Key Takeaways
- Providing a written employment contract is mandatory in Vietnam. Employers must provide a written employment contract to their employees within 30 days of the start of employment. Failure to do so can result in fines and other legal consequences.
- Clauses such as job title, working hours, salary, benefits, and termination conditions must be clearly stated in the employment contract to avoid misunderstandings and disputes.
- Avoiding common mistakes such as failing to comply with minimum requirements, not specifying essential terms, and not providing a probationary period can help employers attract and retain talented employees and ensure a legal and transparent relationship.
Vietnam has been a popular destination for foreign investors and companies looking to expand their operations in Southeast Asia.
With a large pool of young, skilled workers and a favorable business environment, Vietnam offers significant opportunities for companies to grow and succeed.
However, doing business in Vietnam also requires companies to comply with the country’s labor laws and regulations, including the rules governing employment contracts.
Employment contracts are a critical component of any employer-employee relationship.
They serve as a legally binding agreement that outlines the terms and conditions of the employment relationship, including the employee’s rights and obligations, working hours, compensation, and benefits.
In Vietnam, employment contracts are regulated by the Labor Code and other relevant laws and regulations.
If you’re an employer or employee in Vietnam, it’s crucial to understand the basic requirements of employment contracts to avoid potential legal issues and ensure a fair and transparent employment relationship.
In this article, we’ll provide you with a comprehensive guide to understanding employment contracts in Vietnam, including the legal requirements, essential clauses, and common mistakes to avoid.
Whether you’re starting a new business in Vietnam or looking to hire new employees, this guide will give you the knowledge and tools you need to comply with the country’s labor laws and regulations and establish a successful employment relationship.
So, let’s dive in and learn what you need to know about employment contracts in Vietnam.
Before we venture further into this article, we like to share who we are and what we do.
About 9cv9
9cv9 is a business tech startup based in Singapore and Vietnam with a strong presence all over the world.
With over six years of startup and business experience, and being highly involved in connecting with thousands of companies and startups, the 9cv9 team has listed some important learning points in this overview of employment contracts in Vietnam.
If your company needs HR, hiring, or corporate services, you can use 9cv9 corporate services. Book a consultation slot here, or send over an email to hello@9cv9.com.
Entering Into Employment Contracts in Vietnam: What You Need to Know
- Basic Overview of Employment Contracts in Vietnam
- Essential Clauses in Employment Contracts in Vietnam
- Salient Points about Probation
- Common Mistakes to Avoid in Employment Contracts in Vietnam
1. Basic Overview of Employment Contracts in Vietnam
Employment contracts are legally binding agreements between employers and employees that outline the terms and conditions of the employment relationship.
In Vietnam, employment contracts are governed by the Labor Code 2019, which sets out the minimum requirements for employment contracts.
Under the Labor Code 2019, Chapter III, Section 1, Article 13, an employment contract is defined as “an agreement between a worker and employer about remunerated work, wages, working conditions and the rights and obligations of each party to the labor relations.”
Both the employer and the employee have to keep 1 copy each.
If the contract duration is less than 1 month, then a verbal employment contract suffices except for certain cases.
There are two main types of employment contracts in Vietnam.
A) Definite-Term Contracts
In Vietnam, a definite-term employment contract is a legal agreement between an employer and an employee in which both parties agree on the length of the contract and the exact date on which it will end.
This type of contract is typically used when an employer needs to hire someone for a specific period of time, such as to complete a project or fill a temporary staffing need.
According to Vietnamese labor law, the duration of a definite term employment contract cannot exceed 36 months from the date the contract comes into force.
The duration cannot be more than 3 years for a definite term employment contract
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Once the contract has reached its agreed-upon end date, the employment relationship will automatically terminate, unless the employer and employee agree to renew the contract.
Within 30 days from the date of expiration of the fixed-term employment contract, the two parties must conclude a new employment contract (and you can only enter into 1 more fixed-term contract).
Prior to the signing of the new employment contract, the rights, obligations, and interests of both parties as prescribed in the expired contract shall be maintained.
If however, no new contract is entered into within 30 days, then the old contract will be concluded, and a new indefinite-term employment contract with all the previous clauses.
A maximum of only two definite-term employment contracts can be signed for an employee in the course of employment.
After which, it will be turned into an indefinite-term contract by default.
B) Indefinite-Term Contracts
An indefinite-term employment contract is a type of legal agreement between an employer and an employee where the duration of employment is not defined or specified.
Unlike a definite term contract, an indefinite term contract does not have a predetermined end date.
An indefinite-term employment contract provides more flexibility for both the employer and the employee, allowing them to maintain a long-term working relationship without having to worry about the contract expiring.
However, it is important to note that this type of contract can be terminated by either party, subject to the requirements and limitations set forth in Vietnamese labor law.
Under the Labor Code, employers must provide a written employment contract to their employees within 30 days from the start of employment.
The contract must include essential terms such as the nature of the work, working hours, wage or salary, social insurance, and other benefits.
The Labor Code also requires employers to obtain a work permit for foreign employees and include specific clauses in the employment contract for foreign employees.
Employment contracts in Vietnam must also comply with other relevant laws and regulations, such as the Law on Social Insurance, Law on Occupational Safety and Health, and Law on Trade Unions.
Employers who fail to comply with employment contract regulations may face legal consequences, such as fines and penalties.
It’s important to note that the Labor Code sets out minimum requirements for employment contracts, and employers are free to negotiate additional terms with their employees.
However, any additional terms must not violate the Labor Code or other relevant laws and regulations.
Employment contracts are a crucial aspect of the employer-employee relationship in Vietnam. Employers must comply with the Labor Code and other relevant laws and regulations when drafting employment contracts to ensure a fair and transparent employment relationship.
