Vietnam Labor Law Program is at the heart of SMEs doing business in Vietnam. This article will delve into the core points of Vietnam’s labor laws, focusing on the provisions that have the greatest impact on Vietnam’s labor laws. We will analyze in detail the legal provisions in key areas such as labor contracts, working hours, salary standards, insurance society and industrial relations.

By comprehensively understanding Vietnamese labor laws, companies can effectively avoid legal risks, establish harmonious labor relations, improve employee motivation, and achieve success in the Vietnamese market. This article aims to provide practical legal guidance for small and medium-sized enterprises that have entered or plan to enter the Vietnamese market and promote the sustainable development of Vietnamese enterprises.

Labor contract

Vietnam’s labor law provides both comprehensive and mandatory provisions on employment contracts, providing clear guidance to both employers and employees. According to the latest labor law, labor contracts are mainly divided into clear types: limited-term contracts, unlimited contracts and temporary work contracts. The term of a limited-term contract shall not exceed 36 months and can be renewed once, but the total period after renewal shall not exceed 72 months. . If the two parties continue to maintain a labor relationship, they must be converted into an indefinite contract. An open-ended contract is an open-ended contract with no fixed end date. Temporary work contracts are for specific work at a specific time or project and are usually for a period of no more than 12 months.

Every employment contract must contain a series of basic contents to ensure that the rights and interests of both parties are fully protected. These contents include: basic information of the employer and employees, work content and location, contract period, wage standards, working hours and rest periods, social insurance and medical insurance, vocational training terms, job protection measures, etc. It is worth noting that the content of the contract must not violate the law, collective labor agreements or professional ethics.

Regarding the term, Vietnamese labor law stipulates that its length depends on the nature and complexity of the work. The probation period shall not exceed 60 days for management positions, 30 days for professional and technical positions, and 6 days for other positions. During the probation period, the employer must pay no less than 85% of the regular salary. After the probationary period is over, the employer must clearly inform the employee of the outcome. If the employee is employed, the employer must convert it to a formal employment contract.

Termination of a labor contract is an important step in labor relations, and the law has strict regulations on this. The contract can be terminated by consensus of both parties or by one party. The employer must have legitimate reasons for unilaterally terminating the contract, such as employees failing to perform their contractual obligations, long-term absence due to illness, or the company encountering force majeure, etc. Employers are required to give employees advance notice, with the notice period depending on the type of contract and the reason for termination, ranging from 3 working days to 45 days. Unlawful dismissal carries significant legal risks, including compensation and reinstatement of employment. An employee’s unilateral termination of a contract also requires advance notice, unless there are special circumstances such as abuse, sexual harassment, or forced labor.

The provisions of labor law on employment contracts aim to balance the rights and interests of employers and employees and provide both parties with a clear code of conduct. For small and medium-sized enterprises going overseas in Vietnam, an in-depth understanding of these regulations and strict compliance with relevant laws can not only avoid unnecessary troubles and troubles, but also establish good labor relations and lay the foundation for the long-term development of the enterprise.

Working hours and overtime

This part has a great impact on the daily operations of the company . In Vietnam, the regulations on working hours and overtime have a significant impact on the daily operations of the company, so it is important to have an in-depth understanding of the relevant legal regulations. According to Vietnamese labor law, standard working hours are no more than 8 hours per day and no more than 48 hours per week. This move aims to protect the rights and interests of employees while providing companies with room to flexibly arrange working hours. For example, a company can choose to implement a work system of 6 days a week, 8 hours a day, or 5 days a week, 9.6 hours a day, as long as the limit does not exceed the total of 48 hours a week.

However, in actual operations, it is sometimes necessary to arrange overtime. Vietnam’s labor law imposes strict restrictions on overtime hours, which stipulates that overtime hours must not exceed 40 hours per month, and the total number of overtime hours per year must not exceed 200 hours. Under special circumstances, with the approval of the labor management department, overtime hours can be extended to a maximum of 300 hours per year. The regulation is designed to balance corporate production needs with employee work-life balance.

