Regional Legal Update on Labor and Employment Law Issues
DFDL’s Employment Practice Group is dedicated to advising clients on employment and labor issues and preparing human resources documentation compliant with local law. Our employment team’s in-depth knowledge of the law and practices in the countries in which we operate allows us to provide specialized, practical advice on issues that arise in employment relationships. Head of our Regional Employment Practice Group is Danyel Thomson, who now based in Bangkok, has been with DFDL for ten years and has worked in our Laos and Myanmar offices. This legal update serves to advise you on important legislation and employment issues in the region.
Cambodia
Recent Developments Concerning the National Social Security Fund
Summary
2016 and 2017 saw significant developments with respect to social security. In recent months, the Ministry of Labor and Vocational Training (“MLVT”), Ministry of Economy and Finance (“MEF”) and Ministry of Health (“MOH”) have issued various ministerial regulations (Prakas) concerning implementation of the health care insurance scheme, one of the three pillars covered by the National Social Security Fund (“NSSF”). These include:
- Prakas 404 on the Implementation of Health Care Scheme for Informal Workers and Provision of Additional Allowance for Female Workers Giving Birth issued by the MLVT, MEF and MOH on 11 October 2017 (“Prakas 404”);
- Prakas 448 on the Registration of Enterprises and Their Employees with the NSSF for Persons Governed under the Labor Law issued by the MLVT on 10 November 2017 (“Prakas 448”); and
- Prakas 449 on the Determination of Rates, Forms and Procedures to Contribute to the NSSF for the Occupational Risk Scheme and Health Care Scheme issued by the MLVT on 10 November 2017 (“Prakas 449”).
Details
Prakas 404 extends the health care scheme through a health equity fund for informal workers and provides additional allowances for both formal and informal female workers upon the birth of a child. These benefits are funded through the State budget and will be implemented from 1 January 2018. For the purposes of this Prakas, ‘informal workers’ are those who have entered into an employment contract to work for a period not exceeding eight hours per week and casual workers. The ‘health equity fund system’ refers to a funding mechanism for social health protection provided to a targeted group of citizens, allowing them to benefit from free health care at local public health centers funded by the Government. Based on this Prakas, employers (including labor contractors) must register their employees with the NSSF regardless of whether they are regular or casual workers. In order for female employees to receive the additional childbirth allowance, they must report the pregnancy to the NSSF within three months prior to the birth of the child, or within one month at the very latest.
Prakas 448 requires enterprises employing one or more employees to register the enterprise and their employees with the NSSF. This amends the previous requirement which only applied to enterprises with eight or more employees. Enterprises that are already in operation but are yet to register with the NSSF must now do so by 31 December 2017. Those enterprises established after issuance of Prakas 448 must register with the NSSF within 30 days of commencing commercial operations. Enterprises that have already registered with the NSSF for the occupational risk and health care schemes are not required to re-register with the NSSF. Additionally, enterprises must register their employees with the NSSF no more than three days after the commencement of their employment. However, this does not include employees already in possession of a valid NSSF membership card.
Prakas 449 requires all enterprises to contribute required payments to the NSSF within 30 days from the date of obtaining the certificate from the NSSF. Employers must make monthly contributions to both the occupational risk scheme and health care scheme no later than the 15th day of the following month. Once registered, each enterprise must pay monthly contributions to the NSSF based on the employees’ salary ranging from USD 0.40 to USD 2.4 per employee for the occupational risk scheme and between USD 1.30 to USD 7.80 per employee for the health care scheme.
Comment
Overall, these new developments in social security greatly increase the responsibility of companies, while providing more benefits to employees. In light of these on-going developments, it is recommended that companies observe and strictly comply with the recent regulations and in particular, fulfill all registration requirements within the prescribed timeline, being 31 December 2017. The NSSF pension scheme has yet to be implemented, although it is being assessed closely by the NSSF and is expected to enter into force in coming years.
Lao PDR
Employee Retirement
Considerations in Implementing an Internal Retirement Policy
Our Quarter 3 update provided general information on employer obligations to retiring employees. Here, we offer a closer look at the payment obligations to retiring employees, including verbal feedback to our queries on the topic from the local labor authorities.
