Labor contract under applicable laws of Vietnam and notes for foreign investors

Labor – Human resources always play an important role in a business. When doing investment in Vietnam, regulations on labor in general and labor contract in particular requires foreign-invested enterprises’ strict compliance.

1. Form and content of a labor contract

Under Article 13 of the Labor Code 2019, a labor contract is an agreement between an employee and an employer on paid job, salary, working conditions, rights and obligations of each party in the employment relations. If the two parties conclude an agreement by another name but showing the following 3 elements, it is still considered a labor contract:

1. paid job;
2. salary; and
3. management and supervision of a party.

a. Form of labor contracts

A labor contract must be made in writing which is in paper or via electronic means in accordance with regulations on electronic transactions, except for a labor contract with less than 1-month terms which may be concluded in verbal.

b. Content of labor contracts

A labor contract must contain the following main contents:

1. Employer’s name, address; full name and position of the contracting person on the employer’s side;
2. Full name, date of birth, gender, residence, identity card/passport number of contracting person on the employee’s side;
3. Job and workplace;
4. Duration of the labor contract;
5. Job- or position-based salary, form of salary payment, due date for payment of salary, allowances and other additional payments;
6. Regimes for promotion and pay rise;
7. Working hours, rest periods;
8. Personal protective equipment for the employee;
9. Social insurance, health insurance and unemployment insurance;
10. Basic training and advanced training, occupational skill development.

In addition, depending on the nature and characteristics of the business and the working position of the employee, the foreign investor can add other terms to the labor contract accordingly.

c. Language of the labor contract

Specific language of the labor contract is not provided by applicable laws of Vietnam, so the foreign investor may enter into labor contracts in single language such as Vietnamese, English, etc. or in bilingual, depending on actual needs. However, in case a dispute arises between an enterprise and its employee which will be resolved at a competent dispute settlement agency, the labor contract in a foreign language must be translated into Vietnamese. Therefore, using bilingual labor contracts is recommended to engage with employees.

d. Agreement on business and technology confidentiality

If the employees’ job is directly related to the business secret, technological know-how as prescribed by law, the employer has the rights to sign a written agreement with the employee on the content and duration of the protection of the business secret, technology know-how, and on the benefit and the compensation obligation in case of violation by the employee. This agreement may be specified as a clause in the labor contract or separated into an independent agreement.

2. Competence to conclude labor contracts

The person who concludes the labor contract on the employer’s side shall be the legal representative or his/her authorized person as prescribed by laws. Accordingly, in case the legal representative authorizes another person to sign the labor contract, the authorization must be made in writing with specify scope of authorization.

3. Prohibited acts by employers during conclusion and performance of labor contracts

During the process of entering into and performing the labor contract, the enterprise must not:

1. Keep the employee’s original identity documents, diplomas and certificates.
2. Request the employee to make a deposit in cash or property as security for his/her performance of the labor contract.
3. Force the employee to keep performing the employment contract to pay debt to the employer.

4. Types of labor contracts

Under Article 20 of the Labor Code 2019, a labor contract includes the following 02 types:

1. Indefinite-term employment contract: Being a contract in which the two parties neither fix the term nor the time of termination of the contract;
2. Fixed-term employment contract: being a contract in which the two parties fix the term of the contract for a duration of up to 36 months from the date of its conclusion.

Depending on the type of labor contract, rights and obligations of employers and employees will be different.

5. Adjustment to labor contracts

During the implementation of the labor contract, the employer and the employee can agree to amend and supplement the labor contract by signing the labor contract annexes. The labor contract annex is a part of the labor contract and has the same effect as the labor contract. Enterprises should note that the labor contract annex may specify, modify and supplement a number of articles and clauses of the labor contract but is not allowed to amend the term of the labor contract. In case the labor contract annex specifies a number of articles and clauses of the labor contract that lead to a different interpretation of the labor contract, the contents of the labor contract shall prevail.

By: Thom Nguyen | LinkedIn