Everything an Expat Should Know About Employment Law in Vietnam

Employment law, also referred to as labor law, is the foundation that regulates the relationship between employers and employees in Vietnam . It encompasses various aspects, including contracts of employment, wages, working hours, workplace safety, discrimination, and termination procedures. The primary objective of employment law is to establish a fair and equitable framework that balances the interests of both parties, ensuring that employees are protected against exploitation while allowing employers the flexibility to manage their workforce efficiently.

Vietnam’s Legal Framework for Employment

Vietnam’s labor law is primarily governed by the Labor Code (Bộ Luật Lao Động), last amended in 2019, and effective since January 1, 2021. The Labor Code outlines the general principles of employment relationships, workers’ rights, and the responsibilities of employers. It also addresses issues related to employment contracts, wages, working hours, labor disputes, and other aspects of the employment relationship.

The Ministry of Labor, Invalids, and Social Affairs (MOLISA) is the key government body responsible for overseeing labor laws and ensuring compliance with employment regulations in Vietnam. Various decrees, circulars, and decisions issued by MOLISA provide further clarity on specific labor issues.

Vietnam’s labor legislation has evolved significantly since the economic reforms known as Đổi Mới in 1986. The Labour Code of 1994 marked a transition from a centrally planned economy to a more market-oriented approach, introducing principles that align with international labor standards. Subsequent revisions have continued to address emerging labor issues, such as informal employment, digital economy challenges, and the needs of a diversifying workforce.

As an expat, your work in Vietnam is primarily regulated under the same laws as Vietnamese nationals, with a few exceptions, which we will explore further below.

Work Permits and Residency for Expatriates

For expatriates intending to work in Vietnam, securing the appropriate work permits and residency documentation is the first step.

Work Permits

Most expatriates working in Vietnam are required to obtain a work permit before commencing employment. The work permit is generally valid for up to two years and can be renewed. There are some exceptions where expatriates may be exempt from needing a work permit, such as when:

• The individual is transferring internally within a company.
• The expatriate holds an enterprise managerial position (e.g., general director, chairman of a Vietnamese company).
• Specific professionals working under international agreements or treaties to which Vietnam is a signatory.

To obtain a work permit, you must fulfill certain requirements, including:

• Possessing qualifications relevant to the job.
• Having at least three years of work experience in the same position.
• Having a clean criminal record.
• Being in good health, confirmed by a Vietnamese medical examination.

It’s important to note that your employer is typically responsible for submitting the work permit application on your behalf. Working without a valid work permit is illegal and may result in fines, deportation, or other legal consequences.

Temporary Residence Card (TRC)

Once you have a work permit, you may also be eligible to apply for a Temporary Residence Card (TRC), which allows you to reside in Vietnam for the duration of your employment contract, eliminating the need for a visa. The TRC can be issued for periods of up to two or three years, depending on the specific circumstances of your employment.

Employment Contracts in Vietnam

Employment contracts serve as the cornerstone of the relationship between employees and employers. They delineate the rights, responsibilities, and obligations of both parties, ensuring clarity and legal compliance.

Types of Employment Contracts

In Vietnam, employment contracts are the foundation of the employee-employer relationship. The law recognizes two primary types of employment contracts:

• Fixed-term Contracts: These are contracts with a specified duration, not exceeding 36 months. After two consecutive fixed-term contracts, if the employment relationship continues, it must be converted into an indefinite-term contract, except for cases specified by law (such as work related to seasonal production).
• Indefinite-term Contracts: These contracts do not have an expiration date and continue indefinitely unless terminated lawfully by one of the parties.

There are also seasonal or project-based contracts, which are used for employment lasting less than 12 months, but these are less common in professional settings.

Contract Requirements

Employment contracts in Vietnam must be in writing, except for contracts with a duration of less than one month. Contracts should be signed before the employee commences work, and they must include key details, such as:

• Job description
• Working hours and rest periods
• Wages and other benefits
• Social insurance and health insurance
• Conditions for contract termination

It’s also important that the contract adheres to Vietnamese labor laws, which means that employers cannot impose conditions that are inconsistent with the law (e.g., paying wages below the minimum wage or denying statutory benefits).

Probation Period

In most cases, a probation period is part of the employment contract. The probation period depends on the nature of the job:

• 60 days for positions that require specialized technical knowledge or professional skills.
• 30 days for administrative or clerical positions.
• 6 days for other types of work.