Retirement Age and Mandatory Retirement
Article 72 of the Law on Labor (No. 06/NA, 27 December 2006) (“Labor Law”) Labor Law sets the age of retirement at 60 years for males and 55 for females, who have worked for at least 15 years (with reductions to 55 and 50, respectively, if they have worked continuously for five years or more with poisonous materials). Employees who do not meet the full requirements (age and working years) under Article 72 are entitled to a lump sum allowance equal to 1.5 months of the “average salary or wages over the final six months multiplied by the total years worked” (Art. 74) (“Retirement Benefit”).
Based on our interpretation and from discussions with the relevant authorities, the retirement age under Lao law qualifies an employee for a pension under the National Social Security Fund (“NSSF”) or collection of Retirement Benefit under the Labor Law, however, it is not a mandatory retirement age. Thus, whether mandatory retirement is distinguishable from redundancy is questionable. On the other hand, an employee who voluntarily agrees to retire upon reaching an internally established retirement age based on the Lao law pensionable age is entitled to the Retirement Benefit.
For guidance on these issues, we contacted the labor authorities in regard to the Ministry of Labor and Social Welfare’s (MLSW) view on mandatory retirement. Per the verbal response from the official with whom we spoke, an employer can effect a mandatory retirement, provided that the conditions of the retirement otherwise comply with the Labor Law and Social Security Law (No. 34/NA, 26 July 2013) (“Social Security Law”). The employer would then pay out the Retirement Benefit to which the employee is entitled under the Labor Law (Art. 74) and would not be liable to make severance payment.
Based on discussions with the labor official, mandatory retirement can only be imposed on employees who are at least 60 years of age – regardless of whether the employee is female or male. Given the lack of a legal basis for this restriction on female retirement, and for mandatory retirement, questions remain as to whether an employer can impose mandatory retirement or a “natural expiration” of contracts at retirement age. An employee who continues to work past retirement age will be entitled to the Retirement Benefit upon actual retirement.
Retirement Benefit/Payout: Lump Sum Allowance per Article 74
The Retirement Benefit referenced as a “lump sum allowance” in the Labor Law, Article 74, is based on the determination by the NSSF as to the average income in Lao PDR over the past 6 months (not the specific employee’s average income over the past 6 months) multiplied by the total years the employee worked. If the employee is a member of the Social Security Organization but does not qualify for the payout from the NSSF under Article 72 of the Labor Law, the NSSF (not the employer) will be responsible for the lump sum allowance Retirement Benefit set out in Article 74. Otherwise, the employer is responsible for the payment.
Given the lack of framework on retirement in the law, it is advisable for every entity to include a clear retirement policy within its internal regulations.
Myanmar
Standard Employment Contract 2017: Annexes for Misconduct and Disciplinary Action
The Ministry of Labor, Immigration and Population releases new template contract
As mentioned in our Quarter 3 update, on 28 August 2017, the Ministry issued Notification 140/2017 together with a revised Standard Employment Contract (“SEC 2017”) which repeals and replaces the SEC 2015. Entities with more than five employees must use the SEC 2017 and register the executed contracts with the Labor Office in the relevant township.
As noted in our previous update, employers must include the terms and conditions which they expect employees to abide by in annexes, including the responding disciplinary action to be taken in the event of any misconduct, i.e.: Annex (A): minor offences and employer’s responsive actions; and Annex (B): serious offences and employer’s responsive action. Per the SEC 2017, the “Ethical Code” issued in the Industrial Zone can be referenced as a sample, and can be amended in accordance with the nature of the work in a particular workplace.
Every workplace will require appropriate rules depending on the nature of the business activities, organizational requirements, and unique characteristics related to the working environment. In any event, the significance of the Annexes to the SEC 2017 are that they comprise an important element of setting expectations for employees, which is a crucial basis for a mutually beneficial employment relationship. At the outset of the employment relationship, employees will understand which actions/inaction on their part will lead to the employer’s right to respond with disciplinary action set out in the Annexes which form part of the employment agreement.
Examples of misconduct that may be included in Annex A are:
- Punctuality;
- ID, Uniforms;
- Fulfilling duties/assignments;
- Safety – equipment;
- Disruptive behavior;
- Entering restricted areas at work; and
- Destroying/defacing property.
