The Children Today, Tomorrow the World
Baby. Khánh Minh
The New Labor Code introduces many changes to the current Labor Code, in particular concerning labor
subleasing, a 6-month maternity leave period, a two-year work permit term, revised working and rest times, and a
new role for upper-level labor unions in enterprises without grass-root unions.
The new Labour Code (“Labour Code 2012”) shall be effective from 1 May 2013, replacing the old  Labour Code
dated 23 June 1994, Law amending, and adding to, certain articles of the Labour Code dated 02 April 2002; Law
amending, and adding to Chapter XIV of Labour Code dated 29 November 2006; Law amending, and adding to
Article 73 of Labour Code dated 02 April 2007 (“old Labour Codes”).

In line with the developments and demands of the employment market and various changes in society over many
decades and which provisions of the Old Labour Codes failed to govern, the Labour Code 2012, succeeds in
modifying key existing provisions of Old Labour Codes on employment relationships ‐ a complicated area where
disputes regularly and constantly occur due to apparent conflicts of interest of relevant parties. For the first time,
this revised Code introduces new provisions to govern manpower outsourcing services, industrial labour collective
agreements and housemaids employment.

Information on these changes is provided below.

Longer Maternity Leave

The New Labor Code provides that female employees are entitled to six months of maternity leave, regardless of
their working condition. The current Labor Code provides for only four months maternity leave, including prenatal
and postnatal period, for most female employees, except for certain limited cases in which female employees can
enjoy five or six months leave.

The New Labor Code also provides that a female employee may return to work prior to the expiry of her maternity
leave only if she has had at least four months' rest after birth. Early return under the current Labor Code is
permissible after two months' rest after birth.
Work Permit Regulations.

The New Labor Code introduces some major changes to the current regulations on work permits. Specifically,
while the current law allows for a maximum term of three years, the New Labor Code only limits that term to a
maximum of two years. In addition, there are fewer exemptions from work permit requirements in the New Labor
Code. Indeed, while the current regulations allow work permit exemptions for any foreign national working in
Vietnam for a term of less than three months, the New Labor Code no longer allows these exemptions.

Labor Subleasing

The New Labor Code introduces the concept of labor subleasing, which is defined as the situation when an
employee employed by  an enterprise licensed to provide outsourcing services works for another employer and
subject to the latter's management while the labor relation with the outsourcing service provider is maintained. The
maximum term of a sublease is twelve months.

An enterprise wishing to engage in labor subleasing activities must (i) have a license issued by the State authority
to provide labour subleasing services; and (ii) meet a minimum funding requirement. Also, the contract for labor-
subleasing must be done in a written form, and the labor subleasor much enter into a labor contract with the
employees before subleasing them to the labor subleasee. The labor subleasor also has to pay salary to the
employees, and ensure that the salary of the employees is no less than the salary of an employee of the labor
subleasee who is of the same level or doing similar work. Furthermore, the labor subleasor is also responsible for
imposing disciplinary measures on the employees in the event that the labor subleasee returns the employees for
their violations of the work regulations of the labor subleasee.

The labor subleasee must not discriminate between the employees and its own employees. It further cannot
sublease the employees to another entity. In addition, the labor subleasee can return the employees to the labor
subleasor if the employees do not meet the requirements as agreed between the labor subleasor and labor
subleasee. The labor subleasee is also responsible for providing evidence of violations of the employees in the event
that it wishes to return the employees to the labor subleasor so that the latter can impose disciplinary measures on
the employees.

Work Time, Rest Time, and Overtime

The New Labor Code provides additional restrictions on the working time of employees. Similar to the current
regulations, the New Labor Code provides that the normal working time may not exceed eight hours a day or 48
hours a week. However, it further specifies that working time cannot exceed ten hours a day in case the employer
schedules the company's work time on a weekly instead of a daily basis.

Regarding rest time, one major change in the New Labor Code is that for Lunar New Year, employees can have
five days leave instead of only four days as provided under the old regulations.