During the probation period, the employer is required to pay the employee at least 85% of the agreed wage. This period serves as a mutual assessment phase where both the employer and the employee can evaluate the suitability of the employment relationship. If either party determines that the arrangement is not working out, the contract can be terminated with minimal notice, as stipulated by law.

It’s important for expatriates to clearly understand the terms of the probation period, including the specific performance metrics and expectations set by the employer. Open communication during this phase can help ensure a smooth transition into the permanent role

Wages and Benefits According to Employment Law

This section breaks down these components to give you a clear picture of what to expect and what is required under Vietnamese law.

Minimum and Average Wage

Vietnam employs a regional minimum wage system, which ensures that wages reflect the economic conditions of different areas. The country is divided into four wage regions, each with its own minimum wage level. 

Below is the minimum wages across these regions:

The average wage in Vietnam varies widely based on industry, expertise, and location. In sectors such as information technology, finance, and engineering, average monthly wages can range from 10 million VND to over 50 million VND for specialized roles in urban centers.

For expatriates employed under local contracts, adherence to these minimum wage standards is mandatory. However, expatriate salaries often exceed these minimums to reflect specialized skills and international standards. 

Overtime Pay

Overtime compensation in Vietnam is regulated to ensure fair remuneration for additional work hours. The standard workweek is set at 48 hours, typically arranged as eight hours per day over six days. Any work beyond this standard must be compensated at premium rates, which differ based on when the overtime occurs:

• Weekday Overtime: 150% of the regular hourly wage.
• Weekend Overtime: 200% of the regular hourly wage.
• Public Holiday or Paid Leave Overtime: 300% of the regular hourly wage.

There are also limits on the amount of overtime an employee can undertake. Generally, the maximum allowable overtime is 40 hours per month and 200 hours per year. In certain industries or exceptional circumstances, this limit may be extended to 300 hours annually, provided that safety and health regulations are maintained.

Employers are responsible for accurately tracking overtime hours and ensuring timely compensation. For expatriates, understanding these overtime policies is important, especially in roles that may require flexible working hours or project-based commitments.

Social Insurance, Health Insurance, and Unemployment Insurance

Vietnam mandates participation in several insurance schemes aimed at providing comprehensive coverage for employees. These schemes are funded through contributions from both employers and employees, ensuring shared responsibility.

• Social Insurance: This compulsory scheme covers benefits such as sickness, maternity, retirement, and workplace accidents. The contribution rate is typically 32.5% of the employee’s salary, with employers contributing 21.5% and employees contributing 11%. 
• Health Insurance: In addition to social insurance, employees must contribute to the health insurance fund. The standard contribution rate is 3% of the employee’s salary, with employers contributing an additional 3.5%. Health insurance provides access to medical treatments, hospitalization, and other healthcare services.
• Unemployment Insurance: This scheme offers financial support to employees who lose their jobs involuntarily. The contribution rate is 1% of the employee’s salary, split equally between the employer and employee (0.5% each). To qualify for unemployment benefits, employees must have contributed to the unemployment insurance fund for at least 12 months within the last 24 months preceding their unemployment.

Participation in these insurance schemes is not only a legal requirement but also an essential component of employee welfare. Expatriates should verify that their employers are compliant with these obligations and understand the benefits available to them under each scheme.

Leave Entitlements and Public Holidays

Vietnamese labor law outlines various leave entitlements to ensure employees can balance work with personal and family needs.  Employers are obligated to honor these provisions, and any deviations should be addressed through appropriate legal channels.

Main leave types include:

• Annual Leave: Full-time employees are entitled to a minimum of 12 days of paid annual leave per year after completing one year of continuous service. This entitlement increases by one day for every five additional years of service, up to a maximum of 20 days. Expatriates should review their contracts, as some employers may offer more generous leave allowances.
• Public Holidays: Vietnam observes 11 national public holidays annually, including Tet (Vietnamese Lunar New Year), National Day, and International Labor Day. These holidays are in addition to annual leave and are fully paid. Employers must ensure that employees receive these days off or provide appropriate compensation if required to work.
• Sick Leave: Employees are entitled to sick leave with sick allowance through the social insurance system. A medical certificate from a recognized healthcare provider is typically required to qualify for sick leave.
• Maternity and Paternity Leave: Female employees are entitled to six months of maternity leave, fully paid through the social insurance system. This period can be extended in cases of complicated childbirth or health issues related to pregnancy. Male employees are entitled to paternity leave of five to 14 days, depending on specific circumstances such as the nature of the job and company policies.
• Marriage and Bereavement Leave: Employees are granted leave for personal milestones such as marriage (typically three days) and bereavement (one day for the death of immediate family members).

