Vietnam is a country infamous for its bureaucratic system. In order to modernize this narrative, a new Labour Code has recently come into force the 1st of January 2021 with the ambition to shake things up. In the meantime, the COVID-19 pandemic has struck for already one year (1).
The dreadful consequences it had on the workplace environment are unquestionable. Companies had to adopt new strategies in order to maintain stability while coping with sanitary restrictions. However, although the amendment was passed in 2019 prior to the epidemic, it still gives parties adapted tools to deal with the ever-changing economy.
In fact, many experts are predicting the market to fully digitalize itself in the future, notably through the means of artificial intelligence (2). Hence, this prepared legislation is here to regulate this transformation. Here are the key changes.
The 2019 Labour Code authorizes employers to modify the employment contract if unexpected difficulties arise within industrial or commercial activities. They will now be able to temporarily affect workers to an unrelated task for a duration of 60 days maximum (3).
Please also note that the seasonal contract has officially disappeared from Vietnamese law. Furthermore, contractual termination was innovated for flexibility purposes. The employer may now unilaterally terminate any contract in 7 circumstances (e.g., the employee lied about his personal information) (4). Consequently, the employer has to address the worker a formal notice within a deadline according to the contractual nature (45 days in case of an indefinite term contract for instance).
As for retirement, the age of departure stretches to 62 for men and 60 for women (previously 60 and 55 respectively). Moreover, the amount of overtime hours is increased to 40 hours per month (compared to 30 before) while simultaneously expanding the opportunities to require overtime work (5).
With such improvement, employers will be able to adapt their workforce in case of a sudden demand from the market. At last, disputes between parties may now be settled in front of an arbitration committee to avoid courts (6). Litigation will therefore be resolved faster and confidentially.
Nevertheless, the Vietnamese government has decided to preserve an important number of rules aimed to protect employees’ rights thus limiting flexibility. First and foremost, if the employer splits, divides or merges itself with another company, the new employer has to establish a labour utilization plan to report which worker will remain employed or not (7). This plan has to be submitted to the worker’s representative organization.
On top of that, the rigid legislation regarding foreigners’ recruitment has only slightly progressed. Pursuant to the Decree No. 152/2020/ND-CP of December 2020, if an employer wishes to recruit a foreigner, the latter has to be technical worker which implies he had undergone technical training for at least 1 year and has worked for at least 3 years in his field (8). However, the new legislation now allows a two-year additional extension to foreigners’ contract (9).
Besides, foreigners married to a Vietnamese citizen will be exempted to obtain a working permit (10). Furthermore, the 2019 Labour Code has eventually defined sexual harassment to comply with international standards (11). Therefore, regardless of the contractual nature, employees may now unilaterally terminate in 8 circumstances without prior notice (e.g., if subject to sexual harassment or absence of payment from the employer (12) (13). This could have a pivotal impact since it would allow employees to ignore the usual delays to issue a notice.
Time period to address a notice to the employer
Indefinite term employment contract
Definite term employment contract with a duration from 12 to 36 months
Definite term employment contract with a duration below 12 months
Overall, the new Labour Code still has room to improve. We must however congratulate the Vietnamese government for following international standards which hopefully will attract foreign investments and provide the necessary means to strive against the sanitary crisis.