Regarding overtime wages, Vietnamese law requires companies to give employees higher wages. Specifically, overtime wages on ordinary working days shall not be less than 150% of normal wages; overtime wages on rest days shall not be less than 200%; and overtime wages during statutory holidays or paid annual leave shall not be less than 300%. This regulation encourages companies to arrange work to avoid excessive overtime while ensuring that employees receive fair labor remuneration.

Different working hours regulations exist in some special industries. For example, for highly centralized or processing-export-oriented enterprises, a shift system can be implemented on the premise of ensuring that employees’ rest time is concentrated at 12 hours a day. Special industries such as oil and gas extraction and offshore operations can adopt flexible working time arrangements, such as 12 hours of work and 12 hours of rest.

In the medical and health industry , hospitals can implement a 24-hour shift system, but each shift must not exceed 12 hours, and must ensure that at least one rest day is completed every hour every week. In the transportation industry , the continuous driving time of heavy passenger transport drivers shall not exceed 4 hours, the total driving time per day shall not exceed 10 hours, and sufficient rest time must be arranged. The tourism and hotel industry is allowed to implement irregular working time arrangements, but the average working time per week must not exceed 48 hours, and employees must be guaranteed to have 4 complete rest days per month. In the oil and gas extraction industry , due to the particularity of the work site, a shortened continuous work system can be implemented (such as 14 days of continuous work followed by 14 days of rest), but the total working hours must be strictly controlled. In the education industry , teachers’ working hours include teaching time and lesson preparation time. Usually teaching time does not exceed 20 hours per week, but the total working time still needs to comply with standard regulations. Agriculture and fishing , these industries can have more flexible working arrangements to take into account external and weather factors, but employers must ensure that employees have adequate rest periods after the peak season. In the financial and securities industry , taking into account the time difference between international markets, flexible working systems can be implemented, but overall working time restrictions must still be observed. In the manufacturing industry , during peak order periods, you can apply to extend overtime hours, but you must obtain approval from relevant departments and provide additional compensation to employees. Creative and media industries , due to the special nature of work, can implement more flexible working time arrangements, but employers must ensure that employees’ total working hours and rest periods comply with legal requirements.

When formulating working time policies, companies need to fully consider industry characteristics, production needs and employee well-being. It is recommended that companies establish a solid time and attendance system to accurately record employees’ working hours and overtime, and conduct regular audits to ensure compliance. At the same time, enterprises should pay attention to rationally arranging work and avoiding frequent overtime work, so as to safeguard the rights and interests of employees and improve work efficiency and satisfaction. When working hours need to be extended under special circumstances, you can communicate with employees in advance to obtain their consent and ensure that overtime wages are paid in accordance with legal provisions.

Wages and social insurance

When running a business in Vietnam, wages and social insurance are areas that need to be focused on. This is not only related to the company’s cost control, but also directly affects employee benefits and corporate financial compliance. The Vietnamese government divides the country into four regions based on regional economic development levels and living costs, and sets minimum wage shield standards respectively. The new standards that will be implemented from 2024 are VND 4,680,000 for Class I areas, VND 4,160,000 for Class II areas, VND 3,640,000 for Class III areas, and VND 3,250,000 for Class IV areas. Let’s take a closer look at the specific composition of the general situation region:

Category 1 areas (minimum wage standard, VND 4,680,000/month):

• Hanoi City and most municipal districts in Ho Chi Minh City
• Bien Hoa City and Nhon Trach District in Dong Nai Province
• Thu Yen and Van Thanh cities in Binh Duong Province
• Most of the municipal districts in Haiphong City
• Vinh Truong City, Ba Ria-Vung Tau Province

Category 2 areas (VND 4,160,000/month):

• Hanoi City and other municipal districts and some rural areas of Ho Chi Minh City
• The remaining municipal districts and some counties of Fanghai City
• Da Nang City
• Can Tho City
• Long Xuan City , An Giang Province
• Other areas in Ba Ria-Vung Tau Province except Vinh Truong City
• Bac Ninh Province
• Bac Giang Province
• Other areas in Binh Duong Province except Thuy An City and Thuan An City
• Other areas in Dong Nai Province except Bien Hoa City and Nhon Trach District
• Hue City
• Ha Long City, Hai Duong Province

Category 3 areas (3,640,000 VND/month):

