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July 17, 2013

Legal Update: Highlights of the New Labor Code of Vietnam

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On May 1, 2013, the new Labor Code (Law 10-2012-QH13 of June 18, 2012) entered into force. This legal update highlights four important changes to the Vietnamese labor laws, introduced by the new Labor Code.

Working Hours

Employers may, pursuant to the new Labor Code, determine working hours on a daily or weekly basis. The regular working hours, however, may not exceed 10 hours in one day or 48 hours per week. Further, the new Labor Code imposes limitations on the number of overtime hours that an employee may work. The maximum number of overtime hours that an employee may work is 50% of the employee’s regular working hours in one day, 30 hours in a month, and 200 hours in a year. If the employer determines regular working hours on a weekly basis, the working hours and overtime hours together may not exceed 12 hours in one day.

Internal Labor Rules

Employers with 10 or more employees were already, under the old Labor Code, required to establish Internal Labor Rules (ILRs) in writing and to register them with the local labor authorities. The new Labor Code amends the provisions of the old Labor Code with respect to both the registration and the contents of ILRs.

The application for registration of the ILRs must, according to the new Labor Code, include an “opinion” obtained from the grassroots-level labor union existing within the employer. Should no such union exist, the district-level labor union (which is usually a government-controlled entity) must be consulted. Thus, obtaining the opinion of a labor union has been made a precondition for obtaining approval for the ILRs.

As for contents, the new Labor Code abolishes as a disciplinary measure “the transfer of an employee to another position with lower wage for a maximum period of six months.” Other previously existing disciplinary measures—including reprimand, deferral of wage increase, removal from office, or dismissal—remain intact in the new Labor Code.

Labor Outsourcing

The new Labor Code introduces an entirely new section on labor outsourcing, but with fairly extensive restrictions. Most notably, labor outsourcing is permitted for a limited number of jobs only, and the entity utilizing the outsourced persons must pay salary at least equal to the salary it pays to its own employees who have the same professional qualifications and are doing the same job or a job of the same value. The duration of the labor outsourcing may not exceed 12 months and may not be extended.

Work Permits

The new Labor Code abolishes the work permit exception for foreign citizens working in Vietnam for less than three months; all foreign citizens working in Vietnam must have a work permit, regardless of the time they intend to work in the country. However, a few exceptions apply. The work permit requirement is waived for capital-contributing members or owners of limited liability companies, members of the board of the management of shareholding companies, and lawyers, among others. The new Labor Code reduces the maximum term of work permits for foreign employees from three to two years.

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