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Vietnam: New Labor Code approved by National Assembly

Future of Work|Total Rewards

December 3, 2019

The new Labor Code revises provisions on probationary employment, mandatory work rules and notice requirements and will widely impact employers.

Employee action code: Act

The National Assembly has approved a new Labor Code that will replace the existing code in its entirety effective January 1, 2021. Much of the text of the existing code will be retained, but existing provisions on probationary employment, mandatory work rules and notice requirements, and other matters are revised in generally favorable terms for employees. The revised code was first submitted to the National Assembly in 2018 and has since gone through a long public consultation. As a result of certain public and business opposition, some provisions were discarded, although most of the original draft provisions were retained.

Key details

Notable aspects of the new Labor Code include:

  • Normal retirement age (NRA): The NRA for social security benefits will increase from 60 to 62 for men (by 2028), and from 55 to 60 for women (by 2035). Starting in January 2021, the retirement age will gradually increase by three months per year for men and four months per year for women.
  • Employment contracts: Fixed-term and indefinite-term contracts will be the only permitted types of employment contracts. The duration of fixed-term contracts will be set at 36 months or less (the current range is 12 to 36 months). Fixed-task and seasonal contracts will no longer be permitted.
  • Probationary employment: Provisions will be expanded to include a new category of employees: business managers (as defined by the Enterprise Law). Business managers could be subject to probationary periods of up to 180 days (the current maximum is 60 days). If employment continues beyond the probationary period, employment would automatically convert to indefinite-term employment.
  • Renewal of work permits: Permits for foreign workers (which have a maximum term of two years) will be renewable once (currently there is no limit).
  • Overtime: The monthly overtime limit will increase from 30 to 40 hours.
  • Termination: There are additional circumstances under which employment can be terminated by the employer (e.g., when employees reach NRA). Also, for the first time, employees will be able to terminate employment contracts with immediate effect for reasons of mistreatment, pregnancy (on advice of a doctor) and failure of the employer to pay salary on time. Currently, employees are subject to minimum notice requirements in all cases.
  • Equal treatment: Companies will be allowed to employ women in a wider range of professions while continuing to restrict them from specific types of work that may have a negative effect on their ability to conceive or raise a child. Provisions to prevent and combat sexual harassment and to promote gender equality in the workplace will be introduced.
  • Union recognition: Employees will be enabled to establish their own labor unions outside of the Vietnamese General Confederation of Labor, which is currently the only recognized representative organization for workers.
  • Public holiday: Leave for the National Day on September 2 will be extended by an additional day either before or after the holiday.

Employee implications

The new code will impact employers in a variety of ways. Employers should consult with appropriate legal counsel to review their existing policies and standards before the new code comes into force.

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