Guide to Hiring: Basic Terms of Employment Contract in Vietnam

Knowing the basic terms of employment contract in Vietnam is indeed important.

In case you are a foreign employer, you should know these in order to draw out legitimate employment contracts that do not violate the labor law when hiring in Vietnam. Or if you are a foreigner who is about to work in this jurisdiction, you should also know these terms so as to protect your own rights and benefits when being hired in Vietnam.

1. Overview of Employment Contract in Vietnam

Labor Code No.45/2019/QH14 is the official law that sets out the rules and regulations on labor issues in Vietnam (taking effect from 2021). The law applies to the following entities:

• Employees, trainees, apprentices and other workers without labor relations;
• Employers;
• Foreign employees who work in Vietnam;
• Other organizations and individuals that directly get involved in labor relations;

So, the next time you prepare an employment contract to hire either nationals or non-nationals in Vietnam, remember to comply with at least the regulations stipulated in the Labor Code.

According to the law, an employment contract in Vietnam is defined as an agreement between an employer and an employee on a job regarding wages, working conditions, the rights and obligations of each party in respect to labor relations.

An employment contract must be made into 2 copies of written form and each party must keep one. The only circumstance under which an employment contract comes under the oral form is when the employment lasts only for 1 month or less.

Employment contracts must be present to employees before employers officially hire them.

2. Basic Terms of Employment Contract in Vietnam

Pursuant to Article 21, an employment contract in Vietnam should have at least the following information:

• Name, address of employer and name, the position of the person who signs the contract for hiring;
• Name, date of birth, gender, residence address, identity card or similar documents of the employee;
• Details on job/position and workplace address;
• Employment contract’s duration;
• Details on wages, payment method, payment due day, allowance and other additional payments;
• Regime for promotion and wage rise;
• Working hours and rest time;
• Details on social insurance, health insurance and unemployment insurance;
• Personal protective equipment for employees;
• Details on occupational training for basic and advanced related skills.

2.1. Duration of Employment Contract

There are two types of employment contracts in Vietnam with different terms of duration. They are:

• Employment contract with an infinite term of duration; and
• Employment contract with a fixed term of duration that lasts no more than 36 months.

In case a fixed-term contract (up to 36 months) expires but the signed employee still continues to work, there must be a new employment contract signed within 30 days from the expiration date of the contract, otherwise, the fixed-term contract will be transformed into a contract with an infinite term of duration.

2.2. Wage and Minimum Wage in Vietnam

Wage comprises fixed salary, allowance and other additional payments. Essentially, an employee’s wage must not be lower than the minimum wage set by the Government. Regarding wage payment, it can be paid directly by cash or via bank transfer.

As for wage allowance and regime for promotion or wage rise, they depend on the agreements made by both parties (employers and employees).

Wage payment period

On payment period (hourly, daily, weekly or monthly), there must be an agreement between two parties:

• Employees working for hourly, daily or weekly wages must be paid after the working hour, day or week. Employers can also pay them in a lump sum of wages, as long as a lump sum is made once every 15 days at least.
• Employees working for monthly wages should receive wage payment once a month or every half month.

Minimum wages in Vietnam

According to Decree no 90/2019/ND/CP issued by the Government, from 2020, minimum wages in different regions are:

Wages for overtime work and night shifts

Employees who work overtime should receive their payment as follow:

• If working overtime on weekdays, at least 150% compared to normal wage payment;
• If working overtime on weekends, at least 200% compared to normal wage payment;
• If working overtime on holidays or paid leave, at least 300% (excluding any additional wages for those events) compared to normal wage payment;

As for night-shift work (from 10 pm to 6 am), employees will be paid at least 30% higher than normal wage payment.

2.3. Working Hours and Rest Time

It is the employers who will determine the working hours on a daily or weekly basis (but must inform their employees):

• On a daily basis, normal working hours are no more than 8 hours.
• On a weekly basis, normal weekly working hours are no more than 48 hours, and normal daily working hours are no more than 10 hours.
• Overtime working is certainly allowed. However, the following conditions must be met:
• There must be consent from employees;
• On a daily basis, overtime working hours must not be more than 50% of normal daily working hours. On a weekly basis, the sum of normal working hours and overtime working hours must not exceed 12 hours per day, and overtime working hours must not pass 40 hours per month;
• Overtime working hours per year must not exceed 200 hours (there are still some exceptions in which employees can work up to 300 hours per year).

Regarding rest time, pursuant to the Labor Code, employees who work for 6 hours or more must be entitled to a 30-minute break at least (45-minute break at least for night-shift). Furthermore, employees must have at least 4 rest days per month if the company does not grant employees a weekly rest day due to the work cycle, and normally 24 hours straight per week.

2.4. Paid Leave

As an employer, you must make sure to entitle your employees to the following paid leave:

Public holidays

There are 11 national holidays in Vietnam on which all employees can receive fully-paid days off:

• Calendar New Year Holiday:  1 day
• Lunar New Year Holidays:  5 days
• Victory Day:  1 day (30th April)
• International Labor Day:  1 day (1st May)
• Independence Day:  2 days (every 2nd September and another one day off preceding or following that day)
• Commemorative Celebration of Vietnam’s Forefather – Kings Hung: 1 day (10th March of the lunar year)

Foreign employees in Vietnam, in addition to the Vietnam public holidays, can have two additional fully-paid days off on the traditional new year holiday (1 day) and national day (1 day) of their countries.

Annual leave

Employees who have worked fully for 12 months with an employer shall be entitled to paid annual leave as follows:

• 12 working days for normal employees;
• 14 working days for employees who are under 18 years old, the disables, or those who do heavy, hazardous and dangerous job;
• 16 working days for employees who do an extremely heavy, hazardous, and dangerous job.

