With Vietnam’s rapid economic growth, more and more companies are choosing to invest in Vietnam by setting up factories or conducting business. To ensure that companies operate compliantly in Vietnam and effectively manage human resources, it is crucial to understand Vietnam’s labor laws. This article provides an in-depth analysis of the key aspects of Vietnam’s labor laws and offers actionable guidelines for companies looking to invest in Vietnam.

1. Main Legal Framework of Vietnam’s Labor Law

Vietnam’s labor law system mainly includes the following key laws and regulations:

Labor Code (Law No. 45/2019/QH14): Passed on November 20, 2019, and effective from January 1, 2021, this code serves as the core of Vietnam’s labor law. It defines the fundamental principles of labor relations, labor contracts, working hours and rest periods, labor remuneration, occupational safety and health, and the resolution of labor disputes.

Decree No. 145/2020/ND-CP: Issued by the government on December 17, 2020, this decree provides detailed guidance on the implementation of the Labor Code, further clarifying the specifics of labor contracts, working conditions, collective agreements, and labor discipline.

Circular No. 10/2021/TT-BLDTBXH: Issued by the Ministry of Labor, Invalids, and Social Affairs (MOLISA) on March 15, 2021, this circular prescribes the document formats and report templates related to labor law.

These laws and regulations provide clear guidance for labor management within companies, ensuring that the rights and obligations of both employers and employees are protected.

2. Types of Labor Contracts and Signing Requirements

In Vietnam, the labor contract is the legal foundation of the employment relationship. According to the Labor Code, labor contracts can be categorized into three types:

Indefinite-term labor contracts: These are used for long-term employment relationships and do not specify an end date.

Fixed-term labor contracts: These contracts have a duration of 12 to 36 months and can be renewed upon expiration.

Seasonal or work-specific contracts: Used for tasks that have a specific completion date, with the contract terminating upon task completion.

Signing Requirements: Labor contracts must be signed in writing and include the following basic information:

• Detailed information of both the employer and the employee
• Job description and work location
• Salary, bonuses, and benefits
• Working hours and rest periods
• Contract duration

Actionable Guideline:

Before signing labor contracts, companies are advised to prepare standardized contract templates that comply with legal requirements. It is also recommended to collaborate with legal consultants to review contract terms and ensure compliance.

3. Working Hours and Rest Periods

The Labor Code of Vietnam clearly stipulates working hours and rest periods to protect the health and rights of workers.

Working hours: Standard working hours are no more than 48 hours per week, typically spread over 6 days, with each day being 8 hours. For certain industries, such as high-risk operations, the working hour restrictions may be stricter.

Overtime: The legal overtime is capped at 40 hours per month and 200 hours per year (300 hours in special cases). Overtime pay ranges from 150% to 300% of the regular wage, depending on the time and duration of the overtime.

Rest periods: Workers are entitled to at least one day off per week. Additionally, employees working on public holidays or rest days are entitled to extra overtime pay.

Actionable Guideline:

Companies should establish reasonable work schedules that comply with the Labor Code and regularly monitor employees’ working hours and rest periods. Furthermore, companies should provide transparent overtime and rest policies and ensure compliance with overtime regulations, especially in special circumstances.

4. Wage and Benefits Regulations

Wages and benefits are crucial components of labor contracts, and the Labor Code provides detailed regulations:

Minimum wage standards: Vietnam’s minimum wage varies by region and is divided into four zones (2023 data): Zone 1 is 4,680,000 VND/month, Zone 2 is 4,160,000 VND/month, Zone 3 is 3,640,000 VND/month, and Zone 4 is 3,250,000 VND/month. Employers must pay wages not lower than the local minimum wage.

Payment method: Wages should be paid in Vietnamese Dong (VND) at least once a month, either in cash or via bank transfer.

Social insurance and benefits: Companies must contribute to social insurance for employees, including pension insurance, health insurance, and unemployment insurance. Additionally, companies should provide statutory holidays, maternity leave, sick leave, etc.

Actionable Guideline:

When designing the wage structure, companies should ensure that salaries are not lower than the local minimum wage and clearly specify the payment method and schedule in the labor contract. For social insurance and benefits, companies should make full contributions as required by law and regularly check payment status to ensure compliance.

5. Labor Discipline and Termination of Labor Contracts

The Labor Code stipulates clear regulations on labor discipline and the termination procedures for labor contracts, ensuring the rights of both employers and employees are protected.

Labor discipline: Companies may establish rules for labor discipline, but these must comply with the Labor Code. Common disciplinary measures include warnings, demotions, and suspensions. Companies must consult with employees or union representatives when setting rules and register them with the local labor department.

Contract termination: Labor contracts may be terminated for reasons such as contract expiration, mutual agreement, employee retirement or death, severe violation of labor discipline by the employee, or layoffs due to economic reasons. When terminating labor contracts, companies must provide notice to employees and pay severance as required by law.

Actionable Guideline:

When establishing labor discipline, companies should ensure that rules are legal and compliant and provide necessary employee training to ensure understanding and adherence to the rules. When terminating labor contracts, companies should strictly follow legal procedures, especially in cases of layoffs and dismissals, to ensure lawful severance payments.

6. Labor Dispute Resolution Mechanism

When labor disputes occur, Vietnam’s labor law provides a clear dispute resolution mechanism, including mediation, arbitration, and litigation.

Mediation: Companies should establish an internal labor dispute mediation committee to prioritize resolving disputes through mediation.

Arbitration: If mediation fails, the parties can submit the dispute to the local labor arbitration council for a decision.

Litigation: If dissatisfied with the arbitration result, the parties may file a lawsuit in court to resolve the dispute through legal means.

Actionable Guideline:

Companies should establish a sound internal labor dispute mediation mechanism and regularly train relevant personnel to ensure that the mediation process is legal and compliant. When disputes arise, companies should prioritize resolving them through mediation or arbitration to avoid unnecessary legal costs.

A comprehensive understanding of Vietnam’s labor laws and implementing compliant labor management policies are key to successful business operations in Vietnam. By legally signing labor contracts, reasonably arranging working hours, ensuring wage and benefit compliance, and effectively managing labor disputes, companies can avoid labor disputes, enhance employee satisfaction, and promote long-term business growth.