New Labour Code № 10/2012/QH13 – the important and key regulations governing employment relationship has finally been issued on 18 June 2012, after several years of preparation and publicly divergent discussions on changes and improvements to be covered in this code.
The new Labour Code (“Labour Code 2012”) shall be effective from 1 May 2013, replacing the current Labour Code dated 23 June 1994, Law amending, and adding to, certain articles of the Labour Code dated 02 April 2002; Law amending, and adding to Chapter XIV of Labour Code dated 29 November 2006; Law amending, and adding to Article 73 of Labour Code dated 02 April 2007 (“Current Labour Codes”).
In line with the developments and demands of the employment market and various changes in society over many decades and which provisions of the Current Labour Codes failed to govern, the Labour Code 2012, succeeds in modifying key existing provisions of Current Labour Codes on employment relationships ‐ a complicated area where disputes regularly and constantly occur due to apparent conflicts of interest of relevant parties. For the first time, this revised Code introduces new provisions to govern manpower outsourcing services, industrial labour collective agreements and housemaids employment.
Particular key changes are discussed below.
The statutory probationary period under the Labour Code 2012 is unchanged, except for further clarifications on qualification as follows:
- Probationary period for positions requiring technical qualifications/college degrees or upper education/training levels must not exceed 60 days.
- Probationary period for positions requiring technical training qualifications from vocational schools; technical worker positions or technical staff must not exceed 30 days; and
- Probationary period must not exceed 6 days for cases not mentioned above.
Wage/salary paid to employees during the probationary period must be at least 85% (which is 15% higher than this under provisions of the Current Labour Codes) of the total base salary paid for that position.
Unlike the Current Labour Codes which provide that probation requirements/agreement would be covered and be a part of an employment contract, the Labour Code 2012 stipulates that, when required/agreed on the probationary period, the employer and employee may enter into a separate probationary contract. When the probation is ended successfully as agreed, the employer must officially enter into an employment contract with employee.
Similar to Current Labour Codes, under the Labour Code 2012, an employment contract is generally classified based on its term and are retained under one of the three categories of employment contract as previously, including (i) indefinite term employment contract; (ii) definite term employment contract with a term of between 12 months and 36 months; and (iii) casual employment contract with a term of less than 12 months.
However, unlike Current Labour Codes which state that an existing definite employment contract shall automatically become an indefinite one if, within 30 days from the date of its expiry, a casual employee keeps working without entering into a new contract with employer, the Labour Code 2012 provides, in this case, the existing definite employment contract shall become (i) a definite term employment contract of 24 months in case of expiry of a casual employment contract, and (ii) an indefinite term employment contract in case of expiry of a definite term employment contract with a term of between 12 months and 36 months.
Further clarification of particular terms and provisions to be presented in an employment contract are also available under the Labour Code 2012.
Interestingly, though having been utilized in practice as a common contractual technique, the Labour Code 2012 further clarifies, for the first time, an addendum of an employment contract shall constitute an integral part of that contract. An addendum which amends an existing employment contract needs to clearly indicate content of amended provisions and effective date of the amendments. Provisions of the existing employment shall, however, prevail in case of contradiction/confusion between an addendum and the main employment contract.
The Labour Code 2012 provides that, when an employee does work which is directly related to business or technological secrets as defined by law, the employer has the right to a written agreement with such employee on contents and terms of confidentiality of business secrets and of technology, of interests or benefits and on payment of compensation if the employee breaches such agreement. However, as with the Current Labour Codes, the Labour Code 2012 protects the right to employment of an employee by confirming that an employee shall not be restricted from entering into employment contracts/relationships with more than one employer provided that he/she is capable of performing his/her obligations under those contracts.
The Labour Code 2012 recognizes the reality of part‐time work demands and existence which stipulates that employees may agree with employer for part‐time work. A part-time employee should not be discriminated against (from full time employees) and should enjoy employment interests and work safety similar to these offered to full‐time employees.
Unilateral termination of employment contract
Generally, there are not many differences in terms of circumstances, conditions and advance notice required for an employee in case of unilateral termination of an employment contract under the Labour Code 2012 in comparison with the Current Labour Codes
An employee has additional reasons/circumstances provided by the Labour Code 2012 to unilaterally terminate the employment contract if he/she subject to sexual harassment.
From an employer’s perspective, one significant change would be the elimination of obtaining consent from the executive committee of the trade union at the company and reporting to local labour authorities in case of unilateral termination of an employment contract decided by an employer except from termination of employment contracts of employees who are trade union officers.
The employer is also permitted to apply this form of dismissal in the additional case of an employee committing an act of gambling, deliberate violence causing injury, uses drugs at the workplace according to the Labour Code 2012.
Utilization of existing employees in cases of a merger, consolidation, division or separation of an enterprise
The Considerable difference provided under the Labour Code 2012 is that in cases of transferring of ownership or right to use assets, the former employer (the seller) must establish a plan of utilization of existing employees, not the succeeding employer (the buyer) as provided under the Current Labour Codes. In cases where existing employees of the former employer become redundant due to the such circumstances, it is the former employer’s responsibility (again, not the succeeding employer as under Current Labour Codes) to pay retrenchment allowances (if any) to those who become unemployed.