• Provincial capital cities and county-level cities affiliated with municipalities directly under the Central Government
• Other areas in Ba Ria-Vung Tau Province, Bac Ninh Province, Hai Phong City, Binh Duong Province, and Dong Nai Province
• Vinh Phuc City (Vinh City) in Vinh Phuc Province
• Ninh Binh City in Ninh Binh Province
• Nam Dinh City in Nam Dinh Province
• Sam Son City in Thanh Hoa Province
• Vinh City in Nghe An Province
• Dong Hai City (Dong Ha), Quang Tri Province
• Hoi An City, Quang Nam Province
• Quy Van City in Binh Dinh Province
• Nha Trang City in Khanh Hoa Province
• Dalat city in Lam Dong province

Category 4 areas (minimum wage standard, VND 3,250,000/month):

• Other remaining areas, including rural areas and less economically developed areas

Note that even within the same province or city, different districts and counties may be classified into different minimum wage categories. For example, in Hanoi and Ho Chi Minh City, central urban areas usually fall into one category of areas, while outer suburbs may be classified into different minimum wage categories. Areas classified as Category II or III.

Regional division aims to balance the level of economic development and the affordability of enterprises in different regions. For companies planning to invest in Vietnam, it is very important to understand this regional division because it directly affects labor costs. For example, if a company plans to set up a factory in Bien Hoa City (Dong Nai Province), it needs to pay the minimum wage according to the standards of Category 1 areas. If it chooses to set up a factory in nearby Tien Son City (the same province), it can pay the minimum wage according to the standards of Category 2 areas. standards implementation.

These minimum wages may be adjusted annually, usually upwards based on inflation and overall economic developments. Therefore, companies need to consider this potential impact on cost growth when conducting long-term human resource planning.

For small and medium-sized enterprises operating in Vietnam, accurately understanding and complying with these minimum wage standards is not only a legal requirement, but also an important basis for maintaining good labor relations and attracting and retaining talents. It is recommended that companies consider the minimum wage standard as one of the factors to consider when choosing an investment location, pay attention to policy changes regularly, and adjust compensation strategies in a timely manner.

salary payment

Vietnamese labor law stipulates that wages must be paid directly to employees on a regular basis, either in cash or by bank transfer. The pay period can be around weekly, every week, or every month, but it cannot be longer than one month. It is worth noting that even if an enterprise cannot pay wages on time due to special reasons, the delay cannot exceed one month, otherwise it will face intense pressure. Companies must provide employees with detailed pay stubs, clearly listing basic wages, overtime pay, bonuses and other components.

year-end bonus

Often referred to as “13th month salary” in Vietnam, although it is not a legal requirement, it has become a work arrangement for many companies. The first bonus is usually distributed before the Lunar New Year (Spring Festival), and the amount is usually distributed within one month. Some companies will adjust the bonus amount based on company performance and personal performance. Although it is not an increase, increasing the year-end bonus is regarded as an important means to retain talents and loyalty in Vietnam. When formulating year-end bonus policies for employees, companies should consider current work, the company’s financial situation and employee expectations, and formulate reasonable production plans.

In addition, Vietnam’s labor law also stipulates other wage-related matters. For example, the salary during the probation period shall not be less than 85% of the formal salary; the salary for night shift work (22:00 to 6:00 the next day) should be at least 30% higher than that for important daytime work; the salary for positions with toxic pest working environment should be paid Subsidies etc. Enterprises also need to note that significant changes in salary adjustments, bonus payments, etc. should be negotiated with employees or trade union representatives in advance.

Penalty ratios for social insurance, medical insurance and business suspension insurance

Social insurance, medical insurance and unemployment insurance (also known as business suspension insurance) form an important part of Vietnam’s social security system. The deposit of these insurances is not only a legal requirement, but also an important part of protecting the rights and interests of employees and maintaining social stability. Let us learn more about the deposit ratios and related regulations of these insurances.

Social insurance ranks first, with the highest contribution ratio. From January 1, 2024, employers are required to pay 17.5% of social insurance premiums for employees equivalent to their monthly wages. The composition of this 17.5% is as follows: 3% for sickness and maternity funds, 0.5% for work-related injuries and occupational diseases funds, and 14% for retirement and survivors’ pension funds. At the same time, I need to pay 8% of my monthly salary as employee social insurance premiums, all of which will be used. This means that the total contribution ratio of social insurance is 25.5% of the employee’s monthly salary.

