Minimum statutory terms
Termination of employment
Discrimination and harassment
Occupational health and safety
Regulation of outsourcing and contracting
Industrial relations

Acknowledgment

This Guide was prepared by the Workplace Law & Advisory – Asia practice of Freehills International Lawyers, with assistance from the following firms:

Contacts:

George Cooper
Practice Leader
+65 6236 9941 begin_of_the_skype_highlighting              +65 6236 9941 
george.cooper@freehills.com

Celia Yuen
Senior Associate
+65 6236 9972 begin_of_the_skype_highlighting              +65 6236 9972 
celia.yuen@freehills.com

Note:     This Guide:

• is current to 31 March 2010;
• contains general introductory information only, without an assumption of a duty of care by Freehills or the other firms listed;
• does not contain legal advice; and
• is not intended to be, nor should it be relied on as, a substitute for legal or other professional advice.

If employers have workplace relations issues or requirements in particular jurisdictions, then Freehills Workplace Law & Advisory - Asia can assist, working with local counsel.

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Minimum statutory terms
Key statutes
The key statute governing employment law in Vietnam is the Labour Code. Another significant statute is the Law on Social Insurance.

A multitude of separate decrees, circulars and other implementing legislation provide guidance on the implementation of the Labour Code and the Law on Social Insurance.

Employer work rules
An employer with more than 10 employees is required by law to formulate a set of work rules which deal with internal work disciplinary actions and procedures. In formulating the rules, the employer is required to consult with the trade union committee. The rules must be registered with the Labour Department.

Probationary period
The probationary period allowed under the Labour Code is a maximum of 30 days, or 60 days for positions which require specialised or highly technical skills. Either party may terminate the employment during the probationary period with immediate effect.

Minimum wage
There is a prescribed minimum wage, which is adjusted periodically. The prescribed minimum may differ depending on the location of the work, and whether the employer is a Vietnamese enterprise or a foreign-invested enterprise.

Remuneration structure
The wages of employees must be agreed upon in the labour contract, and may be calculated by reference to time (hours, days, weeks, months), on the basis of the number of products produced or upon completed pieces of work. Wages of employees may not be lower than the applicable minimum wage.

Working hours
Hours of work—The normal working hours of each employee working in normal working conditions are a maximum of eight hours per day or 48 hours per week. The working hours of an employee are reduced by one to two hours for employees who perform extremely heavy, dangerous or toxic work. The employer has the right to set working hours on a daily or a weekly basis, provided that employees are notified in advance and such right is clearly set out in the employee’s labour contract, labour agreement and in the internal rules of the enterprise.

Rest periods—An employee who works for eight consecutive hours in normal working conditions or for six or seven consecutive hours in the case that the employee’s working hours have been reduced, is entitled to a break of at least 30 minutes as part of that working period. Those who work the night shift are entitled to a break of at least 45 minutes. If an employee works for 10 hours or more in a day, the employer must provide an additional break of at least 30 minutes during working hours, in addition to the regular break in the normal working shift.

For each seven working days, an employee is entitled to a break of at least one day (24 consecutive hours), which is normally taken on a Sunday. However where, due to the nature of the work, it is impossible for the employees to have one day off per week, the employer must make alternative arrangements to ensure that the employees on average have at least four days off in a month. Employees who work in shifts are also entitled to have at least 12 hours rest between each shift.

Overtime—Overtime may not exceed four hours per day, or 200 hours per year. In special cases, where urgent demands of production need to be met or due to other unforeseeable factors experienced by enterprises engaged in the production or processing of exports including textiles, garments, leather, shoes and marine products, the total overtime per year can be more but must not exceed 300 hours a year and is subject to the approval of the relevant state authorities.

Overtime pay on normal working days is 150% of the employee’s regular wage. Overtime pay on weekends or weekly rest days is 200% of the employee’s regular wage. Overtime pay on public holidays or statutory leave days is 300% of the employee’s regular wage.

Public holidays
Employees in Vietnam are entitled to nine paid public holidays per annum on the dates prescribed by the government. Where a public holiday coincides with a weekly day off, the employees are entitled to take the following day off.

Paid annual leave
An employee who has been employed for 12 months is entitled to annual leave of 12 working days. Where an employee has worked for less than 12 months, their annual leave entitlement is calculated in proportion to the number of months that the employee has worked during the year.

Employees working under strenuous, hazardous or dangerous conditions are entitled to annual leave of 14 or 16 working days, depending on the severity of the conditions under which they are working.

The number of annual leave days to which an employee is entitled increases in accordance with the length of service, by one additional day for every five years of employment.
When taking annual leave, the employee may be paid in advance an amount equal to their wages in respect of the days to be taken as annual leave. If an employee does not take their full annual leave entitlement for a given year, they are entitled to be paid in lieu.

The employer is entitled to determine the timetable for the annual leave, provided that the executive committee of the trade union operating in the enterprise is consulted and the employees are notified in advance. The employees and the employer may agree on the annual leave being taken in instalments.