Regarding overtime work, while the current regulations require consent of employees in all cases of working
overtime, the New Labor Code provides for some exceptions to this rule. Specifically, under the New Labor Code,
the employer must obtain consent from employees to work overtime, except (i) if the country is in a period of war
or the President announces a national emergency situation; and (ii) to prevent or remedy/limit the loss of lives and
assets, or coming dangers in emergency situations, such as serious accidents, fires, floods, storms, earthquakes,
epidemics or other disasters.

Furthermore, while the current regulations provide that overtime hours must not exceed 50% of official working
hours in a day or 200 hours per year (in some special limited cases, not exceeding 300 hours), the New Labor
Code has added that overtime hours must not exceed 30 hours a month.

Another new point in the New Labor Code is the payment for employees for overtime hours. Specifically, if an
employee works overtime at night, in addition to payments provided under current regulations, that is, (i) the
normal overtime rate (150-300% of the current salary rate, depending on whether overtime hours are on
weekdays, weekends, or public holidays or fully paid leave days) and (ii) the additional payment for work
performed at night (at least 30% of the salary earned for day-work), the employer needs to pay the employees
additional compensation of 20% of the salary earned for day-work.

Probation

The statutory probationary period under the Labour Code 2012 is unchanged, except for further clarifications on
qualification as follows:

Probationary period for positions requiring technical qualifications/college degrees or upper
education/training levels must not exceed 60 days.

Probationary period for positions requiring technical training qualifications from vocational schools;
technical worker positions or technical staff must not exceed 30 days; and

Probationary period must not exceed 6 days for cases not mentioned above.

Wage/salary paid to employees during the probationary period must be at least 85% (which is 15% higher
than this under provisions of the Old Labour Codes) of the total base salary paid for that position.

Unlike the Old Labour Codes which provide that probation requirements/agreement would be covered and be a part
of an employment contract, the Labour Code 2012 stipulates that, when required/agreed on the probationary
period, the employer and employee may enter into a separate probationary contract. When the probation is ended
successfully as agreed, the employer must officially enter into an employment contract with employee.

Laobour contracts

An employment contract is generally classified based on its term and are retained under one of the three categories
of employment contract as previously, including (i) indefinite term employment contract; (ii) definite term
employment contract with a term of between 12 months and 36 months; and (iii) casual employment contract with
a term of less than 12 months.

However, unlike Old  Labour Codes which state that an existing definite employment contract shall automatically
become an indefinite one if, within 30 days from the date of its expiry, a casual employee keeps working without
entering into a new contract with employer, the Labour Code 2012 provides, in this case, the existing definite
employment contract shall become (i) a definite term employment contract of 24 months in case of expiry of a
casual employment contract, and (ii) an indefinite term employment contract in case of expiry of a definite term
employment contract with a term of between 12 months and 36 months.

Further clarification of particular terms and provisions to be presented in an employment contract are also available
under the Labour Code 2012.

Interestingly, though having been utilized in practice as a common contractual technique, the Labour Code 2012
further clarifies, for the first time, an addendum of an employment contract shall constitute an integral part of that
contract. An addendum which amends an existing employment contract needs to clearly indicate content of
amended provisions and effective date of the amendments. Provisions of the existing employment shall, however,
prevail in case of contradiction/confusion between an addendum and the main employment contract.

The Labour Code 2012 provides that, when an employee does work which is directly related to business or
technological secrets as defined by law, the employer has the right to a written agreement with such employee on
contents and terms of confidentiality of business secrets and of technology, of interests or benefits and on
payment of compensation if the employee breaches such agreement. However, as with the Old Labour Codes, the
Labour Code 2012 protects the right to employment of an employee by confirming that an employee shall not be
restricted from entering into employment contracts/relationships with more than one employer provided that he/she
is capable of performing his/her obligations under those contracts.