For every five years under the employment with the same employer, an employee will be given an additional day of paid leave, added to their annual leave.

However, in case employees have not worked for a full 12-month period, the total of annual leave will be the number of months they have worked for an employer.

Other paid leave

Under the following circumstances, an employee can also receive fully paid leave:

• Own marriage: 3 days;
• Children’s marriage: 1 day;
• Death of certain family members (parents, spouse, children): 3 days.

As for maternity leave, a female employee is entitled to 6 months of prenatal leave (which must not exceed 2 months) and postnatal leave. In case she gives birth to twin or more babies, each additional child (from the second one) equals 1 more month off. During the maternity period, she will be entitled to maternity policies provided by the law on social insurance.

2.5. Social Insurance, Health Insurance and Unemployment Insurance

Employers and employees shall participate in compulsory social insurance, compulsory health insurance as well as unemployment insurance. Employees are fully entitled to the benefits in accordance with social insurance and health insurance laws.

Remarkably, it is the responsibility of an employer to withhold a part of an employee’s wage (according to regulated rates) and contribute the amount to the required insurance on behalf of that employee.

The table below demonstrates the insurance rates set for one Vietnamese employee:

As for foreign employees, pursuant to Decree No.143/2018/ND-CP, non-nationals must also contribute to compulsory social insurance if they:

• Work in Vietnam under work permit or similar document issued by related Vietnam government agencies; and
• Work under an employment contract in Vietnam with infinite term or fixed-term of no less than 1 year.

Furthermore, according to Article 17 in Decision No.595/QD-BHXH, both nationals and non-nationals who work under employment contracts in Vietnam with infinite term or fixed-term of no less than 3 months must participate in health insurance.

The table below demonstrates the insurance rates set for one foreign employee until 2022:

The table below demonstrates the insurance rates set for one foreign employee from 2022:

3. Termination of Employment Contract in Vietnam

Both employers and employees have the rights to terminate their employment contracts.

Cases that employees can terminate their employment contracts

Employees can unilaterally terminate their contracts without any notice when their employer does not deliver what has been stated in the contracts (wage, job duties, working conditions and so forth).

Furthermore, they can also unilaterally terminate contracts without notice when they are being abused or sexually harassed at work, or being insulted so heavily that their physical and mental conditions are negatively affected.

For other acceptable reasons, employees can still terminate their employment contracts but must send notices to the employer within:

• 45 days in advance if the contracts have an infinite term of duration;
• 30 days in advance if the contracts have a fixed-term from 12 months to 36 months;
• 3 days in advance if the contracts have a fixed-term under 12 months.

Cases that employers can terminate their employment contracts

• Employees usually fail to fulfill their duties pursuant to their employment contracts;
• Employees cannot recover from illnesses or accidents (within regulated timeframes);
• Business cut-off due to natural disasters, fire, epidemic or government’s orders;
• Employees are absent from work for 5 consecutive days without any valid reason;
• Other regulated cases (employees reaching retirement age, employees providing false contract information, employees not making their presence within 15 days when being reinstated after contract suspension).

In most cases, employers have to send notices of termination to employees within similar timeframes for employees’ termination notice mentioned above.

4. Some Notes on Other Groups of Employees

Hiring people under 18 years old and non-nationals are also possible in Vietnam, but they are subject to specific conditions.

4.1. Employees under 18 years old

When hiring employees from 15 to 18 years old, employers must get permission from their parents or guardians, and must make sure that the offered jobs are suitable for these employees’ physical and mental conditions.

This group of employees can work up to 8 hours per day and 40 hours per week. They are also allowed to work overtime and night-shift but only in some regulated jobs.

In very few cases, employers can hire employees who are from 13 to under 15 years old. This group of employees can only work in light jobs that are regulated by the Ministry of Labor, War Invalids and Social Affairs. They can only work up to 4 hours per day and 20 hours per week. No overtime or night-shift work is allowed.

Certainly, there are a number of regulations for hiring employees under the age of 15. The main points are: the employer must sign an employment contract with both employee and his/her law representative, the working schedule must not affect the schooling schedule, and the working conditions must be safe for the employee.

4.2. Non-nationals

Enterprises, organizations, agencies, individuals and contractors can only hire non-nationals for the positions of managers, professionals or technical employees when Vietnamese employees cannot fulfill the requirements for those positions. In order to proceed with the hiring process, organizations need to obtain consent under written form from related government agencies.

Regarding foreign employees, in order to be hired in Vietnam, they must satisfy the general conditions as follows:

• Being 18 years old or above and having full legal capacity;
• Meeting criteria regarding qualification, experience and health conditions;
• Not being subject to any legal liability or criminal issues under foreign laws or Vietnam laws;
• Having work permits issued by related Vietnam government agencies.

5. Conclusion

As an employer, when drawing out an employment contract in Vietnam, you should comply with the regulations in the Labor Code. In general, you should mention the basic terms regarding details on the signing parties, job duties and obligations, wages (must be higher than minimum wage in Vietnam), working hours, each party’s obligations and employee’s benefits (insurance, bonus, occupational training, etc.).

You can surely hire non-nationals employees and even employees under 18 years old, but make sure to comply with the law provisions that regulate those groups of workforces.

Last but not least, other than fulfilling the agreements in an employment contract, you are also responsible for withholding a part of your employees’ wages to pay required insurances as well as personal income tax on their behalf.

Should you have any questions about employment in Vietnam, feel free to ask our experts! We are always willing to help!