Tax Alert - New regulations in Labour Code 2019

On 20th November 2019, the National Assembly of Vietnam has adopted the Labor Code 2019 which shall come into force as from 1st January 2021 and replace the current Labor Code 2012. Below is summary of the most notable points of this new Labor Code.

1. Determination of a labor contract

An agreement with titles other than “labor contract” but having contents of paid scope of work, salary, management, administration and supervision from one side towards the other shall also be considered as a labor contract. As a result, the conclusion of other types of contract such as collaboration agreement, work package contract, etc. must be re-executed under the form of labor contracts if all of the above-mentioned elements are fully included therein.

2. Form of labor contract

Labor contracts concluded via electronic means under the form of data message in accordance with the Law on E-transactions shall have equal validity to written labor contracts.

3. Types of labor contract

The new Labor Code has removed the category of seasonal or work-specific labor contract with term under 12 months. The definition of definite-term labor contract is amended as contract with maximum term not exceeding 36 months (without setting a minimum threshold).

Upon expiry of the term of the labor contract, if the employee continues to work for the employer, both parties must enter into a new labor contract within 30 days as from the expiry date, for the time during which the new labor contract has yet to be signed, the rights and obligations of both parties shall be in accordance with the concluded contract. If the new labor contract is not signed, the concluded contract will be automatically turned into indefinite-term labor contract.

The parties are only entitled to sign one additional definite-term labor contract, except for 4 special circumstances, including: employed director of state-owned enterprise; elderly employees, foreign employees, members of the head committee of the grassroots-level employees’ representative organization whose labor contract expires during his/her tenure.

4. Term of labor contract

The parties are not allowed to sign annexes for the purpose of amending the term of a labor contract.

5. Probationary period

Supplementing regulations on probationary period of up to 180 days for enterprise managers as prescribed by Law on Enterprises, Law on management and utilization of state capital invested in manufacturing and business activities in enterprises.

6. Right to unilaterally terminate the labor contract of employees

Employees are entitled to unilaterally terminate the labor contract without reasons but only required to notify in advance within the prescribed time limit. In some special circumstances, it shall not be compulsory for the employees to give prior notice (employers fail to make salary payment in full or on time, maltreatment, sexual harassment, coercive labor, etc.)

7. Right to unilaterally terminate the labor contract of the employers

Supplementing 3 reasons for which the employers are entitled to unilaterally terminate the labor contract, including: (i) Employees are in the age of retirement, (ii) Employees have been absent from work without reasonable reasons from 05 consecutive working days, (iii) Employees provide untruthful information that affects their recruitment.

The advance notice time limit depends on the type of labor contract. When the labor contract is terminated since the employees are not present at the workplace after prescribed time limit or have been absent from work without reasonable reasons from 05 consecutive working days, the employers are not obliged to give prior notice for such termination. In some special cases, an advance notice is required as per the Government’s regulations.

8. Obligation to inform the employees of change of structure, technology or economic reasons

The employers must inform the employees at least 30 days in advance of the termination of their labor contracts and disclose the labor ultilization plan to the employees within 15 days from the date of adoption.

9. Apprenticeship and on-the-job training

Supplementing the definition of apprenticeship and on-the-job training. The time limit of an apprenticeship is in accordance with the Law on Vocational Education. The time limit of an on-the-job training is up to 03 months. 

10. Grassroots-level employees’ representative organization

According to the new regulations, there may be several grassroots-level employees’ representative organizations, including trade unions and employees’ organizations at the enterprises. Trade union is established and operates in accordance with the Law on Trade Union while the employees’ organization at the enterprises shall be legally established and operates after being registered with the competent authority.

11. Dialogue at the workplace

Dialogue at the workplace must be periodically conducted at least once every year.

12. Collective bargaining

The grassroots-level employees’ representative organization has the right to request collective bargaining when reaching the minimum number of members out of the total employees of the enterprise in accordance with the Government’s regulations. In cases where there are several grassroots-level employees’ representative organizations satisfying this requirement, the organization with the most members shall be entitled to request collective bargaining. Other organizations may participate in collective bargaining upon the approval of the entitled organization.

In cases where none of the grassroots-level employees’ representative organizations meeting such requirement, these organizations may have the right to voluntarily co-operate with each other to request collective bargaining; however, the total number of members must reach the minimum threshold as per Government’s regulations.

13. Salary for work suspension

The employers and the employees are allowed to negotiate the salary for work suspension upon the occurence of incidents (without fault of either party) in which if the work suspension is up to 14 working days, the salary for work suspension shall not be lower than the minimum salary. In the circumstance where the work has been suspened for over 14 working days, the wage for work suspension shall be agreed by the two parties with the assurance that the first 14-day salary must not be lower than the minimum rate.           

14. Working overtime

Increasing the maximum overtime working hours per month from 30 hours to 40 hours and supplementing some cases where the maximum overtime hours per year is 300 hours (due to weather, natural disater, fire, enemy-inflictes destruction, lack of electricity and power, technical problems of the production line, etc.).

15. National Day Leave

Increasing the fully paid day-off from 01 day to 02 days (the second day of September of the calendar year and an additonal immediately preceeding or following day).

16. Internal Labor Regulations

The employers must issue an internal labor regulations, in cases where the employers employing 10 employees or more, they are obliged to have internal labor regulations in writing and to register it with the competent authority. Apart from the regulations as prescribed in the Labor Code 2012, the internal labor regulations must include provisions on prevention and fighting against sexual harassment at the workplace as well as the order and procedures for handling such misconduct at the workplace. Sexual harassment at the workplace is also supplemented as a basis for applying the discipline under the form of dismissal.

17. Age of retirement

The retirement age of the employees working in normal conditions has been adjusted according to the roadmap in which the retirement age may be increased until the male employees reach 62 years old in full by 2028 and the female employees reach 60 years old in full by 2035.

From the year of 2021, the retirement age of employees working in normal conditions is 60 years old and 03 months in full for male and 55 years old and 04 months in full for female; after that, the age of retirement will be annually increased by 03 months for male employees and 04 months for female employees.

18. Salary

Supplementing provisions on employers’ obligation to provide the employees with pay slip when making salary payment as well as to pay fees for account opening and maintenance in cases of paying via the employees’ bank accounts.

Removing regulation that salary scales and tables must be sent to the district-level state management agency on labor.

19. Foreign employees working in Vietnam

Foreign citizens who are owners or contributing members of limited liability companies, Chairman or members of the Board of Directors of joint-stock companies with a minimum capital contribution as per the Government’s regulations shall be exempted from work permit. Additionally, a foreign employee who is married to a Vietnamese citizen and lives within the territory of Vietnam shall also subject to work permit exemption.

Supplementing the regulation that work permit can only be extended once with the maximum term of 2 years. When recruiting foreign employees, the two parties are entitled to negotiate to execute several definite-term labor contracts.

20. Right to suddenly inspect of the labor inspectorate

When conducting a sudden inspection as per the decision of the competent authority in emergency circumstances threatening the safety, life, health, honor and/or dignity of the employees at the workplace, the labor inspectorate shall not need to inform on such inspection in advance.

OUR SUPPORT

We do trust the above points are notable and sufficient, but should you have any questions or need a deeper discussion on this issue, please do not hesitate to contact us.

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