International companies hiring employees for their expansion into Vietnam must comply with many layers of complex tax, employment, and social insurance regulations. Failure to comply risks fines, sanctions, and the possibility your staff could be deported, or business operations suspended.
The employer-employee relationship in Vietnam is governed by the Civil Code and Labor Code, which was amended in 2021 to bring in new worker guarantees. Additionally, proposals from the Ministry of Public Security will impose stricter obligations on employers regarding privacy and data protection.
Amendments to the Labor Code stipulated that contract can either be open-ended (indefinite) or fixed term, with no other options allowed, apart from probationary contracts.
When hiring new staff and drawing up their contracts, specific requirements from the Labor Code apply and must be considered. These include:
Generally, a labor contract in Vietnam is effective from the date it is signed, not from when it is lodged with the labor authorities. The Labor Code, as amended in 2019 and coming into force from January 2021, recognizes two types of contracts, plus probationary agreements.
Open-ended, indefinite employment contracts: These are the most common type of contract and are terminated by agreement between the parties or resignation by the employee.
Fixed-term, definite employment contracts: These can be agreed for up to a 36-month period, but only two consecutive contracts are permitted. If employment continues after this the contract automatically becomes indefinite.
Probation or trial period employment contracts: Probationary or trial periods are agreed on a case-by-case basis depending on the type of job and the qualifications or experience of the new employee. The Labor Code allows for probation periods of six, 30, 60 or 180 days as agreed by the contract.
Foreigner employment contracts: These are generally for a maximum of 24 months, due to visa and work permit regulations.
Seasonal employment contracts: There is no specific contract type for seasonal workers as the amended Labor Code eliminated the categories of ‘seasonal or specific employment’ workers. Seasonal, temporary, or part-time workers are now treated as workers on a fixed-term contract, which has no minimum period but must not last longer than 36 months. Workers with these contracts now have the same benefits and entitlements as employees on indefinite contracts.
Collective and trade union agreements: The Vietnam General Confederation of Labor (VGCL) is the only employment group that can represent employee bodies in collective bargaining negotiations or agreements.