Human Resources & Payroll

Vietnamese Labor Contracts: What You Need to Know

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By: Chet Scheltema – Regional Director, Dezan Shira & Associates

 VB-Vietnamese Labor Contracts

South East Asia continues to attract foreign investors seeking to draw from its ever-more-skilled, abundant and still relatively inexpensive labor resources. However, historic sensitivity to abusive labor practices, and in some cases combined with the influence of litigious jurisprudence, has led to an environment where foreign investors are advised to tread cautiously and lay a solid foundation for human resources management, lest they run afoul of local labor laws or trigger costly labor disputes. One pillar of this firm foundation is typically a well-crafted employment contract.

Certain South East Asian countries, including Vietnam – and Indonesia and Malaysia – distinguish themselves by mandating a formal, written labor contract signed by the parties. Rather than viewing it an additional administrative burden, foreign investors should consider this as an opportunity to establish a firm foundation for human resources management in Vietnam.

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How to Draft Vietnamese Probation Contracts That Will Reduce Your Turnover

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By: Dezan Shira & Associates
Editor: Maxfield Brown

Finding the right workers can be a difficult task in any market, Vietnam being no exception. Fortunately, prior to entering into a binding labor contract in Vietnam, probationary periods provide both the employer and the employee an opportunity to assess their relationship. With minimized compliance, reduced compensation requirements, and fewer restrictions surrounding termination, probation contracts are an invaluable asset allowing foreign investors to safeguard their operations and reduce turnover.

Professional Service_CB icons_2015RELATED: Dezan Shira & Associates’ Payroll and Human Resources Services

Who should use probationary contracts? 

Companies seeking to employ workers in high-skilled positions stand to gain most from use of probation contracts as a first step to prior to standard labor contracting. Not only are the skills for these jobs more subjective and difficult to assess within an interview, wage premiums attached to skilled labor in Vietnam can exacerbate the risks of onboarding of unqualified or unsuited candidates. Generally speaking, the higher the salary of a potential employee, the greater value is added by a probation contract arrangement.

Given the shifting position of Vietnam in the value chain, many sectors are susceptible to turnover. At present, IT, professional business services, and managerial positions in manufacturing are all in high demand and thus experience heightened levels of churn. Employers in all sectors, however, should be sure to assess the Vietnamese labor market and to implement probationary contracting if needed. 

How do probationary contracts differ from standard labor contracts?

Under the prevailing labor code of 2012, probation contracts are provided as a separate agreement to a standard labor contract.  As such, probationary contracts are subject to a reduced list of information and documentation requirements. The specifics of these requirements can be found above in the chart below outlining the differences in contract structuring: 

contract structure (2)

While separated from a legal standpoint, probation contracts can be issued in conjunction with a standard labor contract which will enter into force upon the successful completion of the probation contract. To tie the two agreements legally, clauses within the probationary contract may specify the continuation of a working relationship through a standard labor contract following the successful conclusion of the probation contract. This approach is popular in practice as it allows employers to effectively negotiate with potential candidates prior to the probation stage. Alternatively, it is also possible to incentivize performance over the period of probation by inserting clauses within the probation contract which offer employment but leave salary and benefits negotiations until after the probation period. 

Related Link Icon RELATED: Social Security in Vietnam: Understanding Your Obligations

What length of probation is permitted? 

Probationary periods permitted for a given position are proportional to the education required for the position and range from six days to 60 days. These contracts are limited to a one-time usage and must be converted to a standard contract of one year or more if both parties wish to continue the relationship beyond the period specified in the probation contract. Existing probationary contract lengths specified under Vietnamese employment law include:

60 days: probationary periods of up to 60 sixty days are reserved for positions that require professional or technical skills that demand a collegiate education or higher.

30 days: probation periods of up to 30 days may be applied for jobs that require a professional skill set, technical qualifications, some of which may require some degree of education to obtain. 

06 days: For all other employment in Vietnam, including most manual labor and manufacturing, probation is limited to six days.

The distinction between the 30 and 60 day probationary periods is subject to clarification at the circular level and should be monitored closely when drafting contracts. As a matter of compliance, pursuant to Circular No. 05/2015/NĐ-CP, companies will be required to notify those undergoing 30 and 60 day probationary periods of their results three days prior to the conclusion of the probation contract.

How much do employers have to pay employees under probation contracts? 

