THE PORTAL FOR FOREIGN DIRECT INVESTMENT IN VIETNAM
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Employment Contract

In Vietnam, employment relationships are governed by contractual agreements entered into between employer and employee. Contracts may take one of the following forms:

• Indefinite-term labour contract

• Definite-term labour contract - the duration of which is defined by the two parties as a period of one to three years

• A temporary labour contract for a specific project or seasonal work - the duration of which is less than one year.

A definite-term labour contract can only be renewed twice; following that, the employer must sign an indefinite-term labour contract. In case the employer does not wish to renew the labour contract with the employee, the employer must inform the employee of the termination at least 15 days before the expiry date of the labour contract.

Contracts must comply with a prescribed form published by the Ministry of Labour, War Invalids and Social Affairs (MOLISA). The labour contract must have minimum principal contents: name and address of Employer; full name, date of birth, gender, residential address, ID number of the employee;

job and work place; term of the labour contract; wage, form of wage payment; deadline for wage payment; regimes for promotion and wage raise, working time; social insurance and health insurance; training. The Labour Code allows an employer to require an employee whose work is related to business or technological secrets to enter into a separate agreement on confidentiality and nondisclosure of those secrets. A confidentiality agreement may contain a clause on financial penalties in case of breach of contract.

The Labour Code prohibits employers from keeping employees’ original identification cards, diplomas and certificates and requesting employees to make deposit in cash or property as security for the performance of the labour contracts when signing and performing labour contracts.

A contract must be signed by the legal representative of the Employer or an authorised person before the employment begins.

Minimum Regional Wages

Region One (which includes urban Hanoi, Hai Phong, Ho Chi Minh City) - VND 3.980million

Region Two (which includes rural Ha Noi, HCMC, Hai Phong plus the capital cities of Hai Duong, Hung Yen, Bac Ninh, Thai Nguyen, Nha Trang, Can Tho and Rach Gia) - VND 3.530 million

Region Three ( which includes the remain cities and districts in the provinces of Hai Duong, Vinh Phuc, Phu Tho, Bac Ninh, Nam Dinh, Phu Yen, Dong Nai and Tien Giang, Ben Tre) - VND 3.090million

Region Four (the least developed areas in Vietnam) - VND 2.760 million.

The above are the regional minimum wage rates which are the lowest rates to be used as the basis for any arrangement between enterprises and employees on salary and salary payment, in which the wage rate to be paid to employees who work under normal working conditions, meet monthly working hour standards, and fully discharge their obligations for predetermined labor productivity norms or agreed worked duties, but these rates must be:

a) Equal or higher than regional minimum wage rates paid to unskilled employees who perform simple tasks;

b) At least 7% higher than the regional minimum wage rates paid to skilled/trained employees.

Normal Working Time, Overtime and Leave

Normal working time

Under the Vietnamese Labour Code, normal working hours should not exceed 8 hours per day or 48 hours per week. This may be extended through an agreement between the employer and employee but the normal working time cannot exceed 10 hours per day, or 48 hours per week.

Overtime

Employers can request the employees to work overtime with the condition that the employer obtains the employee’s consent. The employer must ensure that the number of overtime working hours does not exceed 50% of the normal working hours per day; (in case of applying regulations on weekly work, the total of normal working hours and overtime working hours must not exceed 12 hours per day); must not exceed 30 hours per month and the total of overtime working hours must not exceed 200 hours per year, except in some special cases as stipulated by the Government in which overtime working hours must not exceed 300 hours per year.

Employees who work overtime are entitled to additional wages. Wages for overtime work on normal days is at least equal to 150% of his/her current wage unit. Wages for overtime work on weekends are at least equal to 200% of his/her current wage unit and for public holidays and paid leave days, the overtime wage is at least equal to 300% of his/her current wage unit.

Leave

Employees that are under 18 years of age and women who are over seven months pregnant, or have a child of less than one year in age, are granted an extra hour off a day and are not permitted to work overtime.

Employees are entitled to at least one rest day per week.

Employees who have been employed for 12 months are provided with a minimum of 12 days of paid annual leave (vacation) per year, alongside the 10 days of public holiday each year. Employees who work in dangerous jobs or those that reside in areas with harsh living conditions may be entitled to up to two to four extra days off. Furthermore, workers are generally entitled to an extra day of holiday for each five years of service with a company.

Employees are entitled to sick leave, although this is not paid for by the employer. The Social Insurance Fund covers sick-leave allowances for employees and also for female employees taking care of their sick children. The maximum time granted per year for sick leave is 30 days (in most industries and professions), with 15 days permitted for taking care of sick children. The allowance granted in lieu of salary is equal to 75 per cent of the salary.

Social Security

Vietnam’s compulsory social, health & unemployment insurance (“SIHIUI”) regime covers sickness, maternity, work-related accidents, unemployment, retirement and survivorship allowance. The employers and Vietnamese employees are required to contribute compulsory social insurance, health insurance and unemployment insurance on a monthly basis to the social insurance fund.

The SIHIUI contribution is computed on the factors of salary and mandatory rate.

The mandatory contribution rate by employee and employer are as follows:

  Social insurance Health insurance Unemployment insurance Total
Emplyee 8% 1.5% 1% 10.5%
Employer 18% 3% 1% 22%
Total 26% 4.5% 2% 32.5%
 

Since 1 January 2015 onwards, it is compulsorily required to contribute the SIHIUI for the employees with labour contracts of 03-month term and above without any taking into account of number of employees in the labour unit as compared to pre 2014.

According to Decree No. 47/2016/ND-CP, effective from 1 May 2016, which regulates the statutory pay rate for public officials, public employees, working employees and workers. Under this Decree, the statutory pay rate was increased to VND1,210,000 per month.

With the effect of the changes in the said Decree, the maximum salary base to determine Social Insurance (“SI”), Health Insurance (“HI”) and Unemployment Insurance (“UI”) contribution are as follows:

• The salary base to determine SI and HI contribution shall not exceed 20 times of the regional minimum salary, from 1 January 2018 is VND 79.6 million per month for employees working in Ho Chi Minh City (i.e. the regional minimum salary VND 3,980,000 x 20 times).

• The salary base to determine UI contribution shall not exceed 20 times of the regional minimum salary, from 1 January 2017 is VND75 million per month for employees working in Ho Chi Minh City (i.e. the regional minimum salary VND3,750,000 x 20 times).

Retirement benefits are provided under the compulsory social insurance regime.

Monthly pensions are provided from the Social Insurance age for men, or 55 years of age for women.

A deduction of up to VND1 million per month is permitted for contributions to supplementary pension schemes. Though

Fund where an individual has contributed social insurance for more than 20 years and when they reach 60 years of age for men, or 55 years of age for women.

A deduction of up to VND1 million per month is permitted for contributions to supplementary pension schemes. Though still in its infancy, it is expected that a greater number of providers will offer supplementary schemes. With these schemes, the employees will have a better support in and the means to save for retirement diversify the sources of their pensions and will provide employers with a means to retain key employees.