2. Essential Clauses in Employment Contracts in Vietnam
According to the Labor Code 2019 Article 21, there are some essential clauses that must be included in employment contracts in Vietnam:
a) The name and address of the employer, and the name and position of the person entering into the employment contract from the employer’s side.
b) The full name, date of birth, sex, residential address, identity card number, or passport of the person entering into the contract from the workers’ side.
c) The work to be undertaken and the place of work.
d) The duration of the employment contract, i.e., The work-based or position-based wage, form of wage payment, date of payment, allowances, and other terms.
e) Policies for wage step upgrade and wage increase.
g) The working time and rest periods.
h) Personal protective equipment for the worker.
i) Social insurance, health insurance, and unemployment insurance.
k) Training, developing, and enhancing occupational knowledge and skills.
The above clauses are considered essential and must be included in employment contracts in Vietnam.
Employers are free to negotiate additional terms with their employees, but any additional terms must comply with the Labor Code and other relevant laws and regulations.
3. Salient Points about Probation
The employer and the worker may negotiate a probationary period as part of the employment contract or conclude a probation contract.
This means probation is not necessary if deemed to be by either of the parties.
In addition, for employment contracts with a duration of less than 1 month, there will be no probation.
For obvious reasons.
Otherwise, for long-term contracts, the probationary period cannot exceed:
a) 180 days for managerial positions of enterprises as stipulated in the Law on Enterprises and the Law on Management and Utilisation of State Capital Invested in the Manufacturing and Business Activities of Enterprises
b) 60 days for jobs requiring college-level or higher professional or technical qualifications
c) 30 days for jobs requiring intermediate-level professional or technical qualifications, technical workers, or specialized workers
d) 6 working days for other jobs
The probationary salary during the probationary period shall be at least 85% of the post-probation salary.
When the probationary period concludes, the employer must notify the results of the probation period to the worker.
If an employee’s probation period is satisfactory, the employer in Vietnam will continue the employment contract as agreed, provided that the probation agreement is part of the employment contract.
However, if a separate probation contract was signed, the employer must conclude a new employment contract.
On the other hand, if the probation period is unsatisfactory, either the employment contract or probation contract will be terminated, and the employee will be released from their duties.
It is essential for employers to provide constructive feedback to their employees during the probationary period, as this will help them to understand their performance and whether they meet the expectations of the job role.
During the probationary period, either party has the right to cancel the probation contract or employment contract without prior notice.
4. Common Mistakes to Avoid in Employment Contracts in Vietnam
Here are some common mistakes to avoid in employment contracts in Vietnam:
- Failing to provide a written employment contract: Employers in Vietnam are required by law to provide a written employment contract to their employees within 30 days from the start of employment. Failure to do so can result in fines and other legal consequences.
- Not complying with minimum requirements: Employment contracts in Vietnam must comply with the minimum requirements set out in the Labor Code and other relevant laws and regulations. Employers who fail to comply with these requirements may face legal consequences.
- Not specifying essential terms: Essential terms such as job title, working hours, salary, benefits, and termination conditions must be clearly stated in the employment contract. Failure to do so can lead to misunderstandings and disputes between employers and employees.
- Not providing a probationary period: A probationary period can help employers assess the employee’s suitability for the job and provide a way to terminate the employment relationship if necessary. Employers who fail to provide a probationary period may find it difficult to terminate the employment relationship without cause.
- Prohibiting employees from joining trade unions: Under Vietnamese law, employees have the right to join trade unions. Employment contracts that prohibit employees from joining trade unions are illegal and can result in legal consequences for employers.
- Not including clauses for foreign employees: If the employee is a foreigner, the employment contract must comply with the relevant laws and regulations governing foreign workers in Vietnam. Employers who fail to include specific clauses for foreign employees may face legal consequences.
- Failing to update the employment contract: Employment contracts should be updated regularly to reflect changes in the employee’s job duties, salary, benefits, and other essential terms. Failure to update the employment contract can lead to misunderstandings and disputes between employers and employees.
- Right to include a non-disclosure clause in the contract: If there is work that is directly related to a business or technological secret as stipulated by law, the employer has the right to sign a written agreement with the worker on the contents and duration of protecting the business or technological secret, including benefits and compensation in the case of violations.
In summary, employers in Vietnam must be aware of the common mistakes to avoid when drafting employment contracts to comply with the Labor Code and other relevant laws and regulations.
Employers who fail to comply with these requirements may face legal consequences, so it’s essential to seek professional advice to ensure compliance.
Conclusion
Employment contracts are essential for both employers and employees in Vietnam, providing a legal framework for the employment relationship.
Understanding the key provisions of employment contracts can help employers and employees avoid misunderstandings and disputes and ensure compliance with the Labor Code and other relevant laws and regulations.
Some of the essential clauses that must be included in employment contracts in Vietnam include the job title and job description, working hours, salary and benefits, probationary period, termination conditions, non-competition and confidentiality, intellectual property rights, social insurance, and clauses for foreign employees.
Employers must also avoid common mistakes, such as failing to provide a written employment contract, not complying with minimum requirements, not specifying essential terms, not providing a probationary period, prohibiting employees from joining trade unions, not including clauses for foreign employees, and failing to update the employment contract.
By understanding the requirements and common mistakes to avoid in employment contracts in Vietnam, employers can create a fair and transparent employment relationship, attract and retain talented employees, and ensure compliance with the law.
If you have any questions or concerns about employment contracts in Vietnam, it’s essential to seek professional advice from experienced legal professionals.
By working with the right advisors, you can protect your legal rights and ensure the success of your business in Vietnam.
If your company needs HR, hiring, or corporate services, you can use 9cv9 corporate services. Book a consultation slot here, or send over an email to hello@9cv9.com.
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