Compensation for probationary employment is subject to the agreement set out by the parties involved and must be stipulated in the agreement negotiated by the employer and employee. While there is considerable latitude with regard to the amount of compensation that is to be provided for probationary employment, employers are obligated to provide compensation no lower than 85 percent of the going wage applied to the position for which the probation is in preparation.


About
 Us

Vietnam Briefing is published by Asia Briefing, a subsidiary of Dezan Shira & Associates. We produce material for foreign investors throughout Eurasia, including ASEANChinaIndiaIndonesiaRussia & the Silk Road. For editorial matters please contact us here and for a complimentary subscription to our products, please click here.

Dezan Shira & Associates provide business intelligence, due diligence, legal, tax and advisory services throughout the Vietnam and the Asian region. We maintain offices in Hanoi and Ho Chi Minh City, as well as throughout China, South-East Asia, India, and Russia. For assistance with investments into Vietnam please contact us at vietnam@dezshira.com or visit us at www.dezshira.com

 

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dsa brochureDezan Shira & Associates Brochure 
Dezan Shira & Associates is a pan-Asia, multi-disciplinary professional services firm, providing legal, tax and operational advisory to international corporate investors. Operational throughout China, ASEAN and India, our mission is to guide foreign companies through Asia’s complex regulatory environment and assist them with all aspects of establishing, maintaining and growing their business operations in the region. This brochure provides an overview of the services and expertise Dezan Shira & Associates can provide.

DSA_Doing Business in Vietnam 2017_cover_126x90pxAn Introduction to Doing Business in Vietnam 2017
An Introduction to Doing Business in Vietnam 2017 will provide readers with an overview of the fundamentals of investing and conducting business in Vietnam. Compiled by Dezan Shira & Associates, a specialist foreign direct investment practice, this guide explains the basics of company establishment, annual compliance, taxation, human resources, payroll, and social insurance in this dynamic country.

 Managing Contracts and Severance in Vietnam 
In this issue of Vietnam Briefing, we discuss the prevailing state of labor pools in Vietnam and outline key considerations for those seeking to staff and retain workers in the country. We highlight the increasing demand for skilled labor, provide in depth coverage of existing contract options, and showcase severance liabilities that may arise if workers or employers choose to terminate their contracts.

 

Vietnam Implements Social Insurance Updates

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Social Insurance

By: Dezan Shira & Associates 
Editor: Chau Pham 

Vietnam’s social insurance scheme is undergoing a series of changes influencing both the statutory contribution rates required of enterprises as well as the types contracts triggering liability. With rate reductions applied from June 2017 and introduction of a wider liability for social insurance contributions scheduled for early 2018, foreign and domestic companies alike will be required to adjust compliance procedures in the near future.

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Vietnam’s Overtime Limits Set to Double Under Recent Proposal

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By: Dezan Shira & Associates 
Editor: Koushan Das

The Ministry of Labour, Invalid, and Social Affairs has proposed to revise the 2012 Labour Code to increase the overtime ceiling from 200 hours per year to 400 hours per year. Manufacturing enterprises have long asked to increase overtime limit to increase production efficiency, worker incomes, and competitiveness. Once the draft is approved, enterprises will be able to ask for more overtime work.

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Payroll Management in Vietnam – New Issue of Vietnam Briefing Magazine

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VB_2017_05_Payroll_Management_in_Vietnam_-_ImageThe latest issue of Vietnam Briefing Magazine, titled “Payroll Management in Vietnam”, is out now and currently available to subscribers as a complimentary download in the Asia Briefing Publication Store.

In this issue:

  • Vietnam’s Statutory Payroll Requirements
  • Emerging Challenges in Vietnamese Payroll
  • Expert Commentary: Understanding the Benefits of Payroll Outsourcing in Vietnam

As companies establish new operations in Vietnam, one of the first tasks for businesses is to put employees on the new entity’s payroll.

This will allow new market entrants to engage local workers and bring in managerial staff from overseas. But payroll administration can quickly become a significant undertaking, even for those who are well versed in market expansion. Payroll compliance and the ever-changing regulatory environment are a challenge for any expanding business.

From individual income tax calculation to ensuring proper social security contributions, companies are required to conduct a variety of monthly compliance tasks to ensure that they are up to take with their statutory obligations. These areas of compliance can often be quite complex and take significant time to master, navigate, and implement effectively.