The contribution ratio for medical insurance is relatively low, but equally important. Employers are required to pay 3% of employees’ monthly wages for medical insurance premiums, while employees themselves need to pay 1.5%. Therefore, the total contribution ratio for medical insurance is 4.5% of the employee’s monthly salary. This insurance provides employees with basic medical care and covers most routine medical expenses.

Unemployment insurance (cessation insurance) has the lowest contribution ratio, but it is very important to protect employees’ basic livelihood during unemployment. Employers and employees each need to pay 1% of the employee’s monthly salary as unemployment insurance premiums, for a total of 2%. It should be noted that temporary insurance is only applicable to Vietnamese employees hired by enterprises with labor contracts of more than 12 months, excluding foreign employees.

Although the basis for calculating these insurance premiums is the employee’s monthly salary, there is an upper limit. The calculation base for social insurance and temporary insurance shall not exceed 20 times the basic salary prescribed by the government. The calculation base for medical insurance shall not exceed 20 times the basic salary stipulated by the government. The calculation base for medical insurance shall not exceed 20 times the basic salary stipulated by the government. More than 25 times the basic salary stipulated by the government. In 2024, the basic salary set by the Vietnamese government is 1,800,000 VND/month. Therefore, the maximum calculation base for social insurance and unemployment insurance is VND 36,000,000/month, and the maximum calculation base for medical insurance is VND 45,000,000/month.

Contribution rules are also different for foreign employees . Starting from 2022, foreign employees working in Vietnam also need to participate in social insurance, but they only need to contribute to the sickness and maternity fund (employer 3%, employees 0%), work-related injury and occupational disease fund (employer 0.5%, employees 0%) and retirement Pensions and Survivors’ Pension Fund (14% for employers, 8% for employees). However, foreign employees do not need to participate in unemployment insurance.

Enterprises must pay these insurance premiums on time every month. If you delay payment, you will face a late payment fee of 0.03% per day, up to a cumulative maximum of 15% of the unpaid amount. Continued delinquency may result in more severe penalties, including fines, suspension or even revocation.

Generally speaking , Vietnam’s wage and social insurance systems are relatively complex. Companies need to establish a solid human resources management system and regularly review recruitment policies to ensure compliance while maintaining competitiveness. For small and medium-sized enterprises that have just entered the Vietnamese market, it is recommended to fully understand and implement relevant regulations to avoid falling into traps due to ignorance of the law.

Vacation system

Vietnam’s leave system is an important part of labor law. It not only protects the rights and interests of employees, but also helps improve work efficiency and employee satisfaction. The system includes paid annual leave, statutory holidays and holidays under various special circumstances. Let us discuss these aspects in detail.

Paid annual leave is a basic right granted to employees by Vietnamese labor law. The calculation method is relatively simple, but it needs to take into account the working years and the nature of the work. Under normal circumstances, employees who have worked for 12 months under normal working conditions use 12 days of paid annual leave. For every five additional years of working experience, the number of annual leave days will increase by one day. For employees engaged in heavy physical labor, dangerous or hazardous work, the basic year is 14 days. Inactive employees and poor workers under the age of 18 are entitled to 16 days of leave. Note that for employees who have been employed for less than 12 months, their annual leave days are calculated based on the proportion of actual working hours.

When arranging for employees to take annual leave, enterprises need to consider the needs and wishes of production and operations. Typically, employees can take annual leave in one lump sum or in multiple installments. If an employee is unable to take annual leave due to work reasons, the company must pay salary compensation for the untaken annual leave. This compensation is calculated based on the number of days left unused and the employee’s current daily wage. Importantly, it is not possible for an enterprise to replace an employee’s actual vacation with cash compensation, except in the case of termination of the labor contract.

Vietnam has 11 statutory holidays every year, including: New Year’s Day (1 day), Spring Festival (5 days), Hung King’s Death Day (1 day), International Labor Day (1 day), National Day (2 days) and South Vietnam’s Liberation Day ( 1 day). If a legal holiday falls on a Sunday, the next working day will be considered a compensatory day off. For employees who work on statutory holidays, companies must pay at least 300% of their wages or arrange compensatory leave.