Additional Benefits

Beyond statutory requirements, many employers in Vietnam offer additional benefits to attract and retain talent, particularly for expatriate employees. These benefits can significantly enhance the overall compensation package and may include:

• Health and Life Insurance: Enhanced insurance packages that provide broader coverage than the mandatory health insurance, including life insurance and private healthcare options.
• Housing Allowance or Company-Provided Accommodation: Assistance with housing costs or provision of company-owned residences to ensure comfortable living arrangements.
• Transportation Allowance: Subsidies for commuting expenses or company-provided transportation services.
• Performance Bonuses: Incentive-based bonuses tied to individual or company performance metrics, offering additional financial rewards beyond base salaries.
• Education Allowance for Children: Financial support for expatriates with children, covering international school fees or educational expenses.
• Relocation Assistance: Support with moving costs, visa applications, and other logistical aspects of relocating to Vietnam.

These additional benefits are often negotiable and can greatly enhance the expatriate experience. It is advisable for expatriates to discuss and clarify these benefits during the contract negotiation phase to ensure that their needs and expectations are met.

Compliance and Enforcement

Ensuring compliance with Vietnam’s labor laws regarding wages and benefits is vital for both employers and employees. The Ministry of Labor, Invalids, and Social Affairs (MOLISA) oversees the enforcement of labor regulations, conducting inspections and addressing grievances related to wage disputes, unpaid overtime, or non-compliance with insurance contributions.

Expatriates should be proactive in understanding their rights and obligations under Vietnamese law. In cases of non-compliance, employees have the right to file complaints with labor authorities or seek legal recourse through the court system. 

Termination of Employment in Vietnam

Termination of employment in Vietnam is regulated by strict legal provisions to ensure fairness and compliance with labor laws. Both employers and employees must adhere to these regulations when ending an employment relationship. The law is designed to protect both parties by setting clear grounds for termination, notice periods, and severance entitlements.

Notice Periods for Termination

Vietnamese labor law mandates that employers provide advance notice to employees when terminating a contract under most circumstances:

• 45 days’ notice for indefinite-term contracts.
• 30 days’ notice for fixed-term contracts.
• 3 days’ notice for seasonal or project-based contracts.

Employers must provide written notice, stating the reasons for termination and specifying the final working day. Failure to provide proper notice could result in legal claims for wrongful dismissal or additional compensation to the employee.

Severance and Job-Loss Allowances

If an employee is terminated due to reasons beyond their control, such as restructuring or job redundancy, they may be entitled to severance pay or a job-loss allowance. The amount of severance pay is calculated based on the employee’s length of service during which the employer did not contribute to mandatory unemployment insurance for the employee:

• Severance pay: One-half of one month’s salary for each year of service if the employee has worked for 12 months or more. This applies when the termination is due to restructuring or technological changes.
• Job-loss allowance: Similar to severance pay but provided in situations where the employer is facing economic difficulties that lead to mass layoffs.

Termination by the Employer

Employers in Vietnam cannot unilaterally terminate an employee’s contract without valid legal grounds. The law protects employees by limiting the circumstances under which termination is permissible. Terminating an employee without adhering to these legal grounds could result in the employer being liable for wrongful termination claims.

Here are the lawful grounds for termination by the employer:

Repeated Poor Performance After Retraining

Before terminating an employee for poor performance, the employer is required to issue a policy under which all criteria to assess the employee’s performance are specified. Performance evaluations and retraining efforts must be documented as proof of compliance with this requirement.

Prolonged Illness

If an employee suffers from an illness or accident and cannot return to work after a specific period, the employer may be permitted to terminate the contract. The periods vary depending on the type of contract:

• 12 consecutive months for indefinite-term contracts.
• 6 consecutive months for fixed-term contracts.
• More than half of the contract’s duration for seasonal or project-based contracts.

The employer must provide the appropriate medical documentation and notice to terminate on these grounds. It is important to note that once the employee recovers, they must be given priority for re-employment if a suitable position is available.

Serious Breaches of Workplace Discipline

If an employee commits a severe violation of workplace rules, such as theft, fraud, or acts of violence, the employer may lawfully terminate the contract. These types of violations, classified as gross misconduct, justify immediate dismissal without retraining or performance review. However, the employer must conduct a formal disciplinary process, ensuring the employee’s right to defend themselves, before proceeding with dismissal.

