Vietnam Labor Law: low wages despite protective legislation for employees
With cheap labour, Vietnam is a very attractive country for foreign investors. Vietnam labor law, however, is protective of employees. The employer is required to comply with the numerous mandatory provisions of the Vietnam labor laws.
Key aspects of Vietnam labor law:
Vietnam labor law provides mandatory rules in many areas:
- Hours of work: the work may not exceed 8 hours per day and 48 hours per week.
- Overtime: overtime may not be greater than 4 hours per day and 200 hours per year according to Vietnam labor law.
- Leave: work on public holidays, the weekly rest days and working days results in an increase in salary.
- Weekly and annual rest: The employee is entitled to a weekly rest day and 12 days of annual leave.
- Retirement: employees can retire between 55 and 60 years of age.
- Unilateral termination: termination of the employment contract by the employee with notice is possible provided you follow a 45-day notice for a permanent contract, 30 days for a Temporary between 12 and 36 months, and 3 working days at least for a seasonal contract or less than 12 months fixed term. Employees also have the right to unilaterally terminate employment contracts with advance notice as same as the law requires employers in general and other notices in advance which are subject to purposes of termination.
- Collective agreements: Vietnam labor law encourages the signing of collective agreements and requires the production of internal regulations for companies employing at least 10 employees.
- Compulsory contributions: it is a social duty in Vietnam, which requires employers and employees to contribute to social insurance, health insurance and unemployment insurance.
Attractive structure of the labour market in Vietnam
The structure of the labour market makes Vietnam highly attractive to foreign investors:
- Rural migration: Vietnam has experienced very high growth rates, which resulted in a large rural migration to urban areas and an industry transition from agriculture to industrial and service activities. This has contributed to a sharp rise in employee rates and higher wages.
- Underemployment: Underemployment is a major concern among workers and many people derive their income from the informal sector. In 2012 the informal sector accounted for 23.5% of employment. This part of the population is not protected by law, has no social security and is therefore difficult to administer.
- Young population: Labour is abundant and dynamic due to the young population. Over 80% of the population is under the age of 54. It is also inexpensive. The minimum wage is very low. The government increased the minimum monthly salary from 12.4% at 1st January 2016: it is 3.5 million dong, or $155 (applying for Area I comprising nominated districts/cities of Hanoi, Haiphong, Ho Chi Minh city, Dong Nai province, Binh Duong province and Ba Ria province).
Obtaining Vietnamese work permits
According to the Vietnam labor law, any foreign employee working on behalf of companies operating in Vietnam must be provided with a work permit, (such as head of a representative office or subsidiary established in Vietnam, foreign lawyers who have a certificate of practice of the legal profession in Vietnam, foreigners being members/owner of LLC, members of the Board of management of SC, foreigners who are internally transferred within a company and within the scope of the List of Commitments of Services of Vietnam with WTO comprising these eleven (11) services: business services; information services; construction services; distribution services; education services; environment services; financial services; medical health services; tourism services; culture and entertainment services; and transportation services).
Vietnam labor laws entrust the Department of Labour, War Invalids and Social Affairs of province and city (DoLISA) with the mission of delivering foreign workers work permits according to the form issued by the Ministry of Labour, War Invalids and Social Affairs (MoLISA).
The period of validity of the work permit is equal to that of the work contract or that the mission decided by the party that sent the employee, and must not exceed two years.
Obtaining Vietnamese business visas
To obtain a business visa valid for three to six months maximum, you must be in possession of an invitation from the Vietnamese authorities, according to the company’s business. The Vietnamese authority will contact the Directorate of Immigration that will provide an authorisation number.
There are 20 different categories of visas and durations. Visa categories are no longer converted from one purpose to another within the country. Foreign investors are subject to be granted visas or temporary resident cards for serving their long term investment activities in Vietnam with the maximum duration not exceeding five (5) years. For several cases, a visa could be granted to foreigners at the international border. Temporary residence permits will be granted by the immigration management department, police station with durations corresponding with the issued visas.
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