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Managing Payroll in Vietnam

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By: Tam Nguyen, Business Advisory Manager at Dezan Shira & Associates

In recent years, foreign direct investment (FDI) flows into Vietnam have been on the rise as greater numbers of foreign companies decide to establish businesses in the country. To operate in Vietnam, a thorough knowledge of the country’s salary structure is vital to maintaining efficiency and to motivate quality staff to stay and contribute to your company’s growth for years to come.

Salary and wages

The salary of Vietnamese employees that work in foreign companies in Vietnam is determined through negotiations between the two parties, but it should be no lower than the minimum monthly salary rates as stipulated by the Vietnamese government.

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Vietnam’s New E-Visa: Eligibility and Applications Explained

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By: Dezan Shira & Associates 
Editor: Daniel Schaefer

With many countries already using the E-visa system, the time for Vietnam to jump on the bandwagon has finally arrived. In November 2016, Vietnam’s National Assembly approved a plan to issue E-visas and starting February 1st, 2017, Vietnam successfully implemented a 2-year pilot program which will allow citizens from 40 countries to be able to apply for an e-Visa.  The new pilot program will be carried out alongside Vietnam’s current visa process, which currently requires applicants to apply for a visa through a third party, which then contacts the Vietnamese embassy. The new e-visa allow eligible candidates to apply for a 30-day single-entry visa online, as well as allowing them to enter through any of the eight international airports (Hanoi, Ho Chi Minh City, Da Nang, Nha Trang, Hai Phong and Phu Quoc Island) and via any of the 13 international land border crossings. This Vids will exclusively be for 30-day single-entry visas.

DZS RELATED: Visa and Work Permit Services from Dezan Shira & Associates

Who is eligible for Vietnam’s E-Visa?

As of the date of this article being published, the Vietnamese government is allowing citizens from the following 40 countries to apply for an e-Visa:

Armenia, Argentina, Azerbaijan, Belarus, Brunei, Bulgaria, Chile, China, Columbia, Czech Republic, Cuba, Denmark, Finland, France, Germany, Greece, Hungary, Ireland, Italy, Japan, Kazakhstan, Luxembourg, Mongolia, Myanmar, Norway, Panama, Peru, Philippines, Poland, Romania, Russia, Slovakia, South Korea, Spain, Sweden, Timor Leste, United Kingdom, United States, Uruguay and Venezuela.

How to apply for Vietnamese E-Visas?

Before applying, the candidate must have prepared a scanned copy of one’s valid passport details as well as a scanned passport photo. It is important to note that the scanned passport photo being sent must have the applicant looking directly at the camera and not smiling.

Once the appropriate materials have been gathered, the inquirer must go to the following link and proceed with the following steps:

  1. Click on “for foreigners”
  2. Upload the passport details and passport photo files. It is important to note that both files must be uploaded separately.
  3. Fill in all the required information.
  4. Pay the US$25 application fee and submit the application. This fee is non-refundable, even if the application is denied.
  5. Once successfully submitted, the applicant will receive a registration code, which can be used to check on the status of the application.
  6. Wait the standard 3-5 business days and return to the website to find out if the application has been approved.
  7. If approval has been granted, print out the e-Visa as proof for travel.
Related Link Icon-VB RELATED: Vietnam’s Visa and Work Permit Procedures
Working out the Bugs

Due to this new initiative being a pilot program, there will no doubt be some kinks and bugs that will need to be worked out. Some particular difficulties that come with this form of visa is that the E-visa will only be available as a 30-day single-entry visa, and cannot be extended. If a visa extension is required, one must go through the previous method of obtaining a visa, which involves going through a third party, or the Vietnamese embassy itself (this visa is generally referred to as the Visa on Arrival).

Something else that must be remembered is that before applying for an E-visa, the border of entry must have already been determined. Once the visa is issued, the traveler cannot switch the point of arrival.

Applying for the E-visa does take longer than its Visa on Arrival counterpart. The application generally requires 3 business days, as oppose to the Visa on Arrival which can be done in two days or less. If any problems were to occur during the visa application process, it will be difficult to receive service support as there has yet to be a service support page established for it. Since its implementation, the website’s servers have also crashed due to access overload, which can make applying for it a bit cumbersome.

