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Forums For Adjudicating Employment Disputes

Depending on its nature, a labour dispute in Vietnam may be settled by a labour conciliator, a labour arbitration council, and/or the court.

In particular, for individual labour disputes (i.e., disputes between an individual employee and his/her employer), the competent authorities for dispute settlement include labour conciliators, labour arbitration councils, and the court. Except for certain cases, such as those involving dismissal or unilateral termination, or payment of compensation or severance to an employee, for which mediation is not mandatory, individual labour disputes must be first settled by a labour conciliator appointed by the local labour authority. If either of the parties does not agree to the solution proposed by the conciliator or either party fails to comply with the conciliation agreement, then it may submit the dispute to the labour arbitration council (subject to the consent of the other party) or the court.

For collective labour disputes (i.e., disputes between the employees as a group and the employer), if a dispute is considered to be regarding existing rights (i.e., a dispute as to the performance of rights and obligations of the parties under the collective labour agreement or labour laws), then the competent authorities for dispute settlement include labour conciliators, labour arbitration councils, and the court. The dispute must be first settled by a labour conciliator. If a mutual agreement as suggested by the conciliator cannot be achieved, then either party may submit the dispute to the court. The parties may also mutually agree to submit the dispute to the labour arbitration council. If the parties elect to submit their dispute to a tribunal under the labour arbitration council, and it finds that the employer has violated the law, the tribunal will not make a settlement decision but will instead issue a record and transfer the documents to a competent authority for settlement as prescribed by law.

If a collective labour dispute involves benefits (i.e., a dispute arising from a demand of either of the parties that is not yet stipulated under the labour laws or the collective labour agreement, such as a dispute as to the demand of the employees for a salary raise or reduction of working hours, etc.) the competent authorities for dispute settlement include labour conciliators and labour arbitration councils. The dispute shall initially be settled by way of conciliation through a labour conciliator. If conciliation fails, then the parties may mutually submit the dispute to the labour arbitration council for settlement or the employees’ representative organization may organize a strike. The authorised representatives of the two disputing parties must be present at the session resolving a collective labour dispute about benefits. If necessary, the labour arbitration council can invite representatives of other concerned bodies and organisations to attend the session. At the dispute resolution meeting, the arbitration tribunal shall specify the issues raised by the parties and each party shall have the opportunity to present its position. After studying the case file and collecting evidence, the arbitration tribunal will issue a decision on the dispute and send it to the parties. If the tribunal fails to issue a decision or the employer fails to implement it, the employees may go on strike.

The Main Sources Of Employment Law

The main sources of employment law in Vietnam are the Labour Code 2019 (effective from 1 January 2021), the Law on Work, the Law on Vietnamese Labourers Working Overseas Under Contract, the Law on Social Insurance, government decrees, ministerial circulars, and guiding documents issued and to be issued to guide the new Labour Code 2019.

National Law And Employees Working For Foreign Companies

Except for those foreign individuals working in Vietnam under an intra-company transfer regime (i.e., a foreign parent company assigns its employee to work at its Vietnam-based subsidiary under an offshore contract), Vietnamese labour laws apply to all individuals physically present in Vietnam working for Vietnam-based organizations (including foreign-invested enterprises).

National Law And Employees Of National Companies Working In Another Jurisdiction

Normally, Vietnamese labour law is applied when Vietnamese companies send their employees to work overseas. Technically, the employment contract does not need to specifically address this issue.

Data privacy

Although the right to privacy and confidentiality of information is a fundamental right recognized by the Constitution of Vietnam, there currently is no single comprehensive law governing data privacy. In February 2021, Vietnam’s Ministry of Public Security released a draft Decree on Personal Data Protection for public comments, with an ambitious goal of issuance and effectiveness by 1 December 2021. For now, Vietnam’s data protection laws are scattered throughout different pieces of legislation, including the Civil Code and various laws and regulations which apply to both Vietnamese and foreign organizations and individuals engaged in the collection, processing, use, storage, transfer and disclosure of personal information in the territory of Vietnam.

