New Labor Code of Vietnam

After an amendment process that went on for four years, the National Assembly of Vietnam finally approved the New Labor Code in November 2019, and it went into effect beginning January 1, 2021.
The New Labor Code of Vietnam has some significant changes that will impact different enterprises and organizations within the country.

Labor Contract
The New Labor Code of Vietnam has made the following changes to the forms, types, and contents of the previous labor code:

  • It acknowledges the validity of e-contracts that follow E-transaction laws and are accepted in the form of data messages
  • There are now two types of labor contracts, including definite term labor contracts with terms of 36-months or below, and indefinite-term labor contracts
  • Directors of state enterprises who have state capital can sign definite term contracts a number of times. These directors must have elderly employees, foreign employees, and a few members from employee representative boards
  • Both the employer and employee are allowed to sign a separate probation agreement. They can also write a probation clause in their contract. Moreover, for managerial positions of enterprises, the probation period can extend up to 180 days

Overtime Cap
The monthly overtime cap has been extended from 30 hours to 40 hours, according to the New Labor Code. Moreover, the new law makes it possible for employers to arrange overtime work for up to 300 hours per year. This is applicable to:

  • The manufacturing department, or for the processing of export items, including electric and electronic gadgets
  • Those employees who are highly technically qualified and are hard to find

Public Holidays
The Vietnamese law has allowed one extra day off on the National Independence Holiday. This can either be on 1 or 3 September. The Prime Minister will decide the schedule for Tet Holidays and National Independence Holidays each year.

Salary Scheme
Even though employers still need to establish salary schemes and take advice from employee representative organizations, these schemes do not require registration anymore, and the labor authorities do not need to be notified.

Work Permit
Generally, in Vietnam, the work permit is limited to two years. However, based on the New Labor Code, work permits can be extended for more than a two-year term.
Expats who wish to work in Vietnam even after their extended work permit has expired will need to apply for a new work permit.

Age of Retirement
The New Labor Code has increased the retirement age for males to 62 and females to 60. Moreover, the law allows those working in hazardous conditions that are dangerous to their health to retire earlier.
However, this may not be more than five years earlier than the normal age of retirement that has been set for previous employees.

It is currently believed that Decrees and Circulars that are part of the current Labor Code of Vietnam will also have to be adjusted. Click here to learn more about hiring and compliance in Vietnam.

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