Other types of leave
Maternity leave—Under the Labour Code and the Law on Social Insurance, a female employee working in normal conditions is entitled to four months maternity leave. Wages during the maternity leave period are paid by the Social Insurance Fund provided that such employee (and her employer) has paid the relevant social insurance premium for at least six months or more within a period of 12 months prior to childbirth.

Sick leave—An employee may take sick leave if they are unable to attend work due to sickness, or due to having to care for their sick child under the age of seven.
The maximum consecutive sick leave period is 12 months for an indefinite-term contract, six months for a definite-term contract with a term of 12 to 36 months, and half the duration of the contract for a definite-term contract that is for less than 12 months. The exceeding of these limits may lead to a unilateral termination by an employer of the employee’s labour contract.

An employer is not obliged to pay the employee during the sick leave period. The employee may however be entitled to an allowance paid by the Social Insurance Fund for the leave period, provided that the employee can provide a medical certificate from an assigned hospital in respect of such period of sick leave. The time period of sickness allowance depends on the working conditions of the employee and the rate and period of social security contribution. The amount of sickness allowance is generally 75% of the salary used to calculate the social insurance contributions immediately prior to the leave of the absence period.

Personal leave—An employee is entitled to paid leave for their own wedding (three days), their child’s wedding (one day), or in the event of the death of a parent, spouse or child of the employee (three days).

Unpaid leave—An employee is entitled, with permission of the employer, to unpaid leave of absence.

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Termination of employment
Legal requirements
The circumstances in which an employer or an employee may terminate a labour contract are specified by law.
An employer may only terminate a labour contract unilaterally in the following circumstances:

• the employee repeatedly fails to perform the contracted work
• the employee is being disciplined in the form of dismissal
• the employee is suffering from an illness and remains unable to work for a considerable period of time
• the employer is forced to reduce production and employment, after trying all measures to recover from force majeure events, or
• the employer ceases operation.

In addition, an employee’s contract may be terminated on the grounds of retrenchment, subject to the compliance with statutory procedures described in ‘Specific requirements applicable to redundancy’ below, if more than one employee is to be retrenched.
The labour laws require employers to discuss and reach an agreement with the executive committee of the local trade union before the employer can unilaterally terminate a labour contract with an employee. Where no agreement is reached, the two parties must report to the local labour authority or organisation. In almost all cases, 30 days after the date of making that report, the employer may proceed with the termination of employment, except for the situation of discipline in the form of dismissal, for which the employer only needs to wait for a period of 20 days.

Notice periods
An employee engaged under an indefinite term labour contract may resign from their employment by giving the employer notice of 45 working days, or three days in the case that the employee is suffering from an accident or illness which has been treated for six consecutive months.

Other than in the case of discipline in the form of dismissal, an employer must provide notice of unilateral termination to the employee of 45 days for an indefinite term labour contract, 30 days for a definite term labour contract and three days for a seasonal labour contract.

If either party fails to give adequate notice of termination, the party in breach must pay compensation to the other party of the amount equal to the employee’s salary that would otherwise have been paid for the days for which no notice was given.

Restrictions on the ability to terminate employment
Other than as provided by the Labour Code, termination of employment is prohibited. In addition, the Labour Code specifically prohibits termination of employment for any of the following reasons:

• because the employee is under medical treatment for an illness, labour accident or occupational illness
• because the employee is on annual leave, personal leave or any other approved absence, or
• because the female employee is getting married, is pregnant, is on maternity leave or has a child under the age of 12 months.

If a female worker’s labour contract is lawfully terminated during the period she is pregnant, on maternity leave or nursing her child of less than 12 months, the termination of contract will be suspended for that period, except in the case of termination due to closure of the enterprise.

Remedies
An employee may make a claim of unlawful termination either to a local labour conciliation council (or labour conciliator) or the People’s Court.
If successful, the employee may obtain a remedy of re-employment in accordance with the signed labour contract, plus back pay, plus additional compensation of at least two months salary. If the employee’s claim is successful but he/she refuses to return to work then, in addition to back pay and compensation, the employer must pay a severance allowance of half a month’s salary for each year of service. If the employer refuses to re-employ the employee and the employee agrees, in addition to the aforementioned compensation and allowance, the two parties are to agree upon an additional amount of compensation to be paid by the employer to the employee in order to terminate the labour contract.

Severance payments
Severance is payable as follows:
Except for termination due to discipline in the form of dismissal (not including dismissal due to the employee taking five days off in one month or twenty days off in one year without proper reason), an employee who has worked for more than one year is entitled upon termination of employment to receive a severance payment of a half month’s salary for each year of service. For Vietnamese employees who participate in the compulsory unemployment insurance scheme, the severance allowance is only calculated in respect of service up to 31 December 2008. From 1 January 2009, pursuant to the Law on Social Insurance, all employers must pay a compulsory unemployment insurance premium in respect of their Vietnamese employees. Therefore, the period of an employee’s employment post-1 January 2009 will not be included in the calculation of an employee’s severance allowance entitlement, provided that the employer and its employee have paid the relevant unemployment insurance premiums in respect of the employee.
If the termination is due to changes in structure or technology, an employee who has worked for more than one year is entitled to redundancy pay of one month’s salary for each year of employment, subject to a minimum payment of two months salary. The period of an employee’s employment post-1 January 2009 will not be included in the calculation of an employee’s redundancy pay entitlement, provided that the employer and employee have paid the relevant unemployment insurance premiums in respect of the employee over that period.