There is no definition of data privacy. In general, data about the private life and personal information of an individual is protected. The definition of personal data and thus the scope of protection is broadly interpreted and largely depends on the discretion of the subject of the information.

In general, the collection, storage, use, processing, publication, disclosure, or transfer of information or materials related to the personal information of an individual must be consented to by that person, unless otherwise stipulated by law. Normally, the consent to the collection and processing of employees’ personal information is provided in the relevant labour contract.

Legal Requirements As To The Form Of Agreement

A labour contract must be in writing and executed before the employee starts to work. Contracts for temporary jobs which last for a term of less than one month do not need to be in writing and can be oral. A labour contract must be written in Vietnamese or in both Vietnamese and another foreign language if the employee is an expatriate.

A labour contract should include the following material terms: (i) work to be performed; (ii) working hours and rest hours; (iii) wages; (iv) working place/location; (v) duration of contract; (vi) conditions on occupational safety and hygiene; (vii) statutory insurance for the employee; and (viii) training and skills improvement for the employee.

Mandatory Requirements
  • Trial Period
  • There is no compulsory obligation to provide trial periods, otherwise known as ‘probationary periods’, when engaging new employees, but it is common in practice to do so. An applicable probationary period is maximum of 180 calendar days for the position of enterprise executive prescribed by the Law on Enterprises and the Law on Management and Use of State Investment in Enterprises; 60 calendar days for jobs requiring a college degree or more; 30 calendar days for jobs requiring vocational qualifications or technical workers and professional staff; and 6 business days for other types of work. Employees must be paid at least 85% of their normal salary during the trial period.

  • Hours Of Work
  • The maximum working hours are 8 hours per day and 48 hours per week for normal working conditions. Working hours may be on an hourly, daily or weekly basis, depending on the employer’s needs. If on a weekly basis, the regular working hours must not exceed 10 hours a day and 48 hours a week. Night-shift work hours are from 10 p.m. to 6 a.m. of the subsequent day.

  • Special Rules For Part-time Work
  • There is only one provision specifically providing for part-time workers, according to which part-time employees are entitled to a wage and are entitled to equal opportunities and to non-discrimination and assured labour safety and hygiene.

  • Earnings
  • Vietnamese labour laws require that the salary payable to employees must at least be equal to the regional minimum salary declared by the Government from time to time. The regional minimum salary in 2021 applicable to non-State-owned enterprises ranged from VND 3,070,000 to VND 4,420,000, depending on the geographical area. This salary level is typically adjusted annually.

  • Holidays/Rest Periods
  • There is a requirement that employees must be entitled to a rest period of a minimum of 24 consecutive hours per week. There are also various compulsory daily and weekly rest periods and/or breaks which must be observed. For instance, an employee who works for 6 hours consecutively is entitled to a break of at least 30 minutes. If the employee works at night, the minimum break is 45 minutes. Employees working on shifts are entitled to a break of at least 12 hours before changing to a different shift.

    Employees are entitled to 12 to 16 annual leave days with pay, depending on the type of work in which they are engaged. In addition, there are 11 public holidays per annum in Vietnam.

  • Minimum/Maximum Age
  • The normal age for lawful employment is 18. In special cases, employers may employ minors who are as young as 13, subject to the satisfaction of certain conditions such as the nature of work and the prior acceptance of the guardian of the employee.

    The Labour Code 2019 raises the retirement ages of employees in normal working conditions from the previous 60 to 62 for males, and from 55 to 60 for females. These changes are being phased in gradually, and will reach the designated ages by 2028 for males and 2035 for females.

    The retirement ages of employees who suffer from work capacity reduction; doing laborious, toxic or dangerous work; or working in highly disadvantaged areas may be younger by up to 5 years than the normal retirement ages unless otherwise prescribed by law. Retirement ages of skilled employees and employees in certain special cases may be older by up to 5 years than the normal retirement ages unless otherwise prescribed by law.

