Quick Guide to Labor Contract in Vietnam

Quick Guide to Labor Contract in Vietnam

Vietnam Labor Contract is a fundamental document governing employment relationships between an employer and an employee in Vietnam. It specifies the agreement about paid employment, wages, working conditions, rights and obligations of each party. This article provides an overview of the key provisions and requirements related to labor contracts in Vietnam according to the Labor Code 2019

Types of labor contract in Vietnam

There are 2 main types of labor contracts in Vietnam:

Indefinite-Term Labor Contract

This is a contract that does not have a specified end date and is used for long-term employment situations.

Definite-Term Labor Contract 

This is a contract with a fixed term not exceeding 36 months. Upon expiration, the contract will automatically terminate. However, if the employee continues to work, there are three scenarios to consider after expiration:

  • Renewal Within 30 Days: both parties must sign a new labor contract. 
  • Automatic Conversion: If no new contract is signed within 30 days, the initial definite-term contract automatically converts into an indefinite-term contract
  • Limited Renewal: If a new definite-term contract is signed after the initial term, it can only be renewed once. Following the second term’s expiration, if the employee continues working, a new indefinite-term labor contract must be signed (with some exceptions, such as the employment of foreign workers in Vietnam)

Employment Contract Vietnam

Essential contents of a Vietnam labor contract

A labor contract in Vietnam must include the following basic contents, according to Article  21 of the Labor Code and Article 3 of Circular 10/2020/TT-BLDTBXH:

Basic information of the employer and employee

For the employer: name, the address, and full name, title of the legal representative person. 

For the employee: full name, date of birth, gender, place of residence, ID card or passport number

Job description and workplace

Job Description: the tasks the employee must perform.

Workplace: The agreed-upon location(s) where the employee will perform their duties. If the employee regularly works at multiple locations, all locations must be specified.

Duration of the labor contract

For definite-term contracts, the specific commence and end dates must be mentioned.

For indefinite-term contracts, the specific commence date must be mentioned.

Salary and benefits

Salary based on job or position, payment method and schedule, allowances, and other additional benefits; 

Promotion and salary increase policies

As agreed upon by the two parties regarding the conditions, time, and wage level after promotion, salary increase, or in accordance with the collective labor agreement, regulations of the employer.

Working hours, break times

As agreed upon by the two parties or in accordance with the labor regulations, regulations of the employer, collective labor agreement, and provisions of the law.

Labor protection equipment for employees

Personal protective equipment (PPE) in labor as agreed upon by the two parties or in accordance with the collective labor agreement, regulations of the employer, and provisions of the law on occupational safety and health.

Insurances 

Including social insurance, health insurance, and unemployment insurance; 

Training and Skill Development

Rights, obligations, and benefits of employers and employees in ensuring time and funding for training, education, and professional development.

Effective date

The labor contract is effective from the signing date of the contract, unless otherwise agreed or by law.

Additionally, parties can freely negotiate and include additional content in the labor contract, as long as it doesn’t violate Vietnamese regulations.

Appendix to the Labor Contract

The appendix to the employment contract is an integral part of the contract and carries the same legal validity. The appendix may specify, amend, or supplement certain articles and clauses of the employment contract, but it cannot modify the term of the employment contract.

If the appendix to the employment contract provides detailed specifications for certain articles or clauses that result in a different interpretation from the main contract, the provisions of the main contract shall take precedence.

If the appendix amends or supplements specific articles or clauses of the employment contract, it must clearly state the specific content of the changes and the effective date.

Foreign employees in Vietnam

Probationary in Vietnam

The employer and employee can agree on probation terms within the labor contract, or through a separate probationary contract. 

The probation period is agreed upon by both parties based on the nature and complexity of the job but can only be conducted once for a specific job, ensuring the following conditions: 

  • Not exceeding 180 days for managerial positions in accordance with the Enterprise Law; 
  • Not exceeding 60 days for positions requiring a professional or technical degree from college level and above; 
  • Not exceeding 30 days for positions requiring a vocational or technical degree, technical workers, or operational staff; 
  • Not exceeding 6 working days for other positions.

The salary of the employee during the probation period is agreed upon by both parties but must be at least 85% of the salary for that position. 

After the probation period, the employer must inform the employee of the results. If successful, the employer proceeds with the labor contract or signs one if it was a probationary contract. If unsuccessful, the contract is terminated.

