Postcard Series: Employing a worker in Vietnam
Capital GES created this series to help businesses that are considering expansion and hiring global staff.
In this postcard series, members of our sales and business development team provide helpful tips on international employment. In this latest post, Crispian Lye, Vice President of Business Development, discusses the relevant employment rules in Vietnam.
If you are considering expanding your business into Asia, Vietnam should be on your priority list. Over the last decade, Vietnam has become one of the fastest-growing economies in Southeast Asia. As a result of this rapid growth, it has earned “tiger” economy status following in the footsteps of Singapore, Hong Kong, South Korea, and Taiwan.
Furthermore, a country once known for its agriculture has now emerged as a hot spot for manufacturing and high value-added industries such as automobiles, electronics, and IT software. Vietnam’s stable government, strong labour force, and abundant natural resources have turned the country into a highly sought-after investment destination for companies looking to expand into Asia.
New Labour Code Introduced in 2021
Before we discuss the three most common employment questions, it’s important to note that Vietnam is undergoing changes in some areas of employment regulations. In November 2019, the Vietnam National Assembly adopted a new labour code which will come into effect on 1st January 2021. This new labour code is expected to have a significant impact on enterprises and organisations that recruit labour in Vietnam.
Employment in Vietnam
However, while Vietnam is open to foreign investment and encourages foreign enterprises, expanding into the country is still challenging. Therefore, it’s vital to have local help when considering business expansion into Vietnam. Below, Crispian discusses the three most common questions asked by clients regarding employment in Vietnam.
Can I trial a worker using a fixed-term employment contract, as I am not sure whether it will work out in the long-term?
Currently, it is possible to use a fixed-term contract. In Vietnam, a fixed-term contract has a term of 12 to 36 months. However, there are rules regarding the use of short term contracts. So, in order for your worker to remain compliant in Vietnam, it’s best to speak to a local advisor before offering the position to the worker.
2. Termination Rules and Costs
What do I need to know about termination and severance pay in Vietnam?
The Vietnamese labour law is very protective of employees, and as such, an employer must have a valid reason for terminating an employee. In Vietnam, an employer can only terminate an employee when they are able to certify that the worker has repeatedly breached his/her contractual obligations or if there is a mutual agreement.
As a result of these strict laws and complex termination process, companies should take termination procedures with extreme caution and seek advice when needed.
Notice and Severance Pay
By law, employers must give notice to their workers. An employer must give 45 days’ notice for employees on an indefinite contract and 30 days for employees on a fixed-term contract.
Regarding severance pay, employees who have worked for 12 months or more are entitled to receive severance pay. This payment is equal to one half of one month’s wage for each year of employment.
3. Statutory Employee Benefits
What are the statutory employee benefits in Vietnam?
Paid Holiday Leave
Employees receive 12 days of paid leave per annum (exclusive of public holidays) following twelve months of employment. Employees also receive an extra day of annual leave after five years of continuous service with their employer.
In addition, employees receive 10 public holidays in Vietnam every year. From January 2021, they will receive one extra public holiday. This holiday will be on the day before or after the 2nd September. In addition to holiday leave, employees also receive special one-day leave (without pay) for life events such as weddings and deaths of close family members.
In Vietnam, employees receive sick leave paid by the social insurance fund, not by the employer. Sick pay varies depending on how many years a worker has paid social insurance premiums. For instance, the average worker receives 30 days sick pay for less than 15 years’ paid insurance, or 40 days if they have paid social insurance for more than 15 years.
Maternity and Paternity Leave
Vietnamese mothers receive six months of paid maternity leave. Vietnamese employees receive 100% of their salary which is paid by the social insurance fund. For multiple births (twins, triplets), the employee is entitled to an additional month of leave.
For Vietnamese fathers, paternity leave days are based on the type of birth. The employee is granted five days (natural birth) or seven days (caesarean birth) for a single birth. For multiple births, the employee is entitled to 10 days (natural birth) or 14 days (caesarean birth). Similar to the female employees, paternity leave is paid by the social insurance fund.
For expats working in Vietnam, paid maternity and paternity leave is subject to the agreement between the employer and the employee.
How Capital GES Can Help You Expand in Vietnam
If you are a business that is looking to expand internationally and employ workers in Vietnam, Capital GES can help. To establish what services you require, contact Crispian at CLye@Capital-GES.com or phone him on +65 9049 5224 for more information.