2012 all businesses, foreign and domestic, will pay a single nationwide minimum wage.
Overtime on a normal working day (six days of the week and including non-public holidays) must be at least one and a half times the normal hourly rate. On non-working days (01 day a week), overtime pay is at least twice the normal hourly pay, while overtime on public holidays and paid annual leave is three times the normal pay rate. Overtime may not exceed 04 hours a day or 16 hours a week, or 200 hours in a year or 300 hours in a year for special circumstances which require the approval of the provincial People’s Committee.
The normal number of working hours in a week is 48 hours, comprising six 8-hour working days and extendable by mutual agreement. Employees working in dangerous, noxious, or especially toxic jobs (as defined by MOLISA) have their work day shortened to 06 or 07 hours.
An employee working for at least 12 months is entitled to annual leave of 12 days in addition to public holidays. Certain especially hazardous and toxic jobs are entitled to either 14 or 16 days annual leave as determined by the Government. An employer may set the schedule of annual leave after consulting with the Executive Committee of the enterprise trade union and notifying his employees. Employees will be compensated for remaining leave prior to departure from work.
An employee is entitled to paid leave for the following personal reasons: marriage (03 days leave); marriage of a son or daughter (01 day leave); and the death of a person’s parents, spouse’s parents, spouse, son, or daughter (03 days leave). Female employees are entitled to maternity leave of at least 04 months, with an allowance equal to 100% of their salary to be paid by the Social Insurance Fund. At least 02 months of the maternity leave must be taken post-birth.
5. Work Permits
Expatriates working in Vietnam for 03 months or more must obtain a work permit. The term of a work permit is required to correspond with the length of the labor contract, which is capped at 36 months but may be extended at the employer's request.
Not less than twenty days before an expatriate’s estimated date of commencement of work, an FIC must apply to DOLISA or BOM of zone to obtain a work permit for that expatriate. DOLISA or BOM of zone is obliged to give its decision within 15 days of its receipt of such application. Clear reasons must be provided if the application is refused. In addition, a work permit can be withdrawn in certain circumstances, including for a breach of the laws of Vietnam by the expatriate.
Following groups of foreigners working in Vietnam are exempt from the requirement of obtaining a work permit:
(i) foreigners entering Vietnam to work for less than 03 months;
(ii) a member of a limited liability company with two or more members;
(iii) the owner of a one member limited liability company;
(iv) a member of the board of management of a shareholding company;
(v) a foreigner entering Vietnam to offer services;
(vi) foreigners entering Vietnam to work to resolve an emergency situation such as a breakdown or a technically or technologically complex situation arising and affecting, or with the risk of affecting, production and/or business which Vietnamese experts or foreign experts currently in Vietnam are unable to deal with. Such foreigners must carry out procedures for issuance of a work permit if their work extends for more than 03 months; and
(vii) a foreign lawyer to whom the Ministry of Justice has issued a certificate to practice law in Vietnam.
Not less than seven days prior to the date of commencement of work, foreigners who are exempted from work permit requirements must be registered at DOLISA or BOM of zone where the employer’s head office is located. The registration must state the name, age, nationality and passport number of the employee, the dates of commencement and termination of employment, and a description of the work to be done.
6. Collective Labor Agreement
An FIC must negotiate a collective labor agreement if requested by the trade union at the company. This agreement is valid only if at least 50% of the employees agree to the provisions of the agreement.
The collective labor agreement covers matters such as wages for different categories of employees and working conditions. A copy of the collective labor agreement must be filed with DOLISA or BOM of zone within 10 days of the signing of the agreement and will come into effect from the date agreed by the parties as stated in the agreement, or from the signing date where no such date is specified. The term of the collective labor agreement can be of 01 to 03 years subject to renewals thereafter.
7. Trade Unions
Within 06 months of the commencement of a company's operations, the provincial federation of trade union shall set up a provisional trade union organization at the company to represent and protect the rights and interests of employees and the workforce.
An employer must recognize a trade union's status once it is validly organized. There are strict rules protecting the trade union and its members from any coercion or discrimination from employers regarding activity within the trade union. The employer is responsible for ensuring an environment conducive to the activities of the trade union.
8. Employment Funds
The Social Insurance Fund, Health Insurance Fund, and Unemployment Insurance Fund only cover Vietnamese employees.
Social Insurance Fund
Contribution to the State Social Insurance Fund is a statutory obligation of both the employer and employee in all contractual employment relationships longer than 03 months. The Social Insurance Fund provides benefits such as pensions, salaries during sick days, salaries and treatment for labor-related accidents and occupational illnesses, maternity benefits, and death benefits. The contributions are made as follows:
• Employer pays 15% of the monthly salary pool to the Social Insurance Fund.
• Employee pays 5% of his/her monthly salary to the Social Insurance Fund.
Health Insurance Fund
The Health Insurance Fund covers 100% of medical expenses, except for cases where high cost treatments are involved. In such cases, the Health Insurance Fund covers 100% of medical expenses incurred by working employees provided that they are less than VND7 million and 60% of such medical expenses with a cap of VND20 million if they are above VND7 million.
An employer is obliged to pay 2% of the monthly salary pool to the Health Insurance Fund. Each employee must also contribute by paying 1% of his or her monthly salary to the Health Insurance Fund.
Unemployment Insurance Fund
The provision of the law on Unemployment Insurance Fund takes effect on 01 January 2009. Unemployment insurance covers unemployment allowance, job-learning support, and job-seeking support. The contributions are made as follows:
• Employer pays 1% of the fund of monthly salary pool of employees who participate in unemployment insurance on which unemployment insurance premiums are based.
• Employee pays 1% of his/her monthly salary on which unemployment insurance premiums are based.
Provision Fund for Retrenchment Allowances
A company is required to place 1-3% of the total wages paid into a Retrenchment Allowance Fund. When an employee loses his or her job due to restructuring or technological advances affecting a company, the employer has responsibility to retrain the employee. If a new job cannot be created, the employee is entitled to a severance pay of one month's salary for each year employment, with at least two months of such pay guaranteed.