  • Illness/Disability
  • Employees who suffer from illness and/or disability and take leave in accordance with doctor’s orders shall receive a monthly allowance paid by the social insurance fund of Vietnam. Depending on the type of work and nature of the illness or disability, the length of time for the allowance varies. The allowance is equal to 75% of the employee’s regular wage, subject to a cap of 20 times the basic minimum wage (at the time of writing, the capped amount was VND 32 million per month).

  • Location Of Work/Mobility
  • An employee’s place of work must be set out in the labour contract in order to comply with statutory requirements. Mobility clauses can be included in the employee’s labour contract, if necessary. Where a job requires travel to another temporary location, it is customary for the employer to reimburse all reasonable travel expenses.

  • Pension Plans
  • Both employers and employees are required to contribute to the compulsory social insurance fund that shall pay a pension to employees when they retire.

  • Parental Rights (Pregnancy/ Maternity/ Paternity/ Adoption)
  • Employers must allow pregnant employees to have their health checked regularly. Female employees are entitled to take 6 months of maternity leave. Male employees are permitted to take 5 to 14 business days of paternity leave, depending on the circumstances of the birth.

  • Compulsory Terms
  • The Labour Code requires a labour contract to include the following material provisions: (i) Name and address of the employer and the position and name of the employer’s legal representative; (ii) full name, date of birth, gender, residential address, telephone number, email address, and the number of ID Card or other legal document of the employee; (iii) work to be performed and work location; (iv) term of the labour contract; (v) salary/wage rate, method and time of salary payment, allowance and other additional payment; (vi) regime for salary increase; (vii) working hours and rest hours; (viii) personal protective equipment for the employee; (ix) social, medical and unemployment insurance; and (x) training.

  • Non-Compulsory Terms
  • Employers and employees are free to agree on any other terms in addition to the compulsory provisions, provided that these additional provisions are no less favourable than what is statutorily required and are not contrary to the law or social morals.

Types Of Agreement

Under Vietnamese labour laws there are two types of labour contracts: (i) Indefinite-term labour contracts and (ii) fixed-term labour contracts with a duration of up to 36 months.


The Labour Code allows for covenants on confidentiality of business and technology secrets via provisions in the labour contract or a separate agreement. Such covenants may include payment of compensation if the employee breaches the confidentiality agreement.

Ownership of Inventions/Other Intellectual Property (IP) Rights

The ownership of inventions and other IP rights generated by the employee in the course of employment shall belong to the employer except if there is an agreement which states otherwise between the employee and the employer.

Pre-Employment Considerations

Employment is highly regulated in Vietnam, and the labour laws tend to be employee-friendly. In particular, it can be difficult to unilaterally terminate an employee unless specific grounds are met and strict procedures are followed.

Due to this reason, most employers choose to enter into a definite-term contract of 12 months instead of executing an indefinite-term contract to enable the employers to review the employee’s performance before hiring him/her on a long term basis. Employers should note, however, that they may only enter into two definite-term contracts before they must enter into an indefinite-term contract with an employee, except for certain special classes of employees, such as foreign employees or employees who are older than the legal retirement age.

Hiring Non-Nationals

All foreign nationals working in Vietnam must have a work permit, regardless of the length of time they intend to work in Vietnam, unless exempted. Vietnamese employers are required to provide support and submit application documents for the work permit. Foreign workers exempted from the work permit requirement include, among others, capital-contributing members or owners of limited liability companies and members of the board of management of shareholding companies (provided the companies have a minimum capital contribution of VND 3 billion), and Heads of Representative Offices of non-governmental organizations.

Hiring Specified Categories Of Individuals

Employers are prohibited from hiring female employees, pregnant employees, child employees, disabled workers, and senior employees for hazardous and hard work that may cause health problems.