In addition to paid annual leave and statutory holidays, Vietnam’s labor law also provides for holidays under a variety of special circumstances:

• Sick leave: Employees can take sick leave when they are unable to work due to illness. Wages during sick leave are paid from the social insurance fund, and the amount is 75% of the employee’s salary. The number of sick leave days depends on the employee’s social insurance claim period and the nature of the job. Generally, 30-70 days of sick leave are available each year.
• Marriage leave: Employees who get married can enjoy 3 days of paid wedding leave. This is the default minimum standard, and many companies will provide longer marriage leave as a benefit.
• Bereavement leave: When an employee’s immediate family member (parents, wife, children) dies, they can enjoy 3 days of paid bereavement leave. One day of paid bereavement leave is available when a grandparent or spouse’s parent dies.
• Maternity leave: Female employees enjoy 6 months of paid maternity leave. For each additional child in a multiple birth, the maternity leave will be increased by 1 month. Wages during maternity leave are paid from the social insurance fund. Male employees can enjoy 5-14 days of paternity leave when their wife gives birth, depending on the type of birth and the number of children.
• Medical leave for miscarriage, stillbirth or post-abortion: Female employees can enjoy 10-50 days of paid leave based on gestational age data.
• Rest of adoption leave: Employees who adopt a baby under 6 months old can enjoy the same leave as maternity leave.
• Personal leave: When employees need to take leave for personal matters, they can negotiate with their employer to arrange unpaid personal leave. The number of personal leave days and wage payment methods must be determined through negotiation between both parties.

In addition, Vietnam’s labor law also stipulates additional leave rights for some special groups. For example, female employees can enjoy 60 minutes of paid rest time every day during pregnancy until they are 12 months old. Female employees who are more than 7 months pregnant are not allowed to work overtime. Female employees can refuse night shifts and overseas assignments during pregnancy, within 6 months after giving birth, or when the baby is under 12 months old.

It is crucial for businesses operating in Vietnam to fully understand and correctly implement these leave regulations. On the one hand, this is a basic requirement for compliance with the law; on the other hand, a reasonable leave system helps improve employee satisfaction and enhance the attractiveness and competitiveness of the company. It is recommended that enterprises develop a holiday management system and clarify the application procedures, calculation processes and salary calculation methods for various types of holidays. At the same time, additional holiday benefits can also be provided based on benchmark standards based on the company’s actual situation and industry characteristics to attract and retain talents.

Trade union organizations

Vietnamese trade unions play an extremely important role in enterprises, which is clearly reflected and guaranteed in Vietnam’s legal system. Laws such as the Vietnam Trade Union Law and the Vietnam Labor Law not only guarantee the legal status of trade unions, but also specify in detail the rights and obligations of trade unions and the relationship between enterprises and trade unions.

According to Vietnamese law, especially the Trade Union Law of 2012 (Law No. 12/2012/QH13), a trade union organization must be established in enterprises with more than 25 employees. Even if there are fewer than 25 employees, enterprises should support the establishment of a union as long as an employee requests it. The establishment process of a trade union is guided by the superior trade union and corporate prisons are not allowed to intervene. It is worth noting that the Labor Law revised in 2019 (Labor Law No. 45/2019/QH14) further puts forward this requirement, stipulating that enterprises must provide necessary conditions and conveniences for the establishment and operation of joint ventures.

The rights and responsibilities of trade unions are clearly stipulated in Vietnamese law. According to Articles 10 and 14 of the Trade Union Law, the main responsibilities of trade unions include: representing and protecting the legitimate rights and interests of workers; participating in the formulation and supervision of implementation of policies and laws related to workers’ rights and interests; participating in negotiation and employment of collective labor Agreement; organize and lead members; participate in the management and supervision of enterprises, etc. It is particularly worth mentioning that Article 174 of the Labor Law stipulates that the trade union can conduct collective bargaining with the employer on behalf of all employees, even if only some employees in the enterprise are union members.