If an employee commits one of the above forms of misconduct, the employer must implement a three-warnings system whereby an employee is first given a verbal warning, and if the misconduct continues, a written warning, then a written warning with a signed undertaking; if the misconduct happens a fourth time, the employer may proceed to terminate the employment agreement without severance pay. Warnings are valid for twelve months.
Examples of serious misconduct that may be included in Annex B are:
- Stealing, misusing, destroying work property;
- Injuring another employee;
- Corruption;
- Alcohol, gambling, drugs;
- Violating confidentiality or IP;
- Criminal arrest or sanctions; and
- Abandonment for three days or five days in a month.
Serious misconduct can result in termination of the employment agreement without severance pay; the employer is not required to give warnings.
Neither of the above lists are the complete lists as set out in the Ethical Code of the Industrial Zone and employers can include more than these. Of utmost importance is that all expectations be made clear within the employment agreement, including the Annexes, and the workplace internal rules to mitigate any risk of misunderstandings and increase the likelihood of a well-functioning employment relationship.
Thailand
The New Work of Aliens Law
On 22 June 2017, a new Emergency Decree on the Work of Aliens B.E. 2560 (A.D. 2017) (“Emergency Decree”) was published in the Royal Gazette. The law effectively came into force on 23 June 2017. The essential elements of the Emergency Decree are to supersede and merge two existing laws, i.e. the Alien Working Act B.E. 2521 (A.D. 1978) and the Emergency Decree on Bringing Alien to Work in the Kingdom B.E. 2559 (A.D. 2016). The legal principles deriving from the older regulations are still enforceable and enshrined in the Emergency Decree.
The key significant amendments are as follows:
- Narrowing the definition of “Work” from “any work involving physical strength or knowledge whether or not done for money or other remuneration” to “any work involving physical strength or knowledge to perform a profession or perform work whether or not done for money or other remuneration”.
- The Minister of Interior, with the approval of the Cabinet, may regulate the area which foreign workers can stay in Thailand, to protect the public for national security reasons (Section 15).
- Significantly increase of the penalty rates in the following circumstances:
KEY AMENDMENT |
NEW EMERGENCY DECREE |
OLD REGULATIONS |
Employing a foreign worker without a work permit or employing a foreigner to work in vocations reserved for Thai nationals |
*A fine from THB 400,000-800,000 per one foreign worker (Section 102) |
A fine from THB 10,000-100,000 per one foreign worker (Section 54) |
Employing a foreign worker differently to the conditions as described in a work permit |
A fine up to THB 400,000 per one foreign worker (Section 123) |
A fine up to THB 10,000 (Section 54) |
Employing a foreign worker who holds a work permit with another employer |
*A fine from THB 400,000-800,000 per one foreign worker (Section 122) |
A fine up to THB 20,000 (Section 52) |
Working differently to the conditions as described in the work permit |
A fine up to THB 100,000 (Section 121) |
A fine up to THB 20,000 (Section 52) |
Working on a necessary and urgent work basis without notifying the Registrar |
*A fine from THB 20,000-100,000 (Section 119) |
A fine up to THB 20,000 (Section 52) |
An employer confiscating a work permit of a foreign worker or essential personal documents |
Imprisonment up to six months or a fine up to THB 100,000, or both (Section 131) |
None |
Terminating the employment agreement of a foreign worker without notifying the Registrar within seven days |
A fine up to THB 100,000 (Section 124) |
None |
Deceiving that he/she can bring a foreigner to work as a domestic employer without a work permit |
A term of imprisonment from three to ten years or a fine from THB 600,000 to 1,000,000, or both (Section 128) |
A term of imprisonment from three to ten years or a fine from THB 60,000 to 200,000, or both (Section 57) |
Operating as a foreigner job agency without the necessary license |
A term of imprisonment from one to three years or a fine from THB 200,000 to 600,000, or both (Section 105) |
A term Imprisonment from one to three years or a fine from THB 20,000 to 60,000, or both (Section 46) |
Employer bringing a foreign worker into the Kingdom without authorization |
A term of imprisonment up to one year or a fine up to THB 200,000 per one foreign worker, or both. (Section 113) |
A term of imprisonment up to one year or a fine up to THB 20,000 per one foreign worker, or both. (Section 45) |
*Due to severe criticism from many employers regarding the sudden implementation of the Emergency Decree, the enforcement of Sections 101, 102, 119, and 122 shall become effective from 1 January 2018.