Outsourcing And/Or Sub-Contracting/Temporary Agency Work

Labour outsourcing is considered a conditional business in Vietnam. As such, labour outsourcing is permitted only for certain types of work and the labour lessor must be licensed to conduct labour outsourcing. In addition, a deposit is required for carrying out the business. The Labour Code provides general principles for this service. For example, the labour lessor is required to pay salary to a contractor at least equal to the salary the lessee would pay for its own employee who has the same level and same job, and the maximum term for outsourcing is 12 months. Labour outsourcing is also limited to only 20 types of jobs set out on a specific list promulgated by the government.

Changes To The Contract

In general, a labour contract must be made in writing and signed by both the employee and employer prior to the employee’s start of work. Therefore, any change to the content of a labour contract must also be made in writing and signed by both parties (except for cases where the change brings more benefits to the employee, such as salary increase, etc.). The party proposing the change to the contract must provide at least three business days’ written notice of the proposed change to the other party, and if the other party agrees, the change can be in the form of an addendum appended to the original labour contract or set out in a new labour contract. Any changes to the duration of the labour contract must be set out in a new contract, and the law prohibits the parties from making this amendment through an addendum. Nevertheless, the law also allows the employer to temporarily change the terms and conditions of a labour contract for a limited period of time under certain circumstances. In particular, in cases of force majeure or due to the employer’s business demand, the employer may temporarily assign an employee to do work other than that specified in the labour contract, subject to the satisfaction of the requirements as to the time of the assignment not exceeding 60 calendar days in one year and the new salary being at least 85% of the current salary.

Change In Ownership Of The Business

Where there is a merger, consolidation, division, separation, or transfer of ownership, or change in the right to manage, or change in the right to use assets, there must be a plan for labour usage. The employer must consult with the employees’ representative organization (if any) about this plan before it is implemented. If a labour contract is terminated under these circumstances, an employee who is let go, but who has worked for the former employer for 12 months or longer, shall be entitled to receive a job-loss allowance equal to one month’s salary for each working year (for which the employee has not already received unemployment benefits in accordance with the Law on Work) but no less than two months’ salary.

Absence For Military Or Public Service Duties

Employees are entitled to suspend performing their duties under labour contracts if they are required to carry out military service or other public civic obligations. Employers are required to re-employ the employees at the end of the suspension period.

Works Councils or Trade Unions

A trade union is defined under Vietnamese law as the body that represents and protects the employees. Generally, the trade union is delegated to participate in, negotiate, sign, and supervise the implementation of collective labour agreements, wage scales, payrolls, internal labour rules, etc.; to assist in resolution of labour disputes, and to discuss and cooperate with the employer to formulate a harmonious, stable and progressive labour relationship within enterprises.

The trade union system consists of the Vietnam General Confederation of Labour and the trade unions at the provincial, district and grassroots levels. Grassroots trade unions are formed upon request of the employees at enterprises with the assistance of, normally, the district-level trade union, provided that there are at least five employees registered as trade union members. A Vietnamese employee working in an enterprise has the right (but not obligation) to establish and join a grassroots trade union and to participate in its activities in accordance with the Law on Trade Unions and Vietnam’s Trade Unions Charter.

Employers are required to facilitate and assist the establishment and operation of the grassroots trade union and, once the grassroots trade union is established, the employer must recognise it and create favourable conditions for its operation. In addition, employers are required to contribute 2% of the payroll amount used as the base salary for social insurance contribution purposes (this base salary is subject to a cap of 20 times the basic minimum wage; at the time of writing, the capped amount was VND 32 million per month), in order to support trade union operations (the “Trade Union Fee”), while the amount contributed by the employee shall be 1% of his/her salary. Employers are required to contribute the Trade Union Fee even if there is no grassroots trade union at their enterprise.

Under the Labour Code 2019, in addition to the grassroots trade union operating at the employer, the employees may also set up their own organization to represent their legitimate rights and interests. At the time of writing, the government had not yet released a decree guiding the establishment and operation of employee representative organizations, but we anticipate this decree to be released in 2021.

