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Employment contract under Vietnam Labor Code

S&B Law would like to provide foreign investor some information about employment contract under Vietnam Labor Code as follows:
1. Type of Employment Contract
Under Vietnam Labor Law, employment contract must be concluded in one of the following types:
- Employment contracts without fixed term in which both Parties do not specify the term and the expiry date of the contract;
- Fixed-term Employment Contracts in which both parties specify the term and the expiry date of the contract within 12 to 36 months;
- Casual employment contracts or regular employment contracts with terms under 12 months.
In case the parties in Employment Contract do not specify the expiry date of the Contract, it shall be classified to the Employment Contracts without fixed term.
With the reference to Employment Contract without fixed term, Vietnam Law strictly limits rights of Employer to unilaterally terminate employment contract. Meanwhile, Employee can unilaterally terminate employment contract at any time just by send a 45 days written notice.
We highly recommend employer to clearly specify expiry date of the Contract. However, the expiry date must not exceed 36 months from the signing date of the Contract.
Ideally, you specify the expiry date of the Contract not exceeding 12 months from the singing date of the Contract. Then, upon the expiry date, the Company can consider renewing validity of the Contract.

2. Hours of work
Vietnam Labor Law allows Employee to work over time. However, the over time working must be subjected to consent of the Employee.
The Company must ensure that the overtime hours of the employee shall not exceed 50% of the normal working hours in 01 days, in case of application of working regulation on weekly basis, the total normal working hours and the overtime hours shall not exceed 12 hours in a day, and less than 30 hours in 01 months and the total of not more than 200 hours in 01 year.
In some special cases, the Employer can ask for approval by the Government to extend the over time working, but it shall not be more than 300 hours in 01 years.

3. Resignation
Under Vietnam Law, with the reference to the Fixed- Term Employment Contract, the Employee can be entitled to terminate the Employment Contract by giving 30 days notice to the Employer.
In case of Employment without fixed term, the Employee shall be entitled to terminate the Employment Contract before the expiry date by giving a 45 days notice only.
  1. Termination by the Company
Under Vietnam Law, Employer can only terminate the Employment Contract for following basis:
  • The Employee regularly fails to complete the works according to the Employment contract;
  • The Employee suffering from sickness or accidents cannot recover after 12 consecutive months of treatment for employment contracts without fixed term, after 06 months for employees working under fixed-term employment contracts, or over one half of the contract term for employees working under casual employment contract or regular employment contract with term under 12 months;
  • The employer have to reduce the production and vacancies after taking all measures to overcome the consequences from natural disasters, fire or other force majeure;
  • The employee fails to be present at the workplace after the employment contract suspension expires.
    1. Other issues which the Company should be aware
  • The Employee must be responsible for paying personal income tax incurred in relation to his wage paid by the Company.
  • We understand that, in this case, as the Company and the Employee agree that the Employment Contract is governed by Vietnam Law and two Parties do not provide any exception for this. Thus, although the Company does not have any presence in Vietnam, the Company still has to pay social insurance for the Employee.
In case the Company enters into Employment Contract which has validity term of more than 03 months, the Company must be liable to pay social insurance for the Employee.

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