Understanding Vietnam Labor Law: A Guide for Foreign Employers

Understanding Vietnam Labor Law: A Guide for Foreign Employers

Overview

The Vietnam Labor Code 2019 (effective January 1, 2021) governs all employment relationships in Vietnam. For foreign employers operating in Vietnam — whether through a wholly foreign-owned enterprise, joint venture, or representative office — compliance is mandatory and strictly enforced.

Employment Contracts

Types of Contracts

Vietnam recognizes only two types:

Indefinite-term contracts: No expiry dateFixed-term contracts: Maximum 36 months

The old seasonal/job-specific contract category has been abolished.

Key Requirements

Must be in writing (Vietnamese language required)Must include: job description, salary, working hours, workplace, contract termProbation period: maximum 60 days for management positions, 30 days for othersElectronic contracts are now legally valid

Working Hours and Overtime

Standard Hours

Maximum 8 hours/day, 48 hours/weekAt least one 24-hour rest period per week

Overtime Limits

Maximum 40 hours/monthMaximum 200 hours/year (300 hours for certain industries)Employee consent required for overtime

Overtime Pay Rates

Normal working days: 150% of normal wageWeekly rest days: 200%Public holidays: 300%Night work premium: additional 30%

Termination

Employer-initiated termination

Valid grounds include:

Repeated failure to perform dutiesProlonged illness (12 months for indefinite contracts)Force majeure (natural disaster, pandemic)Business restructuring

Required notice:

45 days for indefinite-term contracts30 days for fixed-term contracts

Employee-initiated termination

Major change: Employees can now resign without providing a reason. They only need to provide advance notice:

45 days for indefinite-term contracts30 days for fixed-term contracts

Severance Pay

0.5 months' salary per year of serviceApplies when employment exceeds 12 monthsDoes not apply in cases of disciplinary dismissal

Mandatory Insurance

Employers must contribute to:

| Insurance | Employer | Employee | |-----------|----------|----------| | Social Insurance | 17.5% | 8% | | Health Insurance | 3% | 1.5% | | Unemployment | 1% | 1% |

Total employer burden: 21.5% of gross salary.

Foreign Employee Work Permits

Requirements

Work permit required for all foreign employeesValid for up to 2 years (renewable)Must apply before the employee starts workingExemptions: intra-company transferees (<90 days), experts providing emergency assistance

Common Violations

Employing foreigners without work permits (fine: up to 150 million VND)Exceeding work permit durationAssigning work outside the permitted scope

Practical Recommendations

Use bilingual contracts: Vietnamese is legally binding, but include English for clarityUpdate internal labor regulations: Must be registered with the labor authority if you have 10+ employeesKeep meticulous records: Attendance, overtime, leave — authorities can audit at any timeBudget for total labor costs: Base salary + 21.5% insurance + bonuses + leave

Conclusion

Vietnam labor law compliance requires ongoing attention and expert guidance. Non-compliance can result in significant fines, reputational damage, and operational disruption.

Contact Attorney Vo Thien Hien at Apolo Lawyers for comprehensive labor law advisory tailored to your business needs.