Employees’ Right To Strike

Employees may voluntarily go on strike. However, strikes must be organized and led by the employees’ representative organizations. Striking is allowed only in respect of a collective labour dispute regarding new benefits and after such dispute has been heard by a labour conciliator (but in which the parties have disagreed with the proposed agreement by the labour conciliator). Statutory procedures and steps for organization of strikes must be followed, such as obtaining opinions from the employees or the trade union, issuing a decision to strike, notifying the decision to strike to the employer and the labour authority, etc.

Strikes are prohibited at enterprises which supply certain types of products and services that are essential for the national economy for the reason that such strikes may cause threats to the national defence and security of Vietnam.

Employees On Strike

Employers are not required to pay salary to employees who participate in a strike. However, employers are prohibited from terminating labour contracts or applying labour disciplinary penalties to employees or to organizers of strikes or transferring employees or strike organizers to do other jobs or to work at another location because of their participation in or preparation for a strike.

Employers’ Responsibility For Actions Of Their Employees

Employers are responsible for the acts of their employees in the course of employment, except where employees act outside the scope of their employment.

Procedures For Terminating the Agreement

There must be proper legal grounds for an employer to terminate a labour contract with an employee, such as performance issues, prolonged illness, a force majeure event or winding up of the company. Employers are required to follow a number of statutory steps such as sending advance written notice regarding the termination of employment to employees within a statutory time limit.

If an employer does not have legal grounds for the termination or fails to follow the proper statutory procedure, a termination may be declared wrongful and, if so, the employer may be required to reinstate the employee, pay their salary for the period that they were not allowed to work, and pay two months or more of the employee’s salary as a penalty for the wrongful termination.

Instant Dismissal

Under Vietnamese labour law, dismissal is the most severe labour disciplinary measure. Employees may be dismissed when they commit an act of gross misconduct such as theft, embezzlement, using drugs at the workplace, gambling, deliberately injuring another person, sexual harassment, disclosure of business or technology secrets, or repeatedly commit acts in violation of the employer’s work rules or policies. A disciplinary hearing meeting must be held and a number of statutory procedures must be followed.

Termination On Notice

An employee may resign from his/her job without a specified reason, subject to an advance notice of at least 45 working days (for an indefinite-term labour contract) or 30 days (for a definite-term contract from 12 months to 36 months) and 3 working days (for a definite-term contract of less than 12 months). For termination without notice, there must be statutorily recognized grounds for his/her resignation, such as the employee not being assigned the correct work or workplace as agreed in the labour contract, or the employee was mistreated, sexually harassed or subject to labour coercion, etc. In this case, no advance notice is required.

An employer may terminate a labour contract only if there are legal grounds as provided for by the law.

Termination By Reason Of The Employee's Age

Unilateral termination by reason of the employee’s age is not a legal ground under Vietnamese labour laws, unless the employee reaches legal retirement age. The legal retirement age under the Labour Code 2019 is 62 for men and 60 for women (though these ages are being gradually phased in). A retired person will receive his/her pension from the social insurance fund. When an employee reaches legal retirement age, the employer is entitled to opt to terminate the labour contract with the employee or to extend the labour contract with such employee. If the labour contract is extended, the senior employee is entitled to reduced working hours in accordance with the provisions of law. Employers may enter into an unlimited number of definite-term contracts with senior employees, whereas in the case of normal employees, employers may only enter into two definite-term contracts.

Unilateral Termination In Cases Of Force Majeure

Where, as a result of a natural disaster, fire, epidemic or for any other cause of force majeure as prescribed by law, an employer, despite having taken all necessary measures to remedy the problem, still needs to downsize its business, the employer is entitled to early termination of labour contracts with employees. However, the employer is still required to send an advance notice to the employees and follow the statutory procedures for termination. If the employees have been employed for at least 12 months, they shall be entitled to a severance allowance which is currently equivalent to half a month’s salary for each year of service during which the parties did not participate in unemployment insurance. Unemployment insurance was introduced in Vietnam in 2009, so for most Vietnamese employees, only working periods prior to 2009 qualify. However, if the employer and employee have suspended their participation in unemployment insurance at any point during the employment relationship (e.g., for the employee’s maternity leave), severance allowance will be due for this period.

