SIGNING A LABOUR CONTRACT IN VIETNAM

With the exception of short-term labour contracts (less than three months), labour contracts must be entered into in writing. Although, strictly speaking, this is not required by law, it is very recommendable to use the standard labour contract issued by the MOLISA (Ministry Of Labour-Invalids and Social Affairs)  as a template in order to avoid unnecessary explanations at the DOLISA (Department Of Labour-Invalids and Social Affairs – A city level). This may collide with the interest of multinational companies that prefer to have their own standard contracts for all jurisdictions they do business in order to streamline internal procedures.

The labour contract must be written in Vietnamese. If one of the parties is a foreigner (this includes foreign-invested companies), the contract may be bilingual (Vietnamese, followed by a translation into the foreign language), but the Vietnamese version prevails in case of inconsistencies between the two versions.

The present Labour Code and also the Labour Code 2013 contain major terms and conditions that must be included in the labour contract (amongst others job description, working hours, salary, holidays).

Salary Paid Currency

Salary paid to Vietnamese employees must be paid in Vietnamese currency (VNDong). Salary paid to foreign employees may be paid in a foreign currency (either to a bank account in Vietnam or a bank account abroad). It is customary to pay a 13th month salary (“Tet bonus”). It is possible to split the salary into a regular portion and a bonus portion which depends on the performance of the employee and/or the enterprise.

It is a gray area whether the salary amount may be stated in a foreign currency in the labour contract. So far, it was generally understood that the salary of a foreign employee could be stated in a foreign currency as payment of salary to a foreigner in a foreign currency is expressly allowed in Art 29.10 Decree 160 dated 28 December 2006. Based on Official Letters (which do not have the force of law, but provide guidelines for interpreting the law) 2321/LDTBXH-TL dated 6 August 2001 and 3245/LDTBXH-TL dated 23 October 2001 issued by the MOLISA, it was furthermore common understanding that the expression of the salary in a foreign currency was also permitted if the employee was Vietnamese, provided that the labour contract contained a clause according to which the salary was to be converted into Vietnamese dong on payment. The MOLISA even publishes up to this date an exchange rate that is to be used to calculate salary in a foreign currency for social security purposes.

However, on 12 June 2012, the Ho Chi Minh City DOLISA issued Official Letter 5667/SLDTBXH-LD requesting all foreign-invested enterprises to change their labour contracts to dong. The Ho Chi Minh City DOLISA intends to apply this Official Letter to both Vietnamese and foreign employees alike. The consequences of non-compliance are presently not clear. It should still be possible to make payments to foreign employees in a foreign currency as this is expressly allowed in Art 29.10 Decree 160 dated 28 December 2006, and an Official Letter cannot change a Decree.

The Duration of A Labour Contract

The term of a labour contract can be (i) indefinite, (ii) 12 to 36 months or (iii) less than 12 months. A labour contract for a term of less than 12 months is only possible for a specific job (e.g. project with a duration of less than 12 months) or a seasonal job. From the perspective of an employer, the difference between an indefinite and a definite term contract is the ease with which the employee can unilaterally terminate it.

A definite term contract can be terminated by an employee prior to the expiry of the term only for specific reasons stipulated in the Labour Code (e.g. prolonged illness, maltreatment by the employer), whereas he or she can walk away from an indefinite term labour contract simply with giving notice 45 working days in advance. For an employer, it is roughly as difficult to unilaterally terminate a definite term labour contract as it is to terminate an indefinite term labour contract.

A definite term labour contract automatically becomes an indefinite term contract if it is renewed more than once.

Work permits for foreigners are issued for a maximum period of 3 years (Labour Code 2013: 2 years) at a time. As a labour contract which is contrary to the contents of the work permit is invalid, foreign employees can only have a definite term labour contract with 3 (from 1 May 2013: 2) years maximum duration.

Probation Period

The parties may agree on the following probationary periods:

up to 60 days for jobs requiring professional or technical college qualification or above;

up to 30 days for jobs requiring an intermediate-level qualification, or for technicians or trained staff;

up to 6 days for any other position.

