Vietnam – New Labor Code
Isabel Coles | 13 March 2020
Vietnam has approved a new Labor Code that will take effect from 1 January 2021 and will widely impact employers. It includes a gradual increase to the normal retirement age: from 60 to 62 for men and from 55 to 60 for women.
Vietnam’s National Assembly has approved a new Labor Code that will take effect from 1 January 2021. This will make changes to the existing Labor Code in areas such as probationary employment, mandatory work rules, notice requirements and will also gradually increase the normal retirement age for social security benefits.
The current retirement age is age 60 for men and age 55 for women. Starting in January 2021, the retirement ages will increase gradually each year by three months for men and by four months for women until they reach age 62 in 2028 for men and age 60 in 2035 for women.
The current rules that allow certain workers (e.g. those working in hazardous conditions) to retire up to 5 years before normal retirement age will continue to apply. Additionally, certain highly-skilled workers will be allowed to delay retirement by up to 5 years.
Labor contracts, working hours and other changes
The new Labor Code provides for only two types of labor contracts going forward: fixed-term contracts (with terms of up to 36 months) and indefinite-term contracts. Seasonal contracts will no longer be permitted from 2021. Employers and employees can now sign a separate probation agreement or include a probation clause in the labor contract. Managerial positions may be subject to a probation period of up to 180 days. The new Labor Code also limits the term of work permits and extensions: foreigners who have work permits, which are valid for a maximum of two years, can only extend them once for a further two-year term. Thereafter they will need to apply for a new work permit.
The working hour limit remains the same at 48 hours per week, but the new Labor Code specifies that normal working hours cannot exceed 8 hours a day or 48 hours per week. If the employer and employee agree on an overtime deal, the overtime cannot exceed 12 hours a day, 40 hours a month and 200 hours a year (although for certain industries a higher overtime cap of 300 hours is permitted). The government will no longer regulate salary policies at individual companies. However, rules on minimum wages must be followed.
The new Labor Code introduces an additional public holiday. Vietnamese workers will get an additional day off either before or after the 2 September National Day holiday.
From 2021, employees will be able to terminate their employment contract with immediate effect for mistreatment, pregnancy or if the employer fails to pay salary on time. Employees are able to terminate their contract without giving a reason provided they comply with the minimum notice requirements (30 days for fixed-term contracts, 45 days for indefinite-term). Employers will be allowed to unilaterally terminate the labor contracts of employees who are absent from work without permission for a total of five consecutive working days or more, or if an employee has provided false information during the recruitment process.
Employees will also be allowed to establish or choose to participate in independent trade unions, without having to become a member of the Vietnam General Confederation of Labor (VGCL). (Currently the state-run VGCL is the only recognised representative organization for workers.)
The new Labor Code enhances protection for employees against discrimination in the workplace. This includes protection from sexual harassment and discrimination based on skin color, race, nationality, ethnicity, gender, marital status, pregnancy, political views, disability, HIV status or union participation. Sexual harassment in the workplace will constitute grounds for dismissal, provided this is specified in a company’s labor regulations.
The new Labor Code will have an impact on businesses, and employers should review their policies and practices to ensure they are legally compliant in 2021.