Collective Dismissals

There is no collective dismissal in Vietnam. Rather, the Labour Code allows for mass layoffs. Specifically, an employer may make employees redundant due to, inter alia , changes in structure or technology, the merger or consolidation or cessation of operations of one or several departments or units, or difficulties due to economic conditions.

Changes in structure or technology are further interpreted to include the following cases:

    1. Changes of organizational structure or re-organization of employment/positions;
    2. Changes to manufacturing or business processes, technology, machinery, or equipment associated with the employer’s manufacturing or business lines; and
    3. Changes to products or product structures.

Difficulties due to economic reasons are defined as an economic crisis or economic depression or where there has been a change in law or state policy restructuring the economy or implementing an international commitment.

Where the changes in structure or technology or difficulties due to economic reasons lead to the termination of two or more employees , the employer, in conjunction with the employees’ representative organization (if any) is required to formulate and implement a so-called “labour usage plan”. The employer must also provide at least 30 days’ notice of the termination to the People’s Committee of the province and the employees.

Termination By Parties’ Agreement

The parties are entirely free to agree to termination on any grounds they desire. Where both parties agree to terminate employment, they are not required to give advance notice. The parties may also waive any procedures. However, all the related issues such as employment termination, severance payments, personal income tax, social insurance, etc., should be finalized and addressed in a document, which should be signed by both parties.

Directors Or Other Senior Officers

In addition to being subject to labour law, certain high-ranking employees, such as general directors and members of the board, are subject to Vietnam’s Investment Law of 2020 and Enterprise Law of 2020, as well as the company’s charter (i.e., articles of association). The term for the above positions shall not exceed 5 years, but it is renewable.

A director or senior officer may have his/her job description set out in the labour contract. However, the functions, duties, obligations, rights, and authority of such employees may also be provided by the relevant law and the company’s charter and/or decisions assigned by general shareholders’ meetings, members’ council, boards, etc.

Special Rules For Categories Of Employee

The Vietnamese labour laws provide special rules for certain categories of employees, including underage, female, disabled and senior employees. For example, for underage employees (i.e., employees under the age of 18), employers are prohibited from using them in extremely heavy, toxic or dangerous work or in jobs which adversely affect the personality and health of underage employees, such as in the production and trading of alcohol, tobacco or other addictive substances; or in casinos, bars, dance halls, etc.

Senior employees include people who continue to work after having reached the retirement age. These employees are entitled to reduce the number of working hours in a day or work on a part-time regime. Employers are prohibited from assigning senior employees to heavy, toxic or dangerous work which might have adverse effects on their health. Employers may enter into an unlimited number of definite-term contracts with senor employees, whereas normally, they may only enter into two definite-term contracts.

Employers are required to ensure suitable working conditions, tools and equipment appropriate for disabled employees and must take regular care of their health. It is also prohibited to allow a disabled person whose ability to work has been reduced by 51% or more to work overtime or at night. Employers are prohibited from assigning disabled workers to heavy, toxic or dangerous work.

Female employees are entitled to the most protective rules. Among other rules, employers are required to ensure the implementation of gender equality during the employment relationship with female employees and ensure that female employees have adequate changing rooms, shower facilities and toilets in the workplace. An employer is not permitted to assign a pregnant female employee to do night work, overtime work or to go on a business trip to remote areas from the employee’s 7th month of pregnancy or if the employee is nursing a child under one year old. During the pregnancy, nursing period or maternity leave, the female employee is not subject to labour discipline. After the maternity leave, the female employee is guaranteed her old job upon returning to work. The employer is also prohibited from assigning a female employee to work which has an adverse effect on her ability to bear and raise a child, work involving regular underwater immersion, or regular underground work (mining).

Specific Rules For Companies in Financial Difficulties

There are special rules which apply if a company is in financial difficulty. If a company goes into liquidation, an employer has legal grounds to unilaterally terminate all employees’ labour contracts. However, the employers are required to send an advance notice and pay severance allowance to employees, etc.

