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January 15, 2021

By Eric Minh Huu Huynh, Joel Akins and Zach Robinson

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New Labour Code

The new Labour Code No. 45/2019/QH14, passed by the National Assembly in November 2019, finally came into effect on 1 January 2021, replacing the Labour Code of 2012. Some of the changes include an additional national holiday; an increase in the retirement age (to be phased in gradually) to 60 for women and 62 for men; a clearer definition of "sexual harassment"; the removal of the seasonal/specific-job category of labour contracts (folded into the definite-term category); confirmation of de facto employment; recognition of e-contracts for employment; and an increase in permitted overtime hours.

While employers have had more than one year to ensure that their labour contracts, internal labour regulations, and employment-related policies are in line with the new law, certain provisions of the new Labour Code remain unclear, or lack sufficient detail. A wide range of subordinate legislation is expected to be issued to guide the implementation of the new code, with 14 decrees, one decision, and eight circulars currently in the legislative queue.


No increase in minimum wage for 2021

The region-based minimum wages for non-state employees will be unchanged for 2021, due to difficulties caused by the COVID‑19 pandemic. Typically, the minimum wages would see an increase at the beginning of the year. The monthly minimum wages range from VND 3,070,000 (USD 131) in rural provinces to VND 4,420,000 (USD 191) in Hanoi and Ho Chi Minh City.


Impact of COVID‑19 on employment

In addition to its considerable impact on public health and the economy, the COVID‑19 pandemic has had legal implications for employment.

Under the labour laws of Vietnam, a pandemic constitutes a force majeure event entitling an employer, after having exhausted all possible and necessary measures to remedy the situation, to scale down production and apply the following actions to its employees:

  • Work suspension;
  • Assignment to another job;
  • Termination of labour contract;
  • Temporary suspension of employment performance (subject to the parties' negotiation).

On 1 April 2020, the Prime Minister of Vietnam declared COVID-19 a nationwide epidemic with a starting date of 23 January 2020 (the date of the first confirmed case in Vietnam). Legally speaking, until the Prime Minister declares that the epidemic has ended, disruptions to a company's business activities, profitability, or financial situation caused by COVID-19 can be used as a force majeure basis for decisions relating to employment, including unilateral termination.

With thanks to Eric Minh Huu Huynh, Joel Akins and Zach Robinson of Tilleke & Gibbins for their invaluable collaboration on this update.




New Labor Code

In November 2019, the National Assembly issued a revised version of the Labor Code, the primary legislation governing labour and employment in Vietnam. The new Labor Code is due to come into force on 1 January 2021 and will replace the current Labor Code of 2012. The changes introduced by the new Labor Code are relatively minor and primarily just clarify unclear provisions and close loopholes found in the current law. However, some of the more noteworthy changes include the introduction of an additional national holiday (bringing the total to 11 days per year); an increase in the retirement age to 60 for women and 62 for men; and the introduction of a clearer definition of 'sexual harassment'.


Increase to Minimum Wage

On 1 January 2020, region-based minimum wages for non-state employees in Vietnam increased by an average of 5.5%. The monthly minimum wages now range from VND 3,070,000 (approximately USD 132) for the least developed areas to VND 4,420,000 (approximately USD 190) for large metropolitan areas like Hanoi and Ho Chi Minh City.


New Decree on administrative penalties

On 4 March 2020, the Government of Vietnam issued a new Decree ("Decree 28") providing penalties for administrative violations in the fields of labor outsourcing, social insurance and overseas manpower supply under contract. Decree 28 came into effect on 15 April 2020 and sets out dozens of actions which could subject an employer to a penalty, including, amongst others, (i) keeping/withholding personal documents of an employee (such as an ID card); (ii) paying outsourced employees less than regular employees who hold the same qualifications and are doing the same (or similar) job; (iii) requiring workers to undergo more than one probation period for one job, or undergo probation longer than permitted; and (iv) sending workers abroad without registering a manpower supply contract. Penalties as high as VND 200 million (approximately USD 8,500) may apply for the most serious violations.




