Back in November 2019, the National Assembly of Vietnam issued a new version of the employment code, which serves as the principal legislation on employment relationships in Vietnam. Said code covers all employment relationships including domestic and foreign employers and employees. Said changes are not sweeping in nature, instead are incremental, and generally aimed to close loopholes and clarify vague provisions in the existing 2012 employment code. The new employment code will take effect on 1 January 2021.
Extension of Protected Subjects
The new employment code protects not only employees working under an employment contract, but also de facto employees working under agreements such as service contracts. It clarifies that any contract that contains information on a certain party’s paid work and other party’s management will immediately be considered an employment contract. This is to ensure no abuse occurs, where employers attempt to circumvent requirements such as contributions to statutory insurance and limitations on work hours.
More Flexibility in Employment Contracts
As long as they comply with electronic transaction laws, the new employment code fully recognises employment contracts signed electronically. Oral contracts with terms of less than one month are also permitted, but written contracts are still required for groups of workers, minors under 15 years of age, and domestic workers.
Another significant development with regards to foreign employees, elderly employees, and officers of employee representative organisations, is that their definite-term contracts can be renewed more than once.
Increase in Retirement Age
The retirement age in normal working conditions are being increased to 60 for women and 62 for men. These changes are being phased in gradually until the new limits are reached by 2035 for women and 2028 for men. An employee’s attainment of the retirement age has been added as a valid reason for unilateral termination of the employment contract for both the employee and the employer.
This increase to retirement age is in response to a shrinking workforce. As Vietnam develops further, more and more young workers are focusing on their careers instead of family raising. As such, skilled talent is leaving the employment pool and not enough new talent is entering it.
Protection From Discrimination and Harassment
Sexual harassment has been more clearly clarified in the new employment code and is strictly prohibited. Prohibited forms of employment discrimination are also defined in more detail. Employees will be protected from discrimination or exclusion. Additionally, female employees are no longer prohibited from doing certain jobs, such as underground mining work. The new code also grants additional protections against abuses such as forced employment and debt bondage, as well as including clearer rules for employment of minors.
Employees are given the right to join or form representative organisations independent of the trade union under the new code. This is being done with the intent to boost employee representation and to protect their rights and interests in employment relations. The new code encourages dialogue and collective bargaining between the employer on one side and the employees and their representative organisations on the other.
Several new provisions are also benefiting the employer. For one, they will have greater rights to self-determination in setting their own wage scales and salary structures, and dispute settlement will also become more flexible. Also, when work must be suspended for reasons of force majeure, the employer will only be required to pay employees the statutory minimum wage for the first 14 working days of the suspension, instead of the entire duration as currently required. After 14 days, salary can be paid at a lower amount, subject to negotiation between the parties.
Employers will have roughly one year to review and adjust their employment contract templates, internal regulations, and HR policies in compliance to the new code. Early adoption and planning will assist in preventing difficulties down the road.