Specific requirements applicable to redundancy
In addition to the standard termination procedures, if more than one employee is to be retrenched in the context of restructuring or technology modernisation, the employer must publicise the list of employees whose contracts are to be terminated. This must be done after consideration of the company’s requirements and the length of service, skills, family conditions and other factors relating to the employees.

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Discrimination and harassment
Vietnam does not have a separate law on discrimination as such. There are however provisions of the Constitution and the Labour Code that are relevant to discrimination. Generally, discrimination on the grounds of sex, race, social class, religion or belief is prohibited by law. The Labour Code provides that every person has the right to work, to freely choose a job, and to improve their professional skills without discrimination due to gender, race, social class, religion or belief.

The Labour Code also contains a general provision prohibiting any acts that insult the honour and dignity of female workers.

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Occupational health and safety
Vietnamese labour law provides that an employer is responsible for the provision of protective equipment and ensuring occupational safety and hygiene. The employer is legally responsible for the improvement of work conditions and workplace. Employers are required to provide safety and hygiene-related training, information and guidance to their employees. Various issued circulars contain detailed safety and hygiene requirements applicable to particular occupations and jobs.

All labour accidents and professional diseases must be declared, investigated, recorded and periodically reported in accordance with the law.


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Regulation of outsourcing and contracting
Legislation in brief
The establishment, rights and obligations of trade unions are provided for under the Constitution of Vietnam. The establishment and operation of trade unions is governed by the Labour Code and the Law on Trade Unions. The organisational structure and operation of union units are also governed by the Charter of Trade Unions of Vietnam.

Role of trade unions and collective agreements
The Labour Federation of Vietnam is the central and national organisation of trade unions in Vietnam. The Federation represents the rights and interests of workers, and participates in the State’s management and formulation of laws and policies.

Under the Labour Federation are various trade union organisations at the industry and provincial levels, which are in turn made up of the ‘grassroots trade union’ units in various enterprises or organisations.

Any five or more workers in an enterprise may voluntarily form a grassroots trade union unit. The role of such trade union units includes:

• being consulted in relation to the formulation of internal work rules by the employer
• proposing, negotiating and signing a collective labour agreement with the employer
• working with the employer to manage and distribute statutory welfare funds
• being consulted in relation to decisions by the employer for example, in relation to wage scales, bonus payments, unilateral terminations and disciplinary action
• monitoring and supervising the employer’s observance of employment laws, including initiating legal action against the employer, and
• participating in the settlement of labour disputes.

The making of collective labour agreements is encouraged by the State. A collective labour agreement will become the primary source of an employee’s terms and conditions of employment, overriding the terms of any individual employment contract or internal work rules to the extent of the inconsistency.

Industrial action and disputes
Amendments to the Labour Code relating to the settlement of labour disputes came into force on 1 July 2007, and were designed to more clearly regulate:

• the processes and competent authority for the settlement of labour disputes, and
• the taking of strike action in connection with such disputes.

Strikes have been fairly prevalent in Vietnam in recent years, and most have occurred in connection with foreign-invested enterprises. The new provisions have generally been welcomed by such employers as they are clearly intended to reduce the incentive to strike and formalise the principle that the workforce should only participate in strikes as a last resort.

The amendments distinguish between the following categories of dispute and specify a different resolution process for each:

• Individual labour disputes—These are normally to be dealt with by the enterprise reconciliation council or labour conciliator, before determination by the relevant court, if they remain unresolved. Strikes are not permitted in connection with individual disputes.
• Collective labour disputes about employees’ rights—These are disputes over the application of relevant laws, rules, agreements etc. These must be referred firstly to the enterprise reconciliation council or labour conciliator, secondly to the Chairman of the district people’s committee and finally, if unresolved, to the People’s Court for determination. Alternatively, the workforce may lawfully strike at this final stage. It is expected that this process will result in many ‘rights disputes’ being resolved without recourse to strikes.
• Collective labour disputes about employees’ interests—These are disputes over new labour conditions and benefits. These must be referred firstly to the enterprise reconciliation council or labour conciliator, secondly to the provincial labour arbitration council and then, if they remain unresolved, the workforce can lawfully strike.

In an enterprise with less than 300 employees, at least 50% of the employees must agree to the strike for it to be lawful. In larger enterprises, at least 75% of a prescribed representative group of employees must agree.

According to the changes, striking employees are not entitled to be paid for the period of the strike.

Either the employer or the employees may apply to the People’s Court for a ruling on whether a strike is lawful. Employees who remain on strike after a finding that the strike is unlawful may be subject to disciplinary penalties. Moreover, if an employer suffers loss or damage as a result of unlawful strike action then those responsible may be required to compensate the employer.

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