The labour contracts must include the following:

•        The work to be performed;

•        Hours to be worked and hours to rest;

•        Salary/wages;

•        Work location;

•        Contract duration;

•        Occupational safety and hygiene conditions;

•        Employee insurance;

All contracts for 3 or more months require that both employer and employee contribute to a social insurance fund.  
This fund helps pays for sick leave, maternity leave, work accidents/diseases, and pensions.;

Employers are not permitted to keep any identification cards and qualifications of employees when performing and
signing labor contracts.

Types of labor contracts in Vietnam include:

•        Indefinite-Term;

•        Fixed-Term- lasting 12 to 36 months;

•        Contract for specific or seasonal job- lasting fewer than 12 months;

All non-Vietnamese citizens must obtain a work permit to work in Vietnam;

For work that can be hazardous, it is illegal for an employer to hire females, pregnant women, children and
employees of a certain age.

The minimum working age is 15.

During a probationary period, no less than 85% of the full salary must be paid to the employee.

If the position in question exposes the employee to business/technology secrets, then the employer is allowed to
require the worker to sign an agreement on confidentially and nondisclosure.  The employee would be liable for
breaching this agreement and, if stipulated, could be responsible for paying compensation.

Employers must make sure that the contract is written in Vietnamese or both Vietnamese and a foreign language.

Part‐time employment

The Labour Code 2012 recognizes the reality of part‐time work demands and existence which stipulates that
employees may agree with employer for part‐time work. A part-time employee should not be discriminated against
(from full time employees) and should enjoy employment interests and work safety similar to these offered to full‐
time employees.

Utilization of existing employees in cases of a merger, consolidation, division or separation of an
enterprise

The Considerable difference provided under the Labour Code 2012 is that in cases of transferring of ownership or
right to use assets, the former employer (the seller) must establish a plan of utilization of existing employees, not
the succeeding employer (the buyer) as provided under the Old  Labour Codes. In cases where existing employees
of the former employer become redundant due to the such circumstances, it is the former employer’s
responsibility (again, not the succeeding employer as under Old Labour Codes) to pay retrenchment allowances (if
any) to those who become unemployed.

Manpower outsourcing services

Manpower outsourcing is becoming routine for many companies in the working world. Particularly, with the
ongoing fluctuation of economy and business strategies, the corporate mindset is shifting its focus from
permanent hiring to temp by outsourcing its workforce. Manpower outsourcing services therefore have
advantages and cost efficiency for businesses in various aspects.

In practice the service of outsourcing manpower has been in existence over recent years in Vietnam. However,
there was almost no legal basis in terms of an employment relationship for this service until the issuance of the
Labour Code 2012. Under the Labour Code 2012, manpower services are conditional businesses which are subject
to certain restrictions (i.e. manpower services are only allowed in certain sectors). In addition, the manpower
service providers must pay a deposit as a guarantee and obtain a license for providing manpower outsourcing
services. The term of a manpower outsourcing contract (the time period of assigning staff from manpower
providers to work for their client) should not exceed 12 months.

Social insurance and flexibility in retirement age

the Labour Code 2012 is in favour of employees by encouraging employer and employees to offer and participate
in other employment insurance schemes for the interest of employees, in addition to the compulsory statutory
social insurance system.

More importantly, in terms of retirement, though reiterating that standard retirement ages are till 60 for male
employee and 55 for female employees, the Labour Code 2012 empowers the retirement age for senior personnel
positions to be 5 years longer than the standard retirement age.

Restriction on recruitment of expatriate employees

Provisions of the Labour Code 2012 on recruiting expatriate employees demonstrate that the Vietnam government
and its labour authorities are providing more scrutiny on restricting expatriate employees from working in Vietnam.
Accordingly, additional requirements for employers who wish to recruit foreign employees under the Labour Code
2012, in comparison with the old labour regulations, are that such employers must explain the necessity of
recruiting foreign employees with and obtain approval from competent labour authorities before hiring foreign
employees.

