This publication is part of our series focusing on workforce management in consideration of the COVID-19 outbreak in Southeast Asian countries.
The Prime Minister Nguyen Xuan Phuc issued Decision No. 447/QD-TTg dated 1 April 2020 (“Decision”) whereby COVID-19 was announced as a national epidemic in Vietnam. This COVID-19 outbreak later declared a global pandemic by the World Health Organization (“WHO”) on 11 March 2020, will severely impact the business operations and workforces of companies which will need to react decisively to the possible consequences of this pandemic.
Due to the fall in demand for products and services, adverse effects on business operations and cash-flow over the course of the coming months, employers must brace themselves and be prepared to make hard decisions to keep their business afloat. Our alert provides lawful considerations below for employers who envisage or need to take action on workforce planning to reduce any adverse impacts on their companies:
1. Annual paid leave
Employees may be requested by their employer to use their paid annual leave entitlement. Indeed, employers may fix the timetable for annual leave after consulting the opinion of its employees. There is no specific advance notice period for employers to announce the dates or duration of annual leave to be taken by their employees. However, employers may encourage their employees to take annual leave at specified periods in the best interests of the enterprise and to protect employment. In light of the COVID-19 situation, transparent explanations should be given to employees on the crucial importance of ensuring full production capacity after the crisis abates, specifically at the end of the year. This would be a prudent first step to build trust and ensure mutual cooperation upon adjusting the annual leave schedule.
2. Unpaid leave
Employers and employees may discuss and agree on unpaid leave in addition to annual paid leave that employees are entitled to under their employment contracts. The length of unpaid leave is a matter to be mutually agreed upon by both parties.
3. Suspension of the performance of labor contracts
Employers and employees may discuss and agree to suspend the performance of labor contracts either at a lower salary or without salary payment during the suspension. Upon expiry of the suspension, employers shall reinstate their employees unless otherwise agreed upon by both parties.
4. Reduction of working days/hours and wages on ceasing work
Employers may propose to reduce their employees’ working hours for lower salary costs. The reduction of working days/hours and by extension, of employees’ salaries, would be deemed as a change of working conditions and only permitted upon mutual agreements between an employer and its employees. The salary during the period of reduced working days/hours would be as agreed by the employers and employees and must not be lower than the regional minimum salary stipulated by the Government. The regional minimum wage applicable to employees working under labor contracts in Hanoi and Ho Chi Minh City in 2020 for example is VND 4,420,000 (approximately USD 190) per month.
5. Unilateral termination of labor contracts by the employer due to force majeure
Employers may unilaterally terminate labor contracts with their employees as a result of COVID-19 being deemed a force majeure event. Upon such unilateral termination of labor contracts, employers must pay severance allowances to the eligible employees and serve their employees with the following prior notice of labor contract termination:
- At least 45 days in the case of an indefinite term labor contract;
- At least 30 days in the case of a definite term contract; or
- At least 3 working days in the case of a seasonal or specific job labor contract with a duration of less than 12 months.
However, employers are not allowed to terminate labor contracts with employees who have suffered an injury due to a work-related accident or contracted an occupational disease, are being treated or nursed on the decision of a competent medical consulting or treating establishment, or who are on annual leave, personal leave of absence or maternity leave, etc.
6. Mutual agreement on termination of labor contracts
Employers and their employees may mutually agree on the termination of labor contracts. Employers must pay their employees the applicable severance allowance and wages associated with other contractual benefits within 7 working days from the date of labor contract termination.
7. Redundancy scheme
If COVID-19 results in an economic crisis or recession whereby two or more employees are in danger of losing their jobs and must be retrenched, employers must formulate and implement a labor utilization plan. Employers may unilaterally terminate labor contracts with their employees only after employers have had discussions with the organization representing the labor collective at the grassroots level and after 30 days’ advance notice is provided to the provincial Department of Labor, Invalids and Social Affairs. In such an event, employers must pay unemployment allowance to the affected employees.
8. MOLISA’s guidance no.1064/LDTBXH-QHLDTL dated 25 March 2020 on certain situations due to COVID-19
The Ministry of Labor, Invalids and Social Affairs (“MOLISA“) issued its guidance to provincial Departments of Labor, Invalids and Social Affairs under Directive No. 1064/LDTBXH-QHLDTL dated 25 March 2020 (“Directive 1064”) regarding wages and benefits for employees during the period of work cessation due to COVID–19. Directive 1064 concerns employees who must cease work due to the direct effects of COVID–19. These are:
- Expatriate employees who have not returned to work at enterprises as requested by the competent authorities;
- Employees who must cease work during the quarantine period at the request of the competent authorities; and
- Employees who must cease work due to the enterprises or certain units of the enterprises being unable to operate because the employers or other employees of such enterprises or units are in quarantine period or have not returned to work.
Wages of such employees during the work cessation period shall be as agreed between the employers and employees but may not be lower than the regional minimum wage.
In respect of enterprises that have difficulties in sourcing material or markets and consequently unable to create enough work for their employees, such employers can temporarily transfer employees to perform other tasks not contemplated under the labor contracts. Also, if the work cessation period is prolonged and affects the liquidity of enterprises, employers and employees may mutually agree to suspend the performance (in whole or in part) of labor contracts. If enterprises must narrow production and reduce the number of jobs, employers may unilaterally terminate labor contracts with their employees (as discussed in item 5) or implement a redundancy scheme (as discussed in item 7) above.
If you have any questions or enquiries with respect to this update or any other issues in relation to the COVID-19 outbreak and its implications for your business, please feel free to contact Hanh Tran (email@example.com) and Thang Huynh (firstname.lastname@example.org).
The information provided here is for information purposes only and is not intended to constitute legal advice. Legal advice should be obtained from qualified legal counsel for all specific situations.
Partner, Vietnam Deputy Managing Director & Head of Ho Chi Minh City Office
Partner & Head of the Hanoi Office