The interaction between enterprises and trade unions is the key to maintaining coordination in labor relations. Article 163 of the “Labor Law” stipulates that enterprises must have regular dialogues (at least once every three months) with the labor union to discuss production and operation conditions, labor conditions, benefits and remuneration, etc. In addition, Article 24 of the “Trade Union Law” requires enterprises to have annual Provide 2% of total wages to the union for use in union activities. These regulations are designed to ensure that trade unions can effectively perform their duties and safeguard the rights and interests of employees.

It is worth noting that the new Labor Law, which takes effect on January 1, 2021, introduces the concept of “employee representative organizations within the enterprise”, allowing other forms of employee organizations besides trade unions to exist. This change provides more flexibility in industrial relations, but it also increases the complexity of business management.

For foreign-invested enterprises operating in Vietnam, it is crucial to correctly handle the relationship with trade unions. Suggested companies:

• Actively support the establishment and operation of trade unions and provide necessary venues and facilities for trade union activities.
• Establish a mechanism for regular conversations with trade unions to promptly understand and resolve employee concerns.
• When making major decisions, such as making decisions, adjusting working hours, etc., the union should be consulted in advance.
• Strictly abide by the disciplinary regulations adhered to by the union and ensure that the union has sufficient resources to carry out its activities.
• Managers should correctly understand the training role of trade unions and establish constructive labor relations.

Vietnam’s trade union system not only embodies the characteristics of a socialist country, but also incorporates the concept of modern labor relations. For enterprises, trade unions should not be seen as a confrontational force, but as a bridge of communication and cooperation. Through active interaction with trade unions, enterprises can better understand employee needs and improve employee satisfaction, thereby improving production efficiency and competition. force. At the same time, good labor-capital relations also help companies establish a positive corporate image in the Vietnamese market and gain recognition from the government and society.

Labor dispute resolution

In Vietnam’s labor relations, the labor dispute resolution mechanism plays a vital role, directly affecting the stability of the enterprise and the protection of employees’ rights and interests. Vietnam’s labor law has detailed definitions, classifications and resolution procedures for labor disputes, aiming to provide a fair and efficient dispute resolution framework for both employers and employees.

According to the Vietnam Labor Law (Labor Law No. 45/2019/QH14), labor disputes are divided into individual labor disputes and collective labor disputes. Individual labor disputes refer to collective labor disputes arising from labor relations between an employer and a single employee, and involve disputes between an employer and multiple employees or trade unions, usually related to collective rights and interests, such as working conditions, collective agreements, etc.

The resolution process of labor disputes usually follows the principle of “mediation first”. Mediation is the first and crucial stage in resolving labor disputes. According to legal provisions, a labor dispute committee should be established within an enterprise, composed of employer representatives, employee representatives and trade union representatives. For enterprises with less than 50 employees, labor mediators can be appointed . The mediation plan should be initiated within 3 working days of receipt and completed in no more than 5 working days. During the mediation process, both parties should seek a mutually acceptable solution in good faith and with mutual understanding.

If mediation is unsuccessful, the dispute may proceed to arbitration. The labor arbitration committee is organized by the local labor management department, and its members include representatives of the labor management department, trade union representatives and employers’ association representatives. Arbitration proceedings shall be initiated within 7 working days after receipt of the application and an award shall be rendered within no more than 30 days. Arbitration awards are binding on all types of disputes (such as dismissal, social insurance, etc.) and must be fulfilled.

If you are dissatisfied with the arbitration award or some disputes do not require arbitration, you can file a lawsuit with the labor court. The Vietnamese court system has established specialized labor tribunals to handle labor dispute cases. Labor litigation procedures follow the provisions of the Civil Procedure Law, but considering the particularity of labor relations, there are some special provisions. For example, if the appeal deadline for labor cases is delayed, the first-instance procedure should usually be completed within no more than 3 months after receiving the complaint. In addition, when hearing labor cases, the court should also focus on trying to achieve an agreement and settlement between the two parties.

It is worth noting that the newly revised Labor Law in 2019 introduced some important changes. For example, regarding collective labor disputes, the law has added a new distinction between “interest disputes” and “rights disputes.” Interest disputes mainly involve the closure of future rights and interests by both parties in the process, while rights disputes involve the implementation of existing laws or agreement negotiations. This distinction affects the procedures and methods of dispute resolution.