Takeaway

With Vietnam expecting to see a 15 percent increase in tourism over the previous year, the E-visa will allow citizens from those 40 countries to have a far smoother experience applying for Vietnamese visas. Those 40 countries were strategically picked as last year; Vietnam saw 2.2 million visitors from China, 1.2 million from South Korea, and 611,000 from Japan respectively. Despite the quirks that may arise from the early practice of this new program, it is proof that Vietnam is embracing its’ tourism industry and is taking proactive steps to adapt to 21st century tourism.


About
 Us

Asia Briefing Ltd. is a subsidiary of Dezan Shira & Associates. Dezan Shira is a specialist foreign direct investment practice, providing corporate establishment, business advisory, tax advisory and compliance, accounting, payroll, due diligence and financial review services to multinationals investing in China, Hong Kong, India, Vietnam, Singapore and the rest of ASEAN. For further information, please email vietnam@dezshira.com or visit www.dezshira.com.

Stay up to date with the latest business and investment trends in Asia by subscribing to our complimentary update service featuring news, commentary and regulatory insight.

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dsa brochureDezan Shira & Associates Brochure
Dezan Shira & Associates is a pan-Asia, multi-disciplinary professional services firm, providing legal, tax and operational advisory to international corporate investors. Operational throughout China, ASEAN and India, our mission is to guide foreign companies through Asia’s complex regulatory environment and assist them with all aspects of establishing, maintaining and growing their business operations in the region. This brochure provides an overview of the services and expertise Dezan Shira & Associates can provide.

DSA_Doing Business in Vietnam 2017_cover_126x90px

An Introduction to Doing Business in Vietnam 2017
An Introduction to Doing Business in Vietnam 2017 will provide readers with an overview of the fundamentals of investing and conducting business in Vietnam. Compiled by Dezan Shira & Associates, a specialist foreign direct investment practice, this guide explains the basics of company establishment, annual compliance, taxation, human resources, payroll, and social insurance in this dynamic country.

VB_2016_12_en_Managing_Contracts_and_Severance_in_Vietnam_-_Cover (1)

Managing Contracts and Severance in Vietnam
In this issue of Vietnam Briefing, we discuss the prevailing state of labor pools in Vietnam and outline key considerations for those seeking to staff and retain workers in the country. We highlight the increasing demand for skilled labor, provide in depth coverage of existing contract options, and showcase severance liabilities that may arise if workers or employers choose to terminate their contracts.

Permitted Contract Structures Under Vietnamese Labor Code

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By Dezan Shira & Associates
Editor: Maxfield Brown

All foreign enterprises seeking to staff operations in Vietnam will find the process regulated by the Vietnamese Labor Code of 2012 (Law No. 10/2012/QH13) and guided by several circulars which have clarified aspects of this legislation. Covering hiring, probationary periods, termination of contracts, and post-employment benefits, the nature of contracts should be studied closely to ascertain the most effective means of onboarding workers as well as ensuring the compliance requirements associated with these contracts.

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Managing Contracts and Severance in Vietnam – Latest Issue of Vietnam Briefing Magazine

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VB_2016_12_en_Managing_Contracts_and_Severance_in_Vietnam_-_CoverThe latest issue of Vietnam Briefing magazine, titled “Managing Contracts and Severance in Vietnam“, is out now and available to subscribers as a complimentary download in the Asia Briefing Publication Store.

In this issue:

  • Identifying Trends in Vietnamese Labor
  • Permitted Contract Structures Under Vietnamese Labor Code
  • Contract Termination and Severance Obligations

Vietnam is undergoing a significant transformation in economic development, moving from conventional production of low cost goods towards the output of more technologically intensive products. While presenting significant opportunities for foreign investors, this has simultaneously created a strain on domestic labor markets. With a finite pool of skilled labor, now more than ever before, investors are exposed to issues stemming from the sourcing of qualified talent and the retention of existing workers for the long term.

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Podcast: Recruiting Practices in Vietnam

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By Dezan Shira & Associates

Oscar Mussons, Associate of Dezan Shira & Associates’ operations in Vietnam, speaks with Jon Whitehead. Jon is the Country Manager for Robert Walters Vietnam – a global, specialist professional recruitment consultancy working with clients across the region and the world.  Together Oscar and Jon explore the Vietnamese landscape with regard to human resources, hiring and retaining Vietnamese workers, and Vietnam’s prospects for the years to come.  

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