In addition, the Labour Code 2012 also shortens the term of a work permit for foreign employees to 24 months,
instead of 36 months as under the old labour regulations. Those (expatriates) who come to work in Vietnam for
less than 3 months are no longer entitled to work permit exemption, except for cases of treatment/resolving of
complicated technical issues.

Discussion in the workplace

Discussion in the work place is aimed at sharing information and enhancing mutual understanding between
employers and employees to ensure a good employment relationship in the work place. Discussion in the
workplace shall include certain main matters as set out in the New Labor Code and shall take place once every
three months or at the request of the employer or the employees. The employer must arrange venues and other
material conditions to ensure that the discussion can take place in the workplace.

Labor discipline

Employers must create a list of the internal labor rules (ILRs) and register it with the local labor authority.
When registering the ILRs, the law requires that documents also contain a statement of opinion from an employee
representative (labor collective).

There are certain disciplinary measures legally applicable in Vietnam.  These include: (1) Reprimand,(2) postponing
an expected wage increase by no more than six months or transfer to another position with the lower wage for
maximum period of six months; Removal from position or donation, (3) Dismissal.

Collective bargaining

The new provisions of the Labour Code 2012 set out the principles of bargaining, representatives to the bargaining
and the contents and the procedures of bargaining. The bargaining request can be initiated by the employer or the
employees, and within seven days from the date of receipt of the request, the other party must accept and propose
a timeline to start the bargaining. Any refusal or delay to start the bargaining by one party may allow the other
party to initiate the procedures of a labor dispute settlement.

Industry collective labor agreement (herein after referred as “ICLA”)

A new feature of the Labour Code 2012 is the ICLA (stupulated in Article 87 of Labour Code). The ICLA shall
replace the enterprise CLA. Specifically, if the rights, obligations and legal interests of the employees provided in
the enterprise CLA or any other regulations of the employer are less favorable than those offered by the ICLA, the
enterprise CLA must be amended accordingly within three months from the date when the ICLA takes effect. An
ICLA has a duration of from one to three years. The chairman of the industry trade union, on behalf of the
collective labor, and the representative of the organization representing employers, shall be the representatives
competent to sign an ICLA.

Statute of limitation for filing a labour dispute is reduced

Unlike Old Labour Codes which states that the statute of limitations for filing an individual labour dispute is from 6
months to 3 years, the Labour Code 2012 reduces this timeline to from 6 months to 1 year, depending on
particular circumstances, from the date the interest/benefits of relevant party are deemed to be harmed.

Additional Causes for Dismissal as a Disciplinary Measure

The current regulations provide a list of limited cases that are subject to dismissal as a disciplinary measure,
including (i) theft, embezzlement, disclosure of business or technology secrets, or other conduct which may cause
serious damage to the assets or to the interest of the enterprise; (ii) re-commit an offence during the period when
he/she is disciplined by extension of the period for wage increase or transfer to another position; or re-commit an
offence after he/she is disciplined in the form of removal from office; and (iii) where an employee takes an
aggregate of five days off in one month or an aggregate of 20 days off in one year without legitimate reasons.
Under the New Labor Code, the above list is extended to some further breaches: assault causing injuries, using
drugs during working time, infringing IP rights of employers, or other breaches possibly causing serious material
damages to employers' interests or assets.

New Role for Upper-Level Labor Unions in Enterprises without Grass-root Unions

Under both current regulations and the New Labor Code, consultation/participation of the trade union is required in
several cases (e.g., consultation on bonus regulations, salary scheme, etc.).

Current regulations impose a clear separation between the standing committee of a trade union at the grassroots
level and the standing committee of an immediate upper level trade union of the grassroots level trade union.
Accordingly, if a company does not have a trade union, the employer may skip the consultation/participation
procedures above, or may have to ask the opinion of the whole labor collective. Under the New Labor Code, on
the other hand, when a company has no trade union, consultation with the immediate upper level trade union will
be required.

                                                                                                               
                        7/2013