For enterprises operating in Vietnam, especially small and medium-sized enterprises, it is crucial to establish an effective internal labor dispute prevention and resolution mechanism. Here are some suggestions:

• Establish standard internal communication mechanisms, conduct regular dialogues with employees or union representatives, and identify and resolve potential problems in a timely manner.
• Develop clear company articles of association and employee handbooks, detail various labor conditions and rights, and reduce disputes caused by misunderstandings.
• Managers acquire labor law knowledge and train communication skills to improve their ability to deal with daily labor information issues.
• When disputes arise, we prioritize resolution through internal mediation, maintain an open and flexible attitude, and seek solutions acceptable to both parties.
• For complex or sensitive labor disputes, consider hiring professional labor legal counsel to ensure that the procedures are legal and handled properly.
• Respect and actively participate in external forums, arbitrations and litigation procedures, and maintain a good corporate image.
• In the process of handling labor disputes, always maintain respect for employees and avoid actions that may aggravate conflicts.
• Regularly summarize experience in handling labor disputes and continuously improve the company’s human resources management system and practices.

Management of foreign employees

For companies going overseas in Vietnam, the management of foreign employees is an extremely important and complex issue. The Vietnamese government has continuously improved relevant regulations in recent years to balance the needs of attracting foreign talents and protecting the local job market. Understanding and strictly abiding by these regulations is not only a requirement for legal compliance, but also a guarantee for efficient corporate operations.

Work permit application is the first step for foreign employees to legally work in Vietnam. According to the Vietnamese government’s Decree No. 152/2020/ND-CP of 2021, there are new regulations on the work permit application process. First, the company needs to determine its employment needs and anticipate applications from foreign employees for employment with the local labor management department. Once approved, the work permit application process can begin. Application materials include: employer’s employment application, foreign employee’s health certificate, no criminal record certificate, professional qualification certificate or work experience certificate, etc. The point is that starting from February 15, 2021, applying for a work permit can be done online, simplifying the procedure to the greatest extent. Under normal circumstances, the entire process takes about 5-7 working days from submitting complete materials to obtaining a work permit. The work permit expires for 2 years and can be renewed, but each renewal shall not exceed 2 years.

There are certain restrictions on the hiring of foreign employees, which is an important measure taken by the Vietnamese government to protect the local labor market. According to coding regulations, companies hiring foreign employees must meet the following conditions: first, the skills or experience required for the position cannot be met in the local labor market; second, foreign employees must have corresponding professional qualifications and work experience. Specifically, management positions require at least 3 years of relevant work experience, and professional and technical positions require relevant academic certificates and at least 5 years of work experience. In addition, the number of foreign employees in Vietnam is also limited. Under normal circumstances, foreign employees cannot exceed 20% of the company’s total employees. Certain special industries may have stricter restrictions. It is worth noting that starting from 2021, foreign experts working for Vietnamese companies for a short period of time (accumulated not exceeding 30 days/year and no more than 3 times/year) can be exempted from applying for a work permit, which provides enterprises with greater opportunities. flexibility.

Regarding the tax policy for foreign employees, Vietnam has implemented a rather complex classified taxation system. A foreign employee’s personal rate of return depends on the time of receipt and income level in Vietnam. If a foreign employee has accumulated or received benefits in Vietnam for 183 consecutive days, he will be regarded as a tax resident in Vietnam, and a progressive growth rate of 5%-35% will apply. If the entry period is less than 183 days, it is considered a non-resident, and a fixed growth rate of 20% applies to individuals. It is worth noting that Vietnam has established double taxation avoidance agreements with several countries, and foreign employees may be eligible for tax relief. In addition, some subsidies, such as housing subsidies, superimposed relocation subsidies, wages for returning home to visit relatives, etc., are tax-free if certain conditions are met.