Vietnam
The end of 2017 marks the introduction of a number of changes to Vietnam’s labor regulations that will impact employers in the coming year.
Vietnam’s regional minimum wage set to increase in 2018
The National Salary Council decided, in August 2017, on an increased minimum wage plan for 2018. This plan has been submitted to the Government for consideration, and before year’s end, a new decree is expected to replace Decree No. 153/2016/ND-CP 14 November 2016 which had been guiding the Regional Minimum Wage for Employees under Labor Contracts.
Based on the National Salary Council’s plan, the regional minimum wage is likely to increase by 6.5%, effective from 1 January 2018:
No |
Minimum wage |
Region |
1 |
VND 3,980,000/person/month |
I (including Hanoi, Ho Chi Minh, Hai Phong, Bien Hoa, ) |
2 |
VND 3,530,000/person/month |
II (including Da Nang, Hue, Can Tho, Nha Trang, Vung Tau and Hoi An) |
3 |
VND 3,090,000/person/month |
III |
4 |
VND 2,760,000/person/month |
IV |
Expanded Scope of Vietnam’s Compulsory Social Insurance Scheme
Two new categories of employee will be added to the scope of Vietnam’s compulsory social insurance scheme, as set out under the Law on Social Insurance No. 58/2014/QH13 of the National Assembly, dated 20 November 2014 (“Law on Social Insurance”). From 1 January 2018, Vietnamese employees working under employment contracts with a term of between one and three months, and foreign employees working in Vietnam under work permits, practice certificates, or practice licenses, will be required to pay into Vietnam’s compulsory social insurance scheme. The social insurance contribution rates for employers and employees are set at 17.5% and 8% respectively.
Changes to Social Insurance Contributions Calculations
Changes have also been made to the method of calculating the monthly social insurance contributions of persons working under employment contracts in Vietnam. The basis for calculating an employee’s social insurance contributions currently includes the employee’s salary plus allowances as stated in his/her employment contract.
From 1 January 2018, the basis for calculating social insurance contributions will include an employee’s salary, plus allowances, plus any other additional amounts stated in the employment contract.
The following chart provides details on the amounts which are to be included and excluded for the purposes of calculating an employee’s social insurance contributions:
Amounts included in social insurance calculation |
Amounts excluded from social insurance calculations |
(i) Salary rate (ii) Salary allowances
(iii) Other additional contractual payments
|
(i) Other benefits, such as:
|
Enhanced criminal liability introduced for unlawful dismissals
An amendment to the Criminal Code of Vietnam which takes effect on 1 January 2018, introduces enhanced criminal liability for unlawful dismissals by employers. Such criminal liability can be imposed in addition to any civil liability that an employer might face under local labor laws.
Under the current Criminal Code, it is an offence for an employer to, “for self-seeking purposes or another private motive, unlawfully force an employee to leave his or her job, causing serious consequences.” An employer can be issued with a warning penalty of up to VND 100 million (approximately USD 4,450), a non-custodial sentence of up to one year, or a period of imprisonment from three months to one year for the offence.
The amended Criminal Code attempts to make the above language clearer in providing that it is an offence to “unlawfully dismiss” an employee, or to “use of force or threats to cause an employee to resign”.
The criminal penalties for an unlawful dismissal have also been amended and will include a fine of up to VND 200 million (approx. USD 8,900) or a term of imprisonment of between one and three years. An individual offender may also be prohibited from holding certain positions in organization if he/she is found guilty of unlawfully dismissing two or more people or a pregnant woman whose pregnancy is known to the offender, or where the offence causes very serious consequences to the dismissed individual, such as suicide.
Given these stringent requirements which will take effect in the new year, it is advisable for all employers to seek legal advice before dismissing an employee or implementing a redundancy plan.
If you seek further information on employment and labor issues in your jurisdiction please contact the Head of our Regional Employment Practice Group, Danyel Thomson.