Guide To Hiring: Basic Terms Of Employment Contracts In Vietnam

If you’ve ever wondered how important employment contracts are for your company in Vietnam, here is a complete guide on why these contracts are crucial, and what to consider when establishing one.

Overview of Employment Contracts in Vietnam

What is it?

An employment contract in Vietnam is defined by law as a templated agreement between an employer and an employee on a job regarding wages, working conditions, and each party’s rights and obligations in labor relations.

A written employment contract must be made in two copies, one for each party. The only time an employment contract takes the verbal form is when the term is less than 1 month.

An employment contract must be present to employees before employers officially hire them.

Who does it apply to?

Labor Code No.45/2019/QH14 is the official law that sets out the rules and regulations on labor issues in Vietnam (taking effect in 2021). The law applies to the following entities:

• Employees, trainees, apprentices, and other workers without labor relations
• Employers
• Foreign employees who work in Vietnam
• Other organizations and individuals that directly get involved in labor relations

Basic terms of an employment contract in Vietnam

Required information

Pursuant to Article 21, an employment contract in Vietnam should have at least the following information:

• Name, address of employer, and name, of the position of the person who signs the contract for hiring
• Name, date of birth, gender, residence address, identity card, or similar documents of the employee
• Details on job/ position and workplace address
• The employment contract’s duration
• Details on wages, payment method, payment due day, allowance, and other additional payments
• Regime for promotion and wage rise
• Working hours and rest time
• Details on social insurance, health insurance, and unemployment insurance
• Personal protective equipment for employees
• Details on occupational training for basic and advanced related skills

Duration of contract

In Vietnam, there are two types of employment contracts with different terms of duration:

• Employment contract with an infinite term of duration
• Employment contract with a fixed term of duration that lasts no more than 36 months

If a fixed-term contract (up to 36 months) expires but the signed employee continues to work, a new contract must be signed within 30 days of the expiration date or transformed into a contract with an infinite term of duration.

Wage and minimum wage

Wages include a base salary, an allowance, and other supplemental payments, which can be made either in cash or via bank transfer.

Essentially, an employee’s wage cannot be less than the government’s minimum wage.

Wage allowance and promotion or wage increase regimes are determined by agreements reached by both parties (employers and employees).

Wage payment period

There must be an agreement between two parties on the payment period (hourly, daily, weekly, or monthly):

• Hourly, daily, and weekly wages

Employees must be paid at the end of the working hour, day, or week.

Employers may also pay wages in a lump sum as long as the payment is made at least once every 15 days.

• Monthly wages

Employees should receive wage payments once a month or every half month.

Minimum wages in Vietnam

According to the Government’s Decree No. 90/2019/ND/CP, starting in 2020, the minimum wages in various regions will be:

• Region I (urban Hanoi and Ho Chi Minh City and other urban developed areas): 4,420,000 VND (around 190 USD)
• Region II (rural Hanoi and Ho Chi Minh City and other less developed areas: 3,920,000 VND ( around 169 USD)
• Regional III (certain provincial cities and districts) 3,430,000 VND ( around 148 USD)
• Region IV (certain remaining areas): 3,070,000 VND ( around 132 USD)

Wages for overtime and night shifts

Employees who work overtime should be paid as follows:

• If working weekday overtime, at least 150% of the normal wage payment
• If working weekend overtime, at least 200% of the normal wage payment
• If working overtime on holidays or paid leave, at least 300% of normal wage payment (excluding any additional wages for those events)

Employees working the night shift (from 10 p.m. to 6 a.m.) will be paid at least 30% more than their regular wage.

Working hours and rest time

Employers will set the working hours on a daily or weekly basis and notify the employees:

• Normal working hours are no more than 8 hours per day
• Normal weekly working hours are no longer than 48 hours, and normal daily working hours are no longer than 10 hours
• Working overtime is permitted under specific conditions

In terms of rest time, employees who work for 6 hours or more are entitled to at least a 30-minute break, according to the Labor Code (a 45-minute break at least for night-shift).

Furthermore, if the company does not provide employees with a weekly rest day due to the work cycle, they must have at least four rest days per month, and normally 24 hours straight per week.

Paid leave

As an employer, you must ensure that your employees have access to the following paid leave:

Public holidays

In Vietnam, there are 11 national holidays on which all employees are entitled to fully paid time off:

• Calendar New Year Holiday: 1 day
• Lunar New Year Holidays: 5 days
• Victory Day: 1 day (30th April)
• International Labor Day: 1 day (1st May)
• Independence Day: 2 days (every 2nd September and another one day off preceding or following that day)
• Commemorative Celebration of Vietnam’s Forefather – Kings Hung: 1 day (10th March of the lunar year)

In addition to the Vietnam public holidays, foreign employees in Vietnam are entitled to two additional fully-paid days off on their home countries’ traditional new year holiday (1 day) and national day (1 day).

Annual leave

Employees who have worked for an employer for a full year are entitled to the following paid annual leave:

• 12 working days for regular employees
• 14 working days for employees under the age of 18, disabled individuals, or those performing heavy, hazardous, and dangerous work
• 16 working days for employees performing extremely heavy, hazardous, and dangerous work

An employee will receive an additional day of paid leave, in addition to annual leave, every five years of employment with the same employer.

