1. Despite the challenges of the pandemic, the Vietnamese economy is doing very well, going into 2022.
2. Part of Vietnam’s economic success can be attributed to the strength of Vietnam Labor Law and the certainty it provides for workers in that country.
3. Any business considering hiring in Vietnam needs to ensure that they comply with minimum employment rights, minimum wage laws and that they classify employees correctly.
4. It is the responsibility of the employer in Vietnam to ensure that all foreign workers operate under a valid work visa and labor contract.
1. Vietnam’s Economy: An Overview
Vietnam continues to be it was one of few countries globally recording consistent economic growth in the midst of the pandemic: The latest World Bank figures forecast growth to more than double in 2022 from 2.6% to 5.5%.
This growth has been actively supported and facilitated by a Vietnamese Government which actively encourages foreign investment and tax incentives, and significant infrastructure projects.
Vietnam has also strengthened its global position in recent years through various Free Trade Agreements (FTAs) with other countries, as well as its membership in the Association of Southeast Asian Nations (ASEAN).
A major driver of foreign investment in Vietnam has been its reputation for a highly educated and effective workforce: A workforce which, due to favourable currency conversions, can often be hired cost-effectively.
But hiring in Vietnam means having an excellent understanding of the labor laws that apply in that country. Here we set out the key things you need to know about Vietnam Labor Law.
2. Impact of the COVID-19 Pandemic on Vietnam Labor Law
While it has bounced back extraordinarily well, it is worth pointing out some of the labor law implications of Vietnam’s response to Covid-19.
In the first six months of the pandemic, approximately 1.2 million laborers became unemployed, with 36.8 per cent of the total being young people. Declining demand meant the highest rate of unemployment in five years. Unsurprisingly, it was the export and tourism industries that were most affected.
All in all, 84.8% of enterprises reported that they had encountered financial difficulties due to COVID-19.
The Vietnam Government responded swiftly. Three support packages were approved, providing tax relief, extending credit, and enhancing social security (the latter valued at VNĐ62 trillion ($2.64 billion)).
In the view of the International Monetary Fund (IMF), Vietnam’s economic success, despite the pandemic, reflected “strong economic fundamentals, decisive containment measures and well-targeted government support”, according to their most recent annual assessment.
3. Employee Rights in Vietnam Labor Law
As of January 1, 2021, Vietnam’s Labor Code was updated with a new definition of employee which is particularly broad: An “employee” is a person who works for an employer under an agreement, and is paid, managed, and supervised by the employer.
This leaves some ambiguity whether independent contractors may fall within the category of ’employee’, whether intentionally or not.
Independent contractors have historically been regulated under Civil Code 2015, rather than the Labor Code, meaning that the contractor was not entitled to standard employment rights or benefits (for more information on those rights and benefits, see below).
This means it is particularly important that businesses clarify the worker’s status in a written agreement. There is a risk that if the relationship contains features commonly found in an employment relationship, that the authorities will classify the individual as a disguised employee after the fact.
For general information on the difference between employees and independent contractors internationally see What Is the Difference Between Employees and Independent Contractors?
As well as clarifying who is, and who isn’t an employee, the Labor Code also sets out special protections for certain types of employee, such as junior employees, female employees or disabled employees.
4. Minimum Wage in Vietnam Labor Law
Vietnam has minimum wage laws, but the minimum wage itself differs by region, as a result of a law change at the start of 2020.
In Hanoi and Ho Chi Minh City the minimum wage per month is VNĐ4.42 million (US $191). It is VNĐ3.92 million ($167) for those in significant urban areas in Can Tho, Da Nang, and Haiphong.
By contrast, in the more rural Bac Ninh, Bac Giang and Hai Duong, the minimum wage per month is set at VNĐ3.43 million ($146).
Anywhere else, the minimum per months is VNĐ3.07 million ($131).
5. Vietnam Labor Law and Foreign Workers
The amended Labor Code introduced in 2019 placed some new requirements for foreign workers working in Vietnam.
Vietnam Labor Law now requires that workers be 18+, have professional qualifications and work experience, and be in good health standing.
in addition, all foreign workers must hold a work permit, except where an exemption applies.
An exemption can be applied for in the following cases:
- Shareholders or ‘members’ contribute capital equal to or more than government regulatory requirements (currently VND 1 Billion / USD 43,000)
- Directors of joint stock companies make capital contributions
- Heads of representative offices (ROs)
- The purpose is to perform marketing services and the worker will be in Vietnam for less than 3 months
- The purpose is to resolve a complicated technical issue that cannot be resolved by a local
- The applicant is a foreign lawyer who has a Lawyer’s Practicing Certificate in Vietnam
- A foreign individual specified in an international treaty which Vietnam has signed up to
- A foreign employee married to a Vietnamese person and living in Vietnam.
Note, Foreign workers in Vietnam are not entitled to enter into indefinite-term employment contracts, and can only enter into fixed-term contracts of two years duration maximum (though these can be extended).
6. Public Holidays in Vietnam
There are 10 public holidays mandated by Vietnam Labor Law. As in many other countries, if a holiday falls during the weekend, it is ‘Mondayized’, and observed on the following Monday. The key holidays are.
- New Year’s Day, 1 Jan.
- Vietnamese New Year, typically occurs in late Jan or early Feb, lasting 5 days
- Hung Kings Commemoration, 10th day of the 3rd lunar month
- Day of Southern Liberation and National Reunification, 30 April
- International Workers’ Day, 1 May
- Vietnamese Independence Day, commemorating the date of independence from French and Japanese occupation, 2 Sept.
Compliance with Vietnam Labor Law
Vietnam remains a “bright spot” in Southeast Asia for foreign investors and businesses, despite the challenges the Pandemic has brought to the region. It is essential that any business considering moving into the region understand the key elements of labor law compliance.
Frequently Asked Questions (FAQ)
No. 13th month pay is not a legal requirement in Vietnam. However, it is commonly offered by employers.
There are a range of changes, including:
- A new definition of employee
- A change in the overtime cap from 30 to 40 hours a week
- A change to labor contracts to prevent the constant extension of fixed-term employment contracts.