1. Vietnam Labor Laws

Labor Law

The Labor Law is the core legal framework regulating employment relationships and the labor market in Vietnam. The latest version, amended in 2019, came into effect on January 1, 2021. The law covers the following key aspects:

• Labor Contracts: Labor contracts are classified into fixed-term contracts, indefinite-term contracts, and temporary contracts. All contracts must be in writing, except those lasting less than one month, which can be verbal.
• Working Hours and Overtime: The legal working hours are capped at 48 hours per week and 8 hours per day. Overtime should not exceed 40 hours per month, and in special cases, the total annual overtime should not exceed 300 hours.
• Minimum Wage: The government adjusts the minimum wage annually through the National Wage Council based on economic growth and living standards. The 2023 regional minimum wage rates in Vietnam are as follows:
  • Region 1: 4,680,000 VND/month (approximately 200 USD)
  • Region 2: 4,160,000 VND/month
  • Region 3: 3,640,000 VND/month
  • Region 4: 3,250,000 VND/month

• Social and Health Insurance: According to the Social Insurance Law and the Health Insurance Law, employers must contribute to social insurance, health insurance, and unemployment insurance for their employees. The employer’s contribution is 22% of the employee’s salary, while employees contribute 10.5%.
• Termination and Dismissal: Employees who are wrongfully dismissed are entitled to compensation. Dismissal must have valid reasons and require prior notice.

Minimum Wage Policy

Vietnam’s minimum wage is adjusted annually through government regulations. The adjustments are based on indicators such as the Consumer Price Index (CPI), economic growth rate, inflation, and living costs. The minimum wage is implemented regionally, varying according to the economic development of each region.

Work Permits for Foreign Workers

The conditions for foreigners to work in Vietnam are regulated by the Work Permit Law (Decree No. 11/2016). Foreign workers must have at least a university degree or 5 years of relevant work experience to apply for a work permit. The maximum validity of a work permit is 2 years, with the possibility of renewal.

Foreign Employee Quota in Foreign-Invested Enterprises (FIEs)

Vietnam’s labor laws and policies set forth the following key regulations regarding the employment of foreign and local workers in foreign-invested enterprises:

• Foreign Employee Quota: Under the Labor Law and the Work Permit Law, foreign-invested enterprises are permitted to employ foreign workers, but the number of foreign employees should not exceed 3% of the total workforce. In specific cases, if the enterprise has technical or management requirements, this ratio can be increased with approval from local labor authorities. Generally, there are more flexible rules for key or senior management positions held by foreign employees.
• Actual Employment Ratio: While the law imposes restrictions on the employment of foreign workers, the actual ratio in foreign-invested enterprises may vary depending on the industry and the nature of the business. In technology-intensive sectors (such as manufacturing and high-tech industries), FIEs tend to employ more foreign experts and managers. In labor-intensive sectors (such as textiles and garments), local labor makes up the majority of the workforce, and the proportion of foreign workers is relatively low.
  Available data suggest that most FIEs employ 1% to 5% foreign workers, unless specific technical or management requirements dictate otherwise.

Union Law

The Union Law guarantees employees the right to form unions. Unions are responsible for collective bargaining and resolving labor disputes on behalf of workers. Enterprises are required to contribute 2% of their total payroll to the union fund.

2. Vietnam Labor Market Data

• Total Labor Force: As of 2023, Vietnam’s total labor force stands at approximately 50.5 million, with men making up a slightly larger proportion than women. The labor force participation rate is around 68%. According to the General Statistics Office, the labor force is primarily concentrated in manufacturing, agriculture, and services, distributed as follows:
  • Manufacturing: Approximately 40%
  • Agriculture: Approximately 37%
  • Services: Approximately 23%

• Unemployment Rate: Vietnam’s national unemployment rate is 2.4%. Urban areas have a higher unemployment rate of 3.1%, while rural areas have a lower rate of 1.8%. The youth unemployment rate is relatively higher, standing at around 7%.
• Vocational Training: The Vietnamese government has implemented several vocational training programs to enhance the skill levels of the labor force, particularly in manufacturing, IT, and engineering fields. Vocational training centers and technical schools support the country’s industrialization and digitalization efforts. By 2023, Vietnam aims to increase the proportion of the workforce receiving vocational training to 25%.

Labor Policies for Foreign-Invested Enterprises (FIEs)

Under Vietnam’s labor laws, FIEs can hire local employees and, under certain conditions, foreign workers. However, foreign employees cannot exceed 3% of the total workforce. FIEs are also required to pay social insurance, health insurance, and union fees for their employees.

Legal Basis

• Labor Law (2019 Amended Version): Covers provisions related to labor contracts, working hours, wages, social insurance, and more.
• Work Permit Law (Decree No. 11/2016): Regulates the requirements and procedures for foreign workers in Vietnam.
• Union Law: Outlines the functions of unions and the responsibilities of employers.
• Social Insurance Law: Regulates social insurance contributions and benefits.

Vietnam’s labor policies provide a clear legal framework and protection mechanisms for businesses entering the Vietnamese market. Companies need to understand relevant labor laws, especially those concerning employment, wages, unions, and work permits for foreign employees, to ensure legal compliance in their operations.