However, if an employee has not worked for an employer for the entire 12-month period, the total annual leave will be the number of months worked.

Other paid leave

An employee may also be granted fully paid leave in the following circumstances:

• Own wedding: 3 days
• Marriage of children: 1 day
• Death of a family member (parents, spouse, children): 3 days

As for maternity leave, a female employee is entitled to 6 months of prenatal leave (not to exceed 2 months) and 2 months of postnatal leave. If she has twins or more children, each additional child (from the second one) equals one more month off. During her maternity leave, she will be entitled to maternity policies under social insurance law.

Social Insurance, Health Insurance, and Unemployment Insurance

Employers and employees must participate in mandatory social insurance, mandatory health insurance, and mandatory unemployment insurance.

The employees have full entitlement to benefits under social insurance and health insurance laws.

Moreover, it’s the employer’s responsibility to withhold a portion of an employee’s wage (at regulated rates) and contribute the amount to the required insurance on that employee’s behalf.

The following table shows the insurance rates for one Vietnamese employee:

	Social insurance	Health insurance	Unemployment insurance
Employer	17.5%	3%	1%
Employee	8%	1.5%	1%
Total (each insurance)	32%	4.5%	2%

So the total of all three insurance is 32%
Foreign employees must contribute to compulsory social insurance under Decree No.143/2018/ND-CP if they:

• Work in Vietnam under a work permit or similar document issued by related Vietnam government agencies; and
• Work in Vietnam under an employment contract with an indefinite or fixed term of at least one year.

Furthermore, according to Article 17 of Decision No.595/QD-BHXH, both nationals, and non-nationals who work in Vietnam under employment contracts with an indefinite or fixed term of no less than three months must participate in health insurance.

The table below demonstrates the insurance rates set for one foreign employee from 2022:

	Social insurance	Health insurance	Unemployment insurance
Employer	17.5%	3%	–
Employee	8%	1.5%	–
Total (each insurance )	25.5%	4.5%	–

So the total of all three insurances is 30%

Termination of an employment contract in Vietnam

Employment contracts can be terminated by both employers and employees.

Termination by employees

Employees have the right to unilaterally terminate contracts if their employer fails to deliver on the promises made in the contracts (wage, job duties, working conditions, and so forth).

The employees can do this without notice if they are being abused or sexually harassed at work, or if they are being insulted so severely that their physical and mental health suffers.

Employees can still terminate their employment contracts for other acceptable reasons, but they must send notices to the employer within:

• 45 days in advance if the contract has an infinite term of duration
• 30 days in advance if the contract has a fixed term of 12 to 36 months
• 3 days in advance if the contract has a fixed term of fewer than 12 months

Termination by employers

The employers can terminate the contract under the following circumstances

• Employees frequently fail to carry out their contractual obligations
• Employees are unable to recover from illnesses or accidents (within the timeframes specified)
• Business interruptions caused by natural disasters, fire, epidemics, or government orders
• Employees are absent from work for 5 days in a row for no apparent reason
• Other regulated situations (employees reaching retirement age, employees providing false contract information, employees not making their presence within 15 days when being reinstated after contract suspension)

In most cases, employers have to send notices of termination to employees within similar timeframes employees’ termination notice mentioned above.

Notes on hiring minor and non-nationals

Hiring people under the age of 18 and non-nationals is allowed in Vietnam, but only under certain conditions.

Minor employees

When hiring employees aged 15 to 18, employers must obtain permission from their parents or guardians, and ensure that the jobs offered are appropriate for employees’ physical and mental conditions.

Minor employees can work up to 8 hours per day and 40 hours per week, with overtime and night shifts only permitted in certain regulated jobs.

Employers can hire employees aged 13 to 15 in very few cases, and only for regulated jobs under the Ministry of Labour, Invalids and Social Affairs. They can work up to 4 hours per day and 20 hours per week, with no overtime or night-shift work permitted.

To hire employees under the age of 15, the employer must:

• Sign an employment contract with both the employee and his or her legal representative
• Ensure that the working schedule does not interfere with the employee’s schooling schedule
• Maintain safe working conditions for the employee

Non-nationals

Non-nationals may be hired by businesses, organizations, government agencies, individuals, and contractors only when Vietnamese employees are unable to meet the requirements for those positions. To proceed with the hiring process, organizations must obtain written consent from relevant government agencies.

Foreign employees must meet the following general conditions in order to be hired in Vietnam:

• Being at least 18 years old and possessing full legal capacity
• Meeting qualification, experience, and health-related criteria
• Being free of any legal liability or criminal issues under foreign or Vietnamese laws
• Possessing work permits issued by relevant Vietnamese government agencies

Conclusion

When drafting a template for an employment contract in Vietnam, as an employer, you must follow the Labor Code regulations. In general, you should include information about the signing parties, job duties and obligations, wages (which must be higher than the minimum wage in Vietnam), working hours, each party’s obligations, and employee benefits (e.g., insurance, bonus, occupational training, etc…

You can hire non-national employees and employees under 18 years old, but make sure to follow the laws that govern those groups of workers.

Last but not least, you are responsible for withholding a portion of your employee’s wages to pay required insurance as well as personal income tax on their behalf, in addition to fulfilling the agreements in an employment contract.

If you have any questions about working in Vietnam, get in touch with our support team for more practical advice via service@bbcincorp.com.

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