Vietnam’s Labor Code contains provisions that outline the rights and obligations of both employers and employees, including working hours, labor agreements, social insurance, overtime, strikes, and termination of employment contracts. To ensure compliance with these laws, foreign companies operating in Vietnam must be familiar with the country’s labor regulations. Furthermore, Vietnam recently updated its Labor Code to align with international labor standards, making it more critical for foreign companies to stay up to date on these changes.
In this guide, we will delve into the key provisions of Vietnam’s Labor Code, specifically for foreign companies. We will discuss employee-employer contracts, severance and payments, bonuses, allowances, benefits, retirement ages, and other crucial provisions in the Labor Code.
When a foreign company hires employees in Vietnam, they must have a written labor contract with the employee in the Vietnamese language. The labor contract must be in accordance with the Vietnamese Labor Code and cannot have terms that are less favorable than the law. The contract must include the following:
- Full name and address of both employer and employee
- Job description, job location, and work schedule
- Probation period (if any)
- Salary and payment schedule
- Overtime policies and compensation
- Insurance policies and benefits
- Annual leave entitlements and holidays
- Termination and severance policies
Both employer and employee must sign the contract, and the employer must provide a copy of the contract to the employee within five days of signing.
Rules for Severance and Payments
The Vietnamese Labor Code outlines rules for severance payments for employees who are dismissed or whose contracts are not renewed. The amount of severance pay is based on the employee’s length of service and monthly salary. Here are the guidelines for calculating severance pay:
- One month’s salary for each year of employment for employees who have worked for one to 12 years
- Two months’ salary for each year of employment for employees who have worked for 12 to 20 years
- Three months’ salary for each year of employment for employees who have worked for more than 20 years
It is important to note that if the employee resigns or is terminated for misconduct, they may not be entitled to severance pay.
Bonuses, Allowances, and Benefits
Foreign companies must provide employees with a number of benefits and allowances, which may include:
- Health insurance: Employers must contribute to an employee’s health insurance premiums, which is calculated as a percentage of the employee’s salary.
- Social insurance: Employers must contribute to an employee’s social insurance premiums, which includes retirement, health, and unemployment insurance.
- Overtime pay: Employees who work beyond their normal work hours are entitled to additional pay, which is calculated as a percentage of their normal hourly wage.
- Annual leave: Employees who have worked for at least 12 months are entitled to at least 12 days of paid annual leave per year. This entitlement increases with length of service.
- Sick leave: Employees who are sick are entitled to paid sick leave, which varies depending on the length of service.
- Maternity leave: Female employees are entitled to six months of paid maternity leave, and male employees are entitled to five days of paid paternity leave.
- 13th month salary: It is common for Vietnamese employers to pay a bonus equivalent to one month’s salary at the end of the year, known as the 13th month salary.
The retirement age in Vietnam is 60 for men and 55 for women, but there are some exceptions. Employees in certain industries, such as aviation and law enforcement, may retire earlier. Employees may also choose to retire later if they wish to continue working.
Foreign companies looking to do business in Vietnam must ensure they comply with the Labor Code and its regulations. The Labor Code provides a legal framework for the rights and obligations of employers and employees, and it is important for foreign companies to understand these regulations in order to operate in Vietnam successfully.
By following the Labor Code, foreign companies can ensure they are treating their employees fairly and legally, which will lead to a happier and more productive workforce. It is important to keep in mind the rules for severance and payments, bonuses, allowances, and benefits, and retirement ages, as these are key provisions of the Labor Code that will impact employees.
Overall, with the right knowledge and preparation,