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Guide to Employment Law in Vietnam 1
The Labour Code of Vietnam was passed in June 1994 and was amended by the 2002
and 2006 Amended Law (collectively, "the Labour Code"). The new Law on Social
Insurance, an important legislation relating to employees, took effect on 1 January
2007. A number of separate Decrees and Circulars, the Labour Code and the Law on Social Insurance create a uniform legal framework. The labour laws of Vietnam are characterised as providing a wide range of protection for employees. Although some fl exible changes have been brought about by the 2002 Amended Law, it is generally agreed that the labour legislation of Vietnam is strict and still favours employees.
It should be noted that the labour laws of Vietnam apply to both local Vietnamese and expatriates working in Vietnam, and most importantly, it is not possible to contract out of the terms of the employment legislation. Generally an employer is encouraged to grant a more favourable treatment to its employees than that provided for by the laws.
This Guide summarises the major features of the labour laws of Vietnam.
Summary of Minimum Statutory Entitlements
Vietnamese labour law states that the wages of employees are to be agreed upon in the labour contract and paid in consideration of the rate of production, and the quality and results of the work performed. Wages of employees may not be lower than the minimum wage stipulated by the State.
Presently, the minimum wage1 for an employee working in a Vietnamese enterprise and for State sectors is VND 450,000 a month (approximately U.S.$27.90)2. The minimum wage for an employee working in a foreign invested enterprise (FIE), foreign and international organisations in Vietnam is as follows:
no less than VND 870,000 (approximately U.S.$54.00) a month for FIEs located in Hanoi and Ho Chi Minh City
no less than VND 790,000 (approximately U.S.$49.00) a month for FIEs located in the suburbs of Hanoi and Ho Chi Minh City, or in the urban areas of Hai Phong, Bien Hoa
and Vung Tau and no less than VND 710,000 (approximately U.S.$44.00) a month for FIEs located in other areas of Vietnam.
The minimum wage is reviewed and adjusted annually. Of course, Vietnamese law encourages businesses and organisations to apply minimum wage levels that are higher than the levels stipulated by the Government.
1 Minimum wage is applied to Vietnamese employees performing the simplest job in ordinary working conditions.
2 U.S.$1 = VND 16,105 (dated 30 October 2007).
By statute, the normal working hours of each employee must not exceed 8 hours a day or
48 hours a week. The employer has the right to set working hours on a daily or a weekly basis, provided that employees are notifi ed in advance.
An employee who works for 8 consecutive hours has the right to a break of at least 30
minutes. Those who work the night shift have the right to a break of at least 45 minutes.
Employees who work in shifts have the right to have at least 12 hours between each shift.
It should be noted that break time is included in the number of hours worked. For each seven working days, an employee is entitled to a break of at least one day (24 consecutive hours). If an employee works for 10 hours or more in a day, the employer must arrange for an additional break time of at least 30 minutes during working hours, in addition to the regular break time in the normal working shift.
Special working hours are applied to female, child, disabled and older employees.
Overtime is strictly regulated by the laws of Vietnam. Specifi cally, although an employer
and an employee may agree on overtime, overtime may not exceed 50% of the usual working day. Where the working hours are determined on a weekly basis, the total number of working hours may not exceed 12 hours a day. The total overtime hours in a year may not exceed 200 hours, except in special cases where the total overtime may be up to 300 hours a year. The employer must strictly comply with the overtime regulation and the overtime payment.
Labour laws of Vietnam provide that an employee working for an employer under normal working conditions for 12 months is entitled to annual leave of 12 days; this number increases to 14 or 16 working days for those employees who work in heavy or dangerous conditions (see also the section Annual Leave on page 5).
Bonus to be paid to an employee will be based on the annual production and business outcomes of an enterprise and the level of performance of the work by the employee.
In practice, bonuses usually take the form of one month's salary. A business must issue regulations on bonus, subject to consultation with the business's executive committee of the trade union.
Vietnam has a social security scheme which provides for allowances in the case of pensions. This scheme is formed from the contribution of the employer and the employee.
Guide to Employment Law in Vietnam 3
Workers' compensation is regulated in the Labour Code. Generally, employees suffering labour accidents or occupational diseases will be entitled to compensation by the employer, the level of which depends on the loss of labour capacity. Vietnam also has a social security scheme that provides for allowances in case of injuries, illness, occupational diseases, maternity leave, allowances for deceased employee's dependants, unemployment and pensions.
The Labour Code and the Law on Social Insurance provide that, in respect to employees who have labour contracts with a term of more than three months, until 2010, an amount equal to 20% of their wages must be contributed to the social insurance fund, and an amount equivalent to 3% of their wages must be contributed to the health insurance fund. The salary used to calculate the social insurance contribution is the salary stated in the labour contract. If such salary is higher than the 20 months minimum salary, then the monthly salary used to calculate the social insurance contribution is equal to the 20 months minimum salary3. The responsibility for these contributions is divided between the employer and the employee. Of the amount equal to
20% of wages that is contributed to the social security fund, employers must contribute
15% (including 3% to the sickness and maternity fund4, 1% to the labour accidents and professional diseases fund, and 11% to the pension and deceased employee's dependants allowances fund5), and employees must contribute 5%6.
In respect of the 3% contribution to the health insurance fund, the employer is responsible for 2%, and the employee is responsible for 1%. This obligation to contribute does not apply to retirees or to employees who have a labour contract with a term of fewer than three months; nevertheless, employers must pay these amounts directly to such employees as assistance to enable them to purchase insurance or use these funds at their discretion.
A female employee is entitled to maternity leave prior to and after the birth of her child for a total period of four to six months, depending on working conditions and the nature of the work. Upon expiry of this period, and upon demand, the employee may agree with the employer on additional leave without pay.
If an employee suffers illness or injury and remains unable to work, he or she is able to take time off for treatment for a maximum period of 12 consecutive months with respect
3 Currently in practice, the minimum salary used to calculate social insurance contribution is the minimum salary of employees working for State owned enterprise and State administrative sectors (VND 450,000, approximately
4 Of the 3% payable to the sickness and maternity fund, the employer retains 2% to pay the…