Redundancies Due to Organizational Restructuring or Technological Changes

Employers may terminate employees due to economic reasons, such as downsizing or technological advancements that eliminate the need for certain roles. In these cases, the employer must develop a restructuring plan and consult with the trade union or employee representatives. Termination on these grounds requires advance notice and, in most cases, payment of severance to affected employees.

Termination by the Employee

Employees in Vietnam have the right to resign from their position, but they must provide notice in accordance with the law. The required notice period for employees is similar to that for employers:

• 45 days’ notice for indefinite-term contracts.
• 30 days’ notice for fixed-term contracts.
• 3 days’ notice for seasonal or project-based contracts.

Employees are generally required to submit a resignation letter to their employer, stating the effective date of their resignation. The employer cannot refuse the resignation if the proper notice has been given.

Exceptions to the Notice Requirement

In some cases, employees are allowed to resign without notice. These exceptions are limited to specific situations where the employer has failed to meet their legal obligations or has violated the employee’s rights. For instance:

• If the employer does not pay the employee’s wages on time or in full.
• If the employer subjects the employee to abuse, harassment, or unsafe working conditions.
• If the employee is unable to continue working due to health reasons or family circumstances, which may necessitate immediate resignation.

In such cases, the employee may resign without fulfilling the usual notice requirement, and the employer may still be liable for severance or compensation depending on the specific circumstances of the resignation.

Labor Disputes and Resolution

When disagreements arise between employers and employees, particularly concerning employment termination, Vietnam’s labor law provides a clear framework for resolving these disputes. The process is structured to promote fairness and efficiency, ensuring that both parties have the opportunity to present their cases and reach a satisfactory resolution. 

The primary methods for dispute resolution under Vietnamese law include mediation, arbitration, and litigation, each serving different levels of conflict severity and complexity.

Mediation

Under the Vietnamese Labor Code (2019), mediation is the preferred initial step for resolving labor disputes. Article 138 of the Labor Code emphasizes the importance of amicable negotiations between employers and employees to settle disagreements without escalating to formal legal actions. 

Mediation is facilitated either internally within the organization by designated labor mediators or externally through professional mediation services. This approach provides a non-adversarial environment where both parties can discuss their issues openly and work towards a mutually agreeable solution. 

Mediation is particularly effective for disputes related to contract termination, unpaid wages, or severance packages, allowing for flexible and customized resolutions that court proceedings may not offer.

Arbitration

If mediation does not result in a satisfactory outcome, the next step is often arbitration. Governed by Article 144 of the Labor Code, arbitration involves a more formal process overseen by a Labor Arbitration Council. This council acts as an impartial body that reviews the evidence, hears testimonies from both parties, and makes a binding decision based on the merits of the case. 

Arbitration is typically faster and less costly than litigation, making it a practical option for resolving more complex or contentious disputes. It is especially useful in cases involving multiple employees or collective labor issues, where a standardized decision can address broader concerns affecting the workforce.

Litigation

When both mediation and arbitration fail to resolve the dispute, litigation becomes the final recourse. According to Article 147 of the Labor Code, either party may bring the case before a Vietnamese court.

Litigation is reserved for the most severe or unresolved disputes, such as those involving significant breaches of contract, wrongful termination without legal grounds, or violations of fundamental labor rights. 

While litigation provides a definitive and enforceable resolution, it is often time-consuming and expensive. Therefore, it is generally viewed as a last resort after other resolution methods have been exhausted.

Government Encouragement of Amicable Resolutions

The Vietnamese government actively promotes the resolution of labor disputes through mediation and arbitration to maintain harmonious labor relations and reduce the burden on the judicial system. 

The Labor Code encourages the use of negotiation, mediation, and arbitration as tools to promote mutual agreement and reduce the burden on the court system. By encouraging employers and employees to engage in constructive dialogue and seek mutually beneficial outcomes, the government aims to foster a stable and productive work environment.

Need a Legal Guide for Employment Law in Vietnam?

Russin & Vecchi specializes in providing tailored legal services to meet your specific needs in Vietnam. Our team of seasoned attorneys offers expert guidance on drafting and reviewing employment contracts, securing work permits, and ensuring compliance with local labor regulations. 

At Russin & Vecchi, we take the time to understand your specific circumstances. Whether you’re setting up a business in Vietnam, handling a diverse team, or dealing with employment termination, we offer tailored legal solutions that fit both local regulations and your objectives.

Contact us today to learn how we can help you achieve your professional goals.