Labor Code No. 45/2019/QH14 issued by the Constitution of Socialist Republic of Vietnam on November 20, 2019, shall enter into force as of 1st of January 2021. There are some key changes to the new Labor Code in 2019 compared to the Labor Code in 2012 that affect both employers and employees.
A New Labor Code has expanded the definition of “Employee”. An Employee is: (i) works under the agreement with an employer, (ii) works under the management and supervision of the employer, and (iii) gets a salary. Where both Employee and employer have another name not like as “ labor contract”, but the contents of the contract satisfy (ii) and (iii) above, then the contract is indeed a labor contract.
Work time and rest time. A New Labor Code increases the monthly overtime from 30 to 40 hours per employee, and in some cases, an employee can work up to 300 hours of overtime per year. This change is intended to allow manufacturing companies to optimize production targets, reduce manufacturing costs, and face better deal with time constraints.
Retirement Age. A New Labor code increases the retirement age for both males and females.
For male employees: the current retirement age for males is 60 years. From January 1, 2021, the retirement age shall be 60 years with 3 months. Every following year the age increases by 3 months until the retirement age for all male employees reaches 62 years in 2028.
For female employees: the current retirement for females is 55 years. From January 1, 2021, the retirement shall be 55 years with 4 months. Every following the retirement increases 4 months and until reaches 60 years in 2035.
A New Labor Code allows the Employee who works in heavy, hazardous, or dangerous to retire at a younger age, but not more than 5 years earlier than the normal gender retirement age.
Probation. The parties to a labor contract have to sign some probationary agreement or to include a clause on probation on the labor contract. Either party can terminate a probationary agreement without reason, without giving prior notice, and with compensation. The maximum probationary period for a person in a managerial position has been increased from 60 days up to 180 days.
A managerial position is defined under Enterprise law. This regulation is a large increase and insufficient to the capacity of someone in a managerial position.
Labor contracts. There are 2 types of labor contract: a definite term labor contract with a term of 36 months or less, and an indefinite term labor contract. A definite term labor contract no longer be extended by using an appendix. After 2 definite terms of labor contracts, the labor contract automatically becomes an indefinite term contract. However, an indefinite term contract can be signed multiple times without automatic extension to an indefinite term in the following cases: (i) foreign employees; (ii) employees who have reaches retirement age; (ii) members of executive boards of employees, and (iv) directors of the enterprise.
This is the first time the labor e-contract is recognized if executed under the Law on e-transactions. This is to help for the employer can sign a lot of employees there is the large distance between employer and employee.
Termination of the labor contract. A new Labor code provides 2 basic cases for automatic termination of employment of a foreign employee: (i) the foreign employee is expelled from Vietnam by the competent court decision, and his/her work permit expires. Either the employer or an employee can unilaterally termination a labor contract upon the employee reaching retirement age.
Labor discipline. An employer can impose labor discipline only if internal labor rules (ILRs) being registered by competent labor authorities. The ILRs are not required to be registered with the competent labor authority if the company has less than 10 employees under the New Labor Code. If the without registered ILRs, the employer and employee are agreed with together to kind of impose labor discipline.
According to the New Labor Code, ILRs regulate more new contents: (i) sexual harassment in the workplace; (ii) temporary transfer of an employee to a different job as agreed in the labor contract; (iii) adding business secret, technology secret; (iv) adding the procedures for labor discipline and compensation.
Work Permit. The New Labor Code requires the work permit or work permit exemption certificate may be renewed one time only for a maximum term of two years. For renewal, some documents and procedures are waived.
Under the existing Labor Code, holders of a share of a limited liability company or the Chairman or a member of the Board of Directors of a joint-stock company are exempt from a work permit. However, the new Labor code requires “shared value” for a foreigner to be exempt from a work permit. The Government will issue a decree in which such share values will be specified.
This update of law is for your information only and shall not form a binding agreement between the Law Firm and the Client.
Lawyer Nguyen Thi Huong
