All companies in Vietnam, regardless of their sizes, must have labour contracts in place for both foreign and local employees. A labour contract is extremely important in Vietnam as it lays out the rights and obligations of both employers and employees.
Organisations in Vietnam that hire employees without labour contracts will face a hefty monetary penalty as much as VND 20 million per case. Since labour contracts are crucial, this article will show you what you should prepare for a labour contract in Vietnam.
Important Elements to be Included in a Labour Contract in Vietnam
Drafting a labour contract in Vietnam requires you to include a few important things to help protect your business and your new hire.
Employment Terms and Conditions
In Vietnam, a temporary contract means an employment contract of fewer than three months. Take note that domestic helpers in Vietnam do not require an employment contract in written form.
When there is a necessity for an employment contract, the Labour Code of Vietnam states that all labour contracts must include the following items and must be drafted in Vietnamese. You can also have your labour contract written in both the foreign language and Vietnamese.
- Wages or salaries
- Contract duration
- Working hours, overtime, and rest hours
- Job scope and descriptions
- Workplace location
- Employee’s social insurance
- Terms and conditions of occupational safety and hygiene
- Work permit information
Termination & Amendment of Labour Contract
A labour contract shall specify the termination and contract amendment conditions.
a. Types and Conditions of Termination
Employers must adhere to regulatory steps to terminate employees. These steps include warning letter issuance and advanced notice of termination with a specified time limit.
Employers must prove the legal ground regarding the termination else a termination can be claimed wrongful under the Vietnamese law. Wrongful termination can lead to penalties such as paying an employee a two-month salary.
b. Amendment of Labour Contract
A labour contract in Vietnam is required to be drafted in writing and has both the employer’s and employee’s signatures. Any adjustments or amendments to the labour contract must also be performed in written form and signed by both the employer and the employee.
c. Employee’s Leaves and Social Insurance
Both employers and employees must contribute to the social insurance with rates specified under the Vietnamese Labour Law. The fund of social insurance provides allowances to employees for their sick leave, maternity leave, work accidents, pension, and occupational illnesses or diseases.
d. Personal Income Tax and Social Benefits
It is a statutory requirement for employers to withhold and pay employees’ income taxes at rates specified per Vietnamese Labour Law. Employees are the ones who are responsible for any extra tax due and tax filing at the end of the year.
For labour contracts with employment terms of more than three months, employers can withhold and contribute to the social insurance allowances. Social insurance allowances that employers withhold are used for maternity leave, sick leave, work accidents, pension, occupational diseases, and death.
For labour contracts that are fewer than three months, the salary itself covers the social insurance and employees are in charge of making payments.
e. Severance Pay and Dispute Resolution
If an employee has finished 12-month employment in a company in Vietnam, they are eligible for a severance pay within 7 days, amounting to 50% of their monthly salary for each year of completed work.
All enterprises in Vietnam shall form a council of labour conciliation to manage their labour disputes. Both employers and employees may also take certain cases to the court to achieve a settlement.
How Cekindo can Assist in Drafting a Labour Contract in Vietnam
Cekindo’s labour contract drafting services details the rights and duties of an employer and an employee.
Our team of legal experts with decades of experience ensures that the delivery of your drafted labour contract in Vietnam is reliable, accurate, and result-oriented. Our effective labour contract drafting helps you prevent potential issues that often come with new employment.
Furthermore, Cekindo can assist with legal contract review and provide you with comprehensive legal advice so that your rights are fully protected before the contract execution. Protecting your business should start today.
Fill in the form below to reach our knowledgeable legal consultants to draft your labour contract in Vietnam.