If the employer is in bankruptcy, the employees shall become unsecured creditors. However, the employees’ interests (salary, allowance, insurance, and other contractual benefits) will be given priority over other unsecured creditors.

Restricting Future Activities

Vietnamese labour laws set forth a basic principle under which employees have the right to work and to freely choose their type of work, and only competent courts have the right to prohibit employees from doing certain jobs. Therefore, while there is no direct legal prohibition, clauses that attempt to restrict the future activities of an employee are likely unenforceable in Vietnam.

In practice, employers often include “unfair competition” or “non-compete” clauses in labour contracts to prevent their former employees from working for their competitors or directly competing with them for a certain period of time after termination. In reality, the enforceability of such agreements will most likely depend on the voluntary compliance of employees.

Whistleblower Laws

There are no law provisions on whistleblowers. If an employer wants to provide regulations on whistleblowers, it would need to do so in its internal labour rules. It will be at the sole discretion of the labour authority to accept such a provision in the internal labour rules.

Special Rules For Garden Leave

Garden leave is not provided for by the laws of Vietnam. The employer may request the employees to take garden leave, provided that the employer pays the employee the salary as agreed in the labour contract.

Severance Payments

Vietnamese labour laws require employers to pay severance to employees for working periods which are not subject to unemployment insurance who have been continually working for the employer for 12 months or more. Unemployment insurance was introduced in 2009, so working periods prior to 2009 are subject to severance allowance. If there are gaps in the parties’ participation in unemployment insurance due to, for example, the employee’s maternity leave, this period will also be subject to severance allowance. For working periods subject to unemployment insurance, the employee will be entitled to payments from the unemployment insurance fund instead of the employer. There are certain cases in which employees are not entitled to severance allowance, such as in the case of dismissal or if the employee illegally resigns. Severance allowance is equal to half a month’s salary per year of service.

Special Tax Provisions And Severance Payments

In Vietnam, any income earned by an employee under the form of salary, wage, allowance, and bonus shall be subject to personal income tax (“PIT”). Employers, as income-paying organizations, are required to withhold and pay PIT to taxation authorities.

Generally speaking, statutorily allowed severance payment is not subject to PIT. However, any extra payments beyond that shall be subject to PIT.

Allowances Payable To Employees After Termination

Employers are not required to contribute to any allowance that is payable to employees after termination, unless otherwise agreed by the parties in the labour contract, provided that all required severance payments up to the date of termination (where applicable) were fully paid.

Time Limits For Claims Following Termination

In terms of a claim arising from the disciplinary measures resulting in dismissal, or a dispute arising from a unilateral termination of the labour contract or disputes relating to payment of compensation for loss and damage or payment of allowances, the statute of limitations for an individual labour dispute is 6 months if the dispute is referred to a labour conciliator, 9 months if the dispute is referred to a labour arbitration council, and one year if the dispute is referred to the court from the date of occurrence of conduct which any disputing party claims breached its rights or benefits.

Specific Matters Which Are Important Or Unique To This Jurisdiction

Labour laws of Vietnam are heavily employee-protective. Without carefully worded and registered internal labour rules, dismissal of an employee in Vietnam is practically impossible. Termination in other circumstances also requires careful attention to procedures and documentation. In addition, at-will termination is not allowed in Vietnam. An employer may only terminate a labour contract prior to its term under certain specific conditions as set out by the laws. Depending on the grounds for termination, the conditions for severance or job-loss allowance, notice periods and procedures may vary.

The Labour Code 2019 came into effect on 1 January 2021, but not all decrees and circulars have been issued guiding its implementation. To such extent, specific advice must be sought on a case-by-case basis.

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© 2021, Tilleke & Gibbins. All rights reserved by Tilleke & Gibbins as authors and the owners of the copyright in this chapter. Tilleke & Gibbins have granted to Multilaw non-exclusive worldwide license to use and include this chapter in