Increase in region-based minimum wages

Decree No. 157/2018/ND-CP dated 16 November 2018 came into effect on 1 January 2019. This Decree applies to all private businesses and has increased the average region-based minimum wage by 5.3%. The new monthly region-based minimum wage range from VND 2,920,000 to VND 4,180,000 depending on the locality, with the higher rates generally applying to the bigger economically developed cities.


Compulsory social Insurance for foreign workers

Decree No.143/2018/ND-CP (“Decree 143”) came into effect on 1 December 2018. This Decree expands the Law on Social Insurance and the Law on Occupational Safety and Hygiene in relation to compulsory social insurance for foreign national employees. With effect from 1 January 2022, employers will be obliged to contribute 3% of the employee’s monthly salary to the sickness and maternity funds, 0.5% into the labor accident and occupational disease fund which started in December 2018, and 14% into the retirement and survivors’ benefits fund. The employee’s contribution is set at 8% of their monthly salary to be paid into the retirement and survivors’ benefits fund.


New decree guiding the Labor Code

Decree No.148/2018/ND-CP (“Decree 148”) came into effect on 15 December 2018. In addition to replacing certain provisions of this Decree has amended the Labor Code as follows:

  • the probationary period or internship period is no longer included in the total duration of employment for the purpose of calculating severance allowance; and
  • the employer only needs to ensure that the notice of invitation for a disciplinary hearing is sent to all participants prior to the hearing, and if any participant is absent without justification, the employer has the right to conduct the disciplinary hearing.




Increase in Minimum Regional Wages

As a result of Government Decree No. 141/2017/ND-CP (applicable from January 1, 2018), there will be an average increase in the minimum wage of 6.5%. The new minimum regional wages range from VND 2,760,000 to VND 3,980,000.


Increase in Base Salaries

According to National Assembly Resolution No. 49/2017/QH14, from 1 July 2018, base salary will increase from VND 1,300,000 to VND 1,390,000 The base salary is used as a basis for calculation of the social and health insurance contributions cap for employers and employees.

It is also worth noting that, from January 1, 2018, the monthly salary used for calculating social insurance contributions will include other additional payments (as opposed to just salary and allowances, as was previously the case).


Expansion of Statutory Unemployment Scheme

Pursuant to the 2014 Social Insurance Law, from 1 January 2018, employees with a labor contract of at least 1 month, and expat employees with work permits or practicing licenses issued by government authorities will be subject to statutory social insurance contributions.


Severe Criminal Punishment for Illegal Dismissal of Employees and Failure to Pay Statutory Insurance Contributions

Under the new Penal Code No. 100/2015/QH13, as amended (the “New Penal Code”), which came into force on January 1, 2018, unlawful dismissal of an employee, including constructive dismissal scenarios, can result in criminal liability, including a fine up to VND 200,000,000, non-custodial reform for up to one year, or imprisonment for up to 3 years.

Under the New Penal Code, an employer (individual) who fails to pay social insurance, health insurance, and unemployment insurance, shall, depending on the amount unpaid and the number of employees affected, be subject to a fine of up to VND 1,000,000,000, non-custodial reform for up to 1 year, or imprisonment for a period of up to 7 years. The New Penal Code also provides for corporate legal entities to be held criminally liable and/or fined up to VND 3,000,000,000 where it has failed to pay social insurance contributions, health insurance or unemployment insurance.

With thanks to Kien Trung Trinh, Nam Ngoc Trinh and Eric Minh Huu Huynh of Tilleke & Gibbins for his invaluable collaboration on this update.


Image: Suzanne Horne
Suzanne Horne
Partner, Employment Law Department

Image: Kirsty Devine
Kirsty Devine
Associate, Employment Law Department

Image: Aashna Parekh
Aashna Parekh
Associate, Employment Law Department

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