For companies going overseas in Vietnam, effective management of foreign employees is not only about compliance, but also directly affects the company’s operational efficiency and cost control. Here are some suggestions:

• Establish a dedicated employee management team to be familiar with the laws and regulations related to foreign employees and keep abreast of policy changes.
• Plan the needs of foreign employees in advance, conduct job analysis and local talent market research, and avoid unnecessary foreign hiring.
• Establish a complete recruitment, onboarding and resignation process for foreign employees to ensure that every step complies with legal requirements.
• Provide comprehensive onboarding training for foreign employees, including Vietnamese culture, laws and regulations, company systems, etc., to help them adapt quickly.
• Regularly review the work permits and passports of foreign employees and arrange renewals in advance.
• Develop a reasonable salary plan that balances foreign employees’ expectations with local salary levels, while fully considering tax implications.
• Establish an integration mechanism between foreign employees and local employees to promote cultural exchanges and improve team cohesion.
• Consider hiring a professional human resources service company or legal consultant to assist in handling complex foreign employee management matters.

Punishment measures for violating labor laws

When running a business in Vietnam, it is crucial to have a thorough understanding of and strict compliance with labor regulations. Vietnam adopts severe penalties for government violations of labor laws, which not only include fines, but may also involve more serious penalties. Understanding these penalties will help companies avoid risks and ensure compliance operations.

Vietnam’s labor law provides for a variety of violations and corresponding penalties. According to Decree No. 28/2020/ND-CP, which took effect on January 1, 2020, common violations include but are not limited to: failure to perform labor contracts, withholding or arrears of wages, forced overtime, violation of working hours and rest time regulations, Punishing employees, violating social insurance penalty regulations, improper dismissal, etc. Penalties for these offenses vary, depending on the nature and severity of the offense.

Fines are the most common form of punishment, with amounts ranging from a few million VND to hundreds of millions of VND. For example, for non-performance of labor contracts, employees’ fines can range from 5 million to 10 million VND. For wage arrears or non-payment of wages on time, the tax exemption can reach VND20 million to VND75 million. It is important to note that these exemptions will be adjusted periodically based on changes in inflation rates and the minimum wage. Enterprises should pay close attention to the updates of relevant regulations and ensure that they are informed of the latest penalty standards in a timely manner.

For serious violations, the Vietnamese government also provides other forms of punishment. These measures may include: For companies that have repeatedly violated labor laws in serious cases, the government may require them to suspend some or all of their business operations until rectifications are completed. This will not only cause direct economic losses, but may also seriously damage the normal operations of the enterprise. In extreme cases, if an enterprise has long-term and serious violations of labor laws and repeated rectifications are ineffective, the government may take measures to revoke business controls. This means that companies will be forced to cease all operations in Vietnam. For companies that seriously violate the law, the government can publicly expose their illegal activities in official media , which will cause a huge blow to the company’s social image and business reputation. Enterprises that violate labor laws may be included in the “blacklist” and lose the qualification to participate in government tenders or receive government projects . In extremely serious cases, such as serious infringement of employees’ rights and interests, causing major safety accidents, etc., business owners may face criminal liability . In addition to administrative penalties, companies must also compulsorily compensate employees, including back wages, back payments of social insurance, and payment of subsidies and compensation.

To avoid these adverse consequences, companies can take the following measures:

• Establish a compliance management system and regularly review whether the company’s labor practices comply with the latest regulations.
• Invest in employee training to ensure that all managers and HR personnel are fully aware of the requirements of Vietnamese labor laws.
• Implement strict internal control mechanisms to promptly detect and correct any potential violations.
• Maintain good communication with local labor management departments and proactively seek guidance and advice.
• When dealing with complex employment issues, consider consulting professional employment legal counsel to ensure the legality of your decision.
• Establish an effective employee grievance mechanism to encourage employees to report potential violations so that problems can be discovered and resolved in a timely manner.
• Conduct regular internal labor law compliance audits to identify potential risks and develop improvement plans.
• Pay close attention to the latest changes in labor regulations and promptly adjust corporate and policy practices.

In general, when operating a business in Vietnam, strict compliance with labor laws is not only a need to avoid penalties, but also the basis for sustainable development of the business. By establishing a comprehensive compliance culture, companies can not only avoid legal risks, but also improve the quality of their employees. In Vietnam, a country with a fierce and complex labor market, only companies that truly value and strictly implement labor regulations can stand firm in the fiercely competitive market. Heel to achieve long development.