Vietnam Introduces Updated Labour Code

After almost 4 years of debate, Vietnam’s government adopted Labour Code No 45/2019/QH14, also known as the New Labour Code. Scheduled to come into legal effect on 1 January 2021, the New Labour Code aims to address a range of gaps in the existing legislation and promote social equality and conditions for certain categories of employee.

With its implementation date set, employers in Vietnam can start preparing for the key changes that the New Labour Code introduces.

Non-employee working relationship: The New Labour Code expands the scope of existing regulations to workers ‘without labour relations’, or those who are working as non-employees such as freelancers. Under the new regulations, individuals are classified as working on a non-employment basis if they satisfy the following criteria:

• They have a job
• Are getting paid for that job, and
• Are working under the supervision of an employer

If those criteria are satisfied, workers will fall under the scope of the New Labour Code regardless of the terms of their employment agreement.

Working time, public holidays, and salary measures: Under the new legislation, employers are required to set up salary schemes in consultation with employee representatives. Further to that measure, the New Labour Code increases the monthly overtime cap to 40 hours (from 30 hours). The new regulation also allows employers to organise up to 300 overtime hours a year if:

• The work involves the manufacture or processing of electrical products for export
• The work requires highly technical qualifications not readily available on the labour market

Additionally, the New Labour Code adds another day to the National Independence Holiday on 1 or 3 September.

Gender equality: The New Labour Code establishes an official definition of discrimination at work, which includes discrimination on the grounds of gender, marital status, pregnancy, and family responsibility. The definition also includes race, nationality, ethnicity, HIV infection, and participation in trade union or employee organisations, as protected characteristics. In its previous version the Labour Code did not include a definition of discrimination.

Labour contracts: The New Labour Code has introduced a number of changes to the form and contents of labour contracts in Vietnam. The changes include:

• Recognition of e-contracts
• The establishment of two types of labour contract:
• Definite term contracts (36 months or less)
• Indefinite term contacts
• The possibility for employers and employees to sign separate probation agreements or probation clauses

The New Labour Code also makes provisions for both employers and employees to unilaterally terminate labour contracts.

Retirement ages: The New Labour Code makes a number of changes to the law concerning retirement ages.

• Retirement age for males will be gradually increased to 62 by 2028
• Retirement age for females will be gradually increased to 60 by 2035
• Employees engaged in heavy, hazardous, or dangerous work may be able to retire at a younger age (but not more than 5 years earlier) than employees working in normal labour conditions

For more information on Vietnam’s labour laws, tax, and payroll landscape browse activpayroll’s Vietnam Global Insight Guide: find background on Vietnam’s global economic profile, major industrial sectors and common business practices.