During probation, either party can terminate the contract without notice or compensation.

Probationary Vietnam

Differences Between Labor Contracts for Vietnamese and Foreign Employees

While the foundational principles of the labor contract remain consistent, there are some key differences between contracts for Vietnamese and foreign employees:

Work Permits and Validity

Foreign employees typically require work permits to work in Vietnam. The labor contract will usually specify the contract terms related to the validity and renewal of the work permit.

Salary Currency 

Foreign employees may opt to receive salary and benefits in VND or foreign currency.

Personal Income Tax

For foreigners who are Vietnamese tax residents, the PIT rate is the same as for local employees. For foreigners who are Vietnamese non-tax residents, the applicable PIT rate is a flat rate of 20%.

Compulsory Insurance Contribution Rate

The total social insurance contribution rate for Vietnamese employees is 10.5% of the social insurance-covered salary, while the rate is 9.5% of the social insurance-covered salary for foreign employees.

Benefits 

Some non-taxable benefit-in-kind might be exclusive to foreign employees, such as children’s school tuition, accommodation, home leave air tickets, and relocation assistance. 

Non-Disclosure Agreement (NDA)

When an employee’s work is directly related to business secrets or technological secrets as stipulated by law, the employer may reach a written Non-Disclosure Agreement with the employee.

The NDA on the protection of business secrets and technological secrets may include the following main contents:

  • List of business secrets and technological secrets;
  • Scope of use of business secrets and technological secrets;
  • Duration of protection of business secrets and technological secrets;
  • Methods of protecting business secrets and technological secrets;
  • Rights, obligations, and responsibilities of the employee and the employer during the period of protection of business secrets and technological secrets;
  • Handling violations of the agreement on the protection of business secrets and technological secrets

FAQs

Yes, employees can enter into multiple labor contracts with different employers, according to Article 19.1 of the Labor Code. However, it’s crucial to ensure you can fully comply with all the agreed-upon terms in each contract.

Labor contracts in Vietnam typically follow these format requirements:

  • Written format (preferred): The traditional format is a physical document. Two copies of the contract must be made. One copy is given to the employee, and the other is kept by the employer.
  • Electronic contracts: Current Vietnamese Labor Code  allows for electronic labor contracts. These contracts use electronic data messages that comply with the Vietnamese electronic transaction laws and have the same legal validity as traditional written contracts.
  • Verbal contracts (limited use): While written contracts are the norm, oral agreements can be used for contracts shorter than one month, unless specific regulations prohibit it

Not necessarily. In Vietnam, the content of the labor agreement takes precedence over the title. Even if your contract has a different name, as long as it reflects paid work, wages, management, direction, and supervision, it’s considered a labor contract. This ensures you receive the benefits and protections Vietnamese law affords employees.

If the content of your labor contract violates legal regulations, there are two main consequences:

Contract Validity: The entire contract could be considered entirely void, meaning it has no legal effect.

Partial Voidance: Only the specific part of the contract that contradicts the law might be considered void, while the remaining legal clauses remain enforceable.

According to Article 9 of Decree 12/2022/NĐ-CP, employers who fail to sign a labor contract with an employee face:

  • A fine ranging from 2,000,000 VND to 25,000,000 VND.
  • The obligation to take remedial measures, including signing the correct type of labor contract with the employee and implementing other necessary actions.

While both collaborator and labor contracts involve providing services, a key distinction lies in the level of control the employer has.

  • Labor Contract: This contract outlines the employer’s management, direction, and supervision over your work process. It establishes a formal labor relationship between the employer and the employee.
  • Collaborator Contract: This functions more like a service contract with freelancers. The service user (employer) is primarily concerned with the final outcome and quality of the service you provide. They have less control over how you achieve those results.

Conclusion

A well-defined labor contract serves as the foundation for a legal and productive working relationship in Vietnam. It protects both employers and employees by outlining expectations, rights, and responsibilities, navigating potential disagreements and ensuring a smooth working experience.

Navigating the complexities of Vietnamese labor law can be challenging, especially for foreign companies or individuals unfamiliar with the legal landscape in Vietnam. At Nova Law, our team of experienced labor law specialists offers a comprehensive range of services, including: labor law consulting, labor contract drafting and review, work permit application, work visa/TRC application, payroll, and labor dispute resolution. Contact Nova Law today for a quote!

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