On January 1, 2021, a new Vietnam Labor Law will come into effect, bringing significant changes that will impact both employers and employees. This update extends certain employee protections, aligning them with the International Labor Organization and global best practices. Simultaneously, employers will notice the removal or relaxation of several requirements. In this article, we will delve into these key changes to provide a comprehensive understanding of their implications.
Key provisions of Vietnam labor law
Working hours & rest time
Employees will now have the opportunity to work up to 40 hours of overtime per month, increased from the previous limit of 30 hours. Moreover, in specific circumstances, an employee can work a total of 300 overtime hours throughout the year. This modification aims to benefit manufacturing companies by enabling them to optimize production targets, reduce manufacturing costs, and better manage time constraints.
Regarding break time, it will only be included within an employee’s working hours if the employee is a shift worker.
Another noteworthy update is the addition of two days of holiday for National Independence Day in September. This means employees will have an extra day off, in addition to the existing day off on September 2. The specific additional day will be determined annually by the Prime Minister and will fall on either September 1 or 3. These changes aim to provide employees with improved working conditions and work-life balance.
Salary
Individual company salary policies negotiated between employers and employees will no longer be regulated by the government. However, it is important to note that minimum wage rules must still be adhered to. This change grants more flexibility to companies and their employees in determining compensation agreements while ensuring that a minimum standard of wages is maintained.
Retirement age
In the New Vietnam Labor Law, the retirement age for both male and female employees has been adjusted.
For male employees, the retirement age currently stands at 60 years, but starting from January 1, 2021, it will increase to 60 years and 3 months. Subsequently, each year, the retirement age for male employees will rise by an additional 3 months until it reaches 62 years in 2028.
As for female employees, their current retirement age is 55 years. However, from January 1, 2021, it will be raised to 55 years and 4 months. In the years that follow, the retirement age for female employees will increase by an additional 4 months annually, until it reaches 60 years in 2035.
The New Vietnam Labor Law also introduces provisions for employees engaged in extremely heavy, hazardous, or dangerous work. Such employees may be eligible to retire at a younger age, but the retirement age cannot be more than 5 years earlier than the normal retirement age for their gender. These adjustments aim to address workforce dynamics and provide adequate support for employees based on their specific job demands.
Labor contracts
The amended labor law simplifies the types of labor contracts, reducing them from three to two. These are the definite-term contracts, which cannot exceed three years, and the indefinite-term contracts. Under the new regulations, the definite-term contract can be renewed only once. Similarly, foreigners with work permits (valid for two years) will also be allowed to renew their contracts. Additionally, foreigners possessing work permits valid for two years will retain the ability to enter into multiple fixed-term contracts.
Notably, starting from 2021, seasonal contracts will no longer be permitted, aligning with the changes brought about by the revised labor law. These modifications aim to streamline contract arrangements, provide more clarity, and ensure fair and consistent practices for both employers and employees.
Termination of labor contract
The New Vietnam Labor Law introduces two additional grounds for the automatic termination of employment for foreign employees. Firstly, if a foreign employee is expelled from Vietnam by a court decision or competent authority, their employment will be terminated. Secondly, the employment of foreign workers will also come to an end if their work permit expires.
When it comes to unilateral termination of labor contracts, both employers and employees have specific conditions. Employers can terminate a labor contract unilaterally if the employee provided false information during recruitment or is absent from work for five consecutive working days without permission or a valid reason. In such cases, the termination takes immediate effect.
On the other hand, employees have the right to unilaterally terminate their employment without providing a reason. However, they must give a prior notice, the duration of which depends on the term of the labor contract. For labor contracts of less than 12 months, a notice of at least three working days is required. For contracts ranging from 12 to 36 months, a notice of 30 working days is needed. For indefinite-term labor contracts, at least 45 days’ notice, except for some specific jobs, the notice period can be extended up to 120 days.
It’s essential to note that in certain situations, employees are not obligated to provide a prior notice. For instance, if the employer has delayed or not fully paid their salary. These provisions aim to safeguard the rights of both employers and employees, ensuring a fair and balanced approach to employment termination.
Labor discipline
Currently, employers must have internal labor rules (ILRs) to lawfully and efficiently handle an employee’s wrongful act. If the employer has 10 or more employees, these ILRs must be registered with the labor authorities. Without registered ILRs, an employer, according to the existing Labor Code, cannot impose labor discipline.
However, the New Labor Code brings a significant change. It states that an employee can now face labor discipline for committing any wrongful act mentioned in their labor contract, labor law, or the ILRs. This means employers can enforce labor discipline even in the absence of ILRs.
Under the New Vietnam Labor Law, ILRs are now required to include three new areas: (i) addressing sexual harassment in the workplace, (ii) covering temporary employee transfers to different jobs as agreed in the labor contract, and (iii) specifying the individuals authorized to issue decisions on labor discipline.
Notably, the ILRs can now include sexual harassment in the workplace as a ground for dismissal, providing employers with an additional measure to address such misconduct. These changes aim to streamline the labor discipline process and ensure a safer and more respectful working environment.
Work permit
Foreigners working in Vietnam must possess either a work permit or a work permit (“WP”) exemption certificate. The provincial Department of Labor, War Invalids, and Social Affairs (“DOLISA”) issues these permits, which remain valid for a maximum of two years. According to the New Labor Code, a WP or WP exemption certificate can be renewed only once, and certain documents and procedures are exempted during the renewal process. Once the extended permit expires, a new application must be submitted.
Previously, the existing Labor Code allowed WP exemptions for individuals holding shares in a limited liability company or serving as the Chairman or a member of the Board of Directors in a joint-stock company, without specifying a share value requirement. However, the New Labor Code introduces a change in this regard. To be exempt from a WP, a foreigner must now hold “a certain share value.” The specific share value requirements will be outlined in a government decree to be issued. These adjustments aim to streamline the WP process and ensure clarity and consistency in foreign employment regulations.
Employee representative organization
Apart from the internal trade union, which is a part of the state trade union, the New Vietnam Labor Law permits employees to establish one or more representative organizations within the company. These employee representative organizations operate independently from the state trade union. If there is no employee representative organization within the company, the company is not required to consult with the district-level trade union before implementing internal labor regulations, salary schemes, work performance review policies, and similar measures. This provision aims to provide more autonomy to employees and companies in addressing internal matters without the need for external involvement.
Decree 145 – Implementing the labor code
To aid in the implementation of the New Labor Code, the government introduced Decree 145/2020/ND-CP, which will take effect on February 1, 2021.
Within the comprehensive content of the decree, we will focus on two essential points:
Sexual harassment
Decree 145/2020/ND-CP provides detailed guidelines on sexual harassment in the workplace, covering all forms of harassment, whether physical, verbal, or non-verbal. This encompasses body language, displays of sexual activity, and even electronic communications. Moreover, the definition of the workplace has been expanded to include not only the physical workplace but also any location where the employee conducts work-related activities, such as social events, workshops, business trips, phone conversations, and vehicles, among others. This comprehensive approach aims to create a safe and respectful working environment for all employees, emphasizing zero tolerance for any form of sexual harassment.
Female employees
To support female employees, those with children under 12 months old will have the privilege of taking a 60-minute break every day for breastfeeding while at work. Additionally, female employees will be granted a 30-minute break during their menstruation period. The specific number of days for these breaks can be mutually agreed upon, but it must be a minimum of three working days per month.
In case female employees cannot take these breaks due to work demands and are allowed to continue working, the employer is obligated to provide additional wages for the extra work. This additional payment is separate from regular overtime pay, ensuring fair compensation for the additional effort and time spent by the employees. These provisions aim to create a supportive and accommodating work environment for female employees.
Conclusion
The amended labor code is aimed at bringing Vietnam in line with international standards, as it is now part of significant free trade agreements like the European Vietnam Free Trade Agreement (EVFTA) and the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP).
The New Labor Code’s implementation will impact existing labor relationships. To ensure compliance, it’s crucial to create a checklist and thoroughly review all employment-related documents like labor contracts, internal labor rules, codes of conduct, and other policies to align them with the New Labor Code.
Given the impact of the new code on businesses, employers should seek professional assistance to ensure their labor practices comply with the new regulations in 2021. Contact MD Law Firm today to ensure your business stays on the right track and maintains a positive working environment for your employees.