The Labor Code applies to all employees, including foreign workers, working in Vietnam and generally sets out the rights and obligations of both employers and employees.

Issues relating to workplace relations are highly regulated in Vietnam, including the form of employment contract, term, probationary period, minimum salary, working hours, rest breaks, overtime, annual and other statutory leave entitlements, special benefits for female employees, social and health insurance contributions, internal labor regulations, collective labor agreements, and safety and hygiene.

Employment relations

The Code requires that all employment relationships (with a few exceptions) must be evidenced by labor contracts in the Vietnamese language entered into between employers and employees, including foreign employees, in duplicate and contain prescribed contents. Labor contracts for foreign employees must be registered.

Collective agreements

FIEs established in Vietnam and foreign and international organizations permitted to operate in Vietnam which have a trade union or temporary executive committee of the trade union are required to enter into collective labor agreements with their Vietnamese employees, in addition to the individual labor contracts between the employer and each employee.

The principal provisions of a collective labor agreement include undertakings of the parties in respect of employment and guarantees of employment, working hours and rest breaks, salaries, bonuses, allowances, labor protection, occupational safety and social insurance for employees.

The terms of a collective labor agreement must be accepted by more than 50 percent of the employees and registered with the local labor department.

Internal labor regulations

Enterprises employing ten or more workers are required to adopt internal labor regulations in writing and register the internal labor regulations with the local labor department. Internal labor regulations stipulate the work hours, rest time, order in the enterprise, labor safety, hygiene, protection of assets and technology secrets of the enterprise. Specific forms of disciplinary measures must be included in the internal labor regulations.

Recruitment

FIEs are entitled to recruit Vietnamese employees directly or through labor supply agencies. Foreign organizations and agencies which are licensed to operate in Vietnam must employ Vietnamese employees through labor supply agencies. If the labor supply agency is not able to identify a suitable candidate within 15 days, the foreign organization or individual is entitled to recruit directly. In practice, certain provinces and cities have abolished this requirement with respect to representative offices of foreign companies and such offices are permitted to employ Vietnamese employees directly.

Dismissal

It is very difficult to dismiss employees in Vietnam, even for serious breaches.

The Code provides for limited term contracts for 12 months and up to three years. It is important to ensure that wherever possible all employees are on limited term contracts so that the employer has the option of not renewing the contract upon maturity. It is very difficult to dismiss an employee who is employed on an indefinite term contract.

Definite term contracts automatically convert into indefinite term contracts if the parties do not sign a new definite term contract within 30 days following the expiry of the contract.

Sickness and disability pension and life assurance

Social insurance

Vietnamese employees on employment contracts of a duration of three months or more or for an indefinite term are subject to the compulsory social insurance scheme. Employers must contribute 17 percent of the salary and the employee must contribute seven percent. Both amounts will increase to 18 percent and eight percent respectively as from 1 January 2014.

There is also a compulsory contribution to an unemployment fund. Employees must contribute one per cent of monthly salary, and employers must contribute one per cent of monthly payroll, to the unemployment fund every month.

Employees are entitled to social insurance benefits and allowances in the event of illness, work-related accidents and occupational diseases, pregnancy, retirement, unemployment and death.

Medical insurance

Medical insurance is compulsory and is applicable to Vietnamese and foreign employees employed by and working for foreign invested enterprises, export processing zones and industrial parks and foreign and international organizations operating in Vietnam, except otherwise stipulated by international treaties executed or entered into by the Socialist Republic of Vietnam amongst others.

Premiums paid to the medical insurance fund for such Vietnamese and foreign employees are equal to 4.5 percent of their monthly wages and salaries and allowances (if any) as specified in the labor contract, of which the employer is required to contribute three per cent and the employee 1.5 percent. For foreign workers the contribution is usually insignificant as it is capped at 20 times the minimum wage.

Industrial relations

Trade unions

The establishment of a trade union in the workplace is to be carried out by the employees themselves or by the trade union at provincial level. Although employers are not required to set up trade unions, they are required to provide support for the establishment and operation of the trade unions. Trade unions are established and regulated pursuant to the Law on Trade Unions 1990 issued by the National Assembly, dated 7 July 1990. The trade union of an enterprise is set up to protect the rights and benefits of employees during the employment and represents employees in negotiation with the employer.

The Vietnam General Federation of Labor and trade unions in general are charged principally with the responsibility of discussing and resolving issues related to labor relations.

Settlement and mediation proceedings

The Labor Code 1994 provides for the resolution of labor disputes in the case of an individual labor dispute and also in the case of a collective labor dispute. A collective labor dispute can be classified as a collective labor dispute about rights and a collective labor dispute about benefits.

A party to an individual dispute may request the local labor conciliation council or, if there is none, a local labor conciliator to resolve the dispute.

For certain individual disputes, either party may bring the dispute directly to the Labor Court. If an individual dispute cannot be resolved satisfactorily by the local labor conciliation council or the conciliator (as the case may be), either party may refer the dispute to the Labor Court.

In the case of a collective dispute, either party has the right to request the labor conciliation council or a local labor conciliator as selected by both parties to resolve the dispute. If no satisfactory solution is found, either party may refer the dispute to the Chairman of the relevant People’s Committee of a district, town or provincial city regarding a collective labor dispute about rights, or the labor provincial arbitration council regarding a collective labor dispute about benefits for further settlement. If a collective labor dispute about rights is not resolved by the Chairman of the People’s Committee of district, town or provincial city, either party may refer the dispute to a Labor Court for final resolution or the Labor Collective may go on strike in accordance with the procedure set down in the relevant regulations. While if a collective dispute about benefits is not resolved by the labor provincial arbitration council, the dispute may not be further referred to the court, the Labor Collective however may go on strike in accordance with the procedure set down in the relevant regulations.