A probationary period can be included in either (i) the labour contract or (ii) a so-called offer letter. The offer letter is a notification by the employer to the employee stating that the employer wishes the employee to commence a job and specifying the conditions under which the employee is to work. If the probationary period is included in the offer letter, there is no obligation to pay social security contributions during the probationary period.

During the probationary period, the employer must pay a salary that corresponds to at least 70% (Labour Code 2013: 85%) of the ordinary salary for the job.

Either party may terminate the employment relationship at will during the probationary period without observing a notice period or paying compensation.

Working hours, rest hours, holidays, overtime

Maximum working hours: 8 hours per day (including 30 minutes break; 45 minutes break during night time), 6 days per week (Labour Code 2013: 10 hours per day, 48 hours per week);

12 days paid leave, increased by one additional day for every 5 years of employment;

9 public holidays (Labour Code 2013: 10 public holidays, foreign employees are additionally entitled to a day off with pay on one traditional holiday and one national day of their country);

Overtime max. 4 hours per week (Labour Code 2013: not more than 12 hours work per day, not more than 30 hours overtime per month) and 200 hours per year (300 hours in textile, clothes, sportswear, fishing industry or with permission from the DOLISA).

An employer requesting an employee to work overtime has to pay an overtime and, if the work is to be performed during the night, a night time premium.

The table below contains an example to visualize the amount of salary to be paid for overtime and night work in the following circumstances: Ordinary hourly salary = 100, working time according to the labour contract from 9 a.m. to 5 p.m., Saturday and Sunday off, place of work is Ho Chi Minh City.

Unless the labour contract or a collective labour agreement contains a stipulation to the contrary, unused annual leave is forfeited. Vietnamese law does not oblige the employer to “buy up” unused annual leave. As an exception, an employee who loses his or her job and could not take up his full annual leave of this particular year shall be paid in money for the leave days not taken. For the purpose of calculating this monetary compensation, the number of leave days that the employee is entitled to is calculated as a ratio corresponding to the time spent working during the year.

According to Art. 113 Labour Code 2013, an employee who takes annual leave is entitled to an advance payment of his or her salary corresponding to the days of annual leave taken; furthermore, he or she may ask the employer to cover his or her travelling expenses if his or her family live in a remote area.

An employee is entitled to paid leave of absence for certain personal reasons (marriage, death of a family member).

Minimum wage

One has to distinguish between the (i) general minimum wage and (ii) the regional minimum wage.

Contributions to compulsory social insurances are calculated on the basis of the salary stated in the labour contract. However, if the salary exceeds an amount corresponding to 20 times the general minimum wage, the basis of calculating the contributions is an amount corresponding to 20 times the general minimum wage. As from 1 May 2012, the general minimum wage is VND 1,050,000/month (approximately USD 50/month).

The regional minimum wage is the monthly salary that an employee is entitled to at least. It is increased by 7% for those employees who have been vocationally trained.  

Based on the level of development, the Government divides the whole country into 4 regions (regions I, II, III and IV). The regional minimum wage depends on the place of employment.  The table below shows the present and the planned regional minimum wages.

Salary during illness and maternity leave

Unless the labour contract or a collective labour agreement contains a stipulation to the contrary, an employer is not required to pay salary to an employee who is ill or on maternity leave. Salary during this period is paid by the compulsory social insurance (capped at presently VND 21 million per month). Maternity leave is 4 months (Labour Code 2013: 6 months). A female employee who is pregnant, on maternity leave or has a child below 12 months of age can, during this period, only be dismissed if the enterprise ceases operation; no other causes for dismissal are recognized.

Related topics: Foreign Employees; Termination of The Labour Contract

Explore More Legal Topics

HOTEL MASTER MANAGEMENT AGREEMENT TERMINATION OF THE LABOUR CONTRACT VIETNAM LABOUR LAW DEFINITIVE CONTRACT FOREIGN EMPLOYEES IN VIETNAM INTERNATIONAL DISTRIBUTION AGREEMENT INVESTMENT IN VIETNAM: KEY INSIGHTS FOR FOREIGN INVESTORS IN 2024 Cost of Setting up a Company in Vietnam: A Comprehensive Guide