The length of maternity leave prolonged to 6 months
The maternity leave period is increased to 6 months (from the current 4 months). In addition to this 6 months’ statutory leave, female employees may seek the employer’s approval for further unpaid leave.
On the other hand, female employees on maternity leave may come to work earlier than 6 months of statutory leave if they have rested for at least 4 months.
Those who are still on maternity leave when the Labour Code 2012 became effective (though they started their maternity leave before May 2013) shall be entitled to apply for the mat
ernity leave provisions of the Labour Code 2012.
Additional days of public holiday provided
The fact that annual public holidays under Vietnam Labour regulations are significantly less than surrounding countries in the region convinced policy makers to allow one more day of leave to the current Tet holiday. Accordingly, Tet holiday from the year 2014 is 5 days (instead of 4 days under the Current Labour Codes).
In addition, expatriate employees shall be entitled to leave on the day of their home country’s National Day.
Manpower outsourcing services
Manpower outsourcing is becoming routine for many companies in the working world. Particularly, with the ongoing fluctuation of economy and business strategies, the corporate mindset is shifting its focus from permanent hiring to temp by outsourcing its workforce. Manpower outsourcing services therefore have advantages and cost efficiency for businesses in various aspects.
In practice the service of outsourcing manpower has been in existence over recent years in Vietnam. However, there was almost no legal basis in terms of an employment relationship for this service until the issuance of the Labour Code 2012. Under the Labour Code 2012, manpower services are conditional businesses which are subject to certain restrictions (i.e. manpower services are only allowed in certain sectors). In addition, the manpower service providers must pay a deposit as a guarantee and obtain a license for providing manpower outsourcing services. The term of a manpower outsourcing contract (the time period of assigning staff from manpower providers to work for their client) should not exceed 12 months.
Social insurance and flexibility in retirement age
As with the Current Labour Codes, the Labour Code 2012 is in favour of employees by encouraging employer and employees to offer and participate in other employment insurance schemes for the interest of employees, in addition to the compulsory statutory social insurance system.
More importantly, in terms of retirement, though reiterating that standard retirement ages are till 60 for male employee and 55 for female employees, the Labour Code 2012 empowers the retirement age for senior personnel positions to be 5 years longer than the standard retirement age.
More restriction on recruitment of expatriate employees
Provisions of the Labour Code 2012 on recruiting expatriate employees demonstrate that the Vietnam government and its labour authorities are providing more scrutiny on restricting expatriate employees from working in Vietnam. Accordingly, additional requirements for employers who wish to recruit foreign employees under the Labour Code 2012, in comparison with the current labour regulations, are that such employers must explain the necessity of recruiting foreign employees with and obtain approval from competent labour authorities before hiring foreign employees.
In addition, the Labour Code 2012 also shortens the term of a work permit for foreign employees to 24 months, instead of 36 months as under the current labour regulations. Those (expatriates) who come to work in Vietnam for less than 3 months are no longer entitled to work permit exemption, except for cases of treatment/resolving of complicated technical issues.
Discussion in the workplace
Discussion in the work place is aimed at sharing information and enhancing mutual understanding between employers and employees to ensure a good employment relationship in the work place. Discussion in the workplace shall include certain main matters as set out in the New Labor Code and shall take place once every three months or at the request of the employer or the employees. The employer must arrange venues and other material conditions to ensure that the discussion can take place in the workplace.
The new provisions of the Labour Code 2012 set out the principles of bargaining, representatives to the bargaining and the contents and the procedures of bargaining. The bargaining request can be initiated by the employer or the employees, and within seven days from the date of receipt of the request, the other party must accept and propose a timeline to start the bargaining. Any refusal or delay to start the bargaining by one party may allow the other party to initiate the procedures of a labor dispute settlement.
Industry-level collective labor agreement (“ICLA”)
A new feature of the Labour Code 2012 is the ICLA. The ICLA shall replace the enterprise CLA. Specifically, if the rights, obligations and legal interests of the employees provided in the enterprise CLA or any other regulations of the employer are less favorable than those offered by the ICLA, the enterprise CLA must be amended accordingly within three months from the date when the ICLA takes effect. An ICLA has a duration of from one to three years. The chairman of the industry trade union, on behalf of the collective labor, and the representative of the organization representing employers, shall be the representatives competent to sign an ICLA.
Statute of limitation for filing a labour dispute is reduced
Unlike Current Labour Codes which states that the statute of limitations for filing an individual labour dispute is from 6 months to 3 years, the Labour Code 2012 reduces this timeline to from 6 months to 1 year, depending on particular circumstances, from the date the interest/benefits of relevant party are deemed to be harmed.
Tran Thanh Nguyen
Phan Thi Lieu
Senior Tax Manager
For any questions in respect of the Labour Code and other Vietnam labour matters, please contact:
Ha Thuc Minh Trang