On November 20, 2019, the National Assembly of Vietnam issued a revised version of the Labor Code, the primary legislation governing employment and employer-employee relationships in Vietnam. The new Labor Code will take effect on January 1, 2021, replacing the current Labor Code of 2012.
The new Labor Code introduces a number of large and small changes, with the general intention being to address shortcomings and clarify unclear provisions of the current law, and bring Vietnam’s labor law more in line with international standards.
Some of the more notable changes include the following:
- Unilateral termination by employees: Employees will be allowed to unilaterally terminate their contracts without providing any reason, provided they meet the requirements for advance notification.
- Additional holiday: The National Day holiday on Sept. 2 will become a two-day holiday – the 11th public holiday on the Vietnamese calendar.
- More overtime allowed: Employees will be allowed to work up to 40 hours of overtime in a month (instead of the previous limit of 30).
- Types of labor contracts: Seasonal/specific-job labor contracts are no longer mentioned in the new Labor Code, which has only (i) indefinite-term labor contracts, and (ii) definite-term (of up to 36 months) labor contracts, which include the previous seasonal/specific-job contracts.
- Multiple fixed-term contracts: While the current Labor Code only allows the signing of two consecutive definite-term contracts—the third contract must be an indefinite-term contract—the new Labor Code provides an exception for elderly employees, who can continue to work on definite-term contracts. Also, the terms of expatriate employees’ labor contracts must be in line with the terms of their work permits (maximum two years); in other words, indefinite-term labor contracts are not applicable to expats.
- Validity of electronic labor contracts: Labor contracts concluded through electronic means (such as by email) will have the same validity as printed paper contracts.
- No direct interference in salary structure: Companies are free to establish their own wage scales and salary structures, provided they at least meet the regional minimum wages set by the government.
- Increase in retirement age: The retirement age, currently 55 for women and 60 for men, will increase to 60 for women and 62 for men. This change will be phased in gradually, with the retirement age increasing by 3 months each year for men and 4 months each year for women until the new limits are reached.
With more than a year before implementation, companies have plenty of time to consider their current work rules and practices, make the necessary changes before implementation, and consult counsel if needed to ensure compliance. For more information on the new Labor Code and how it may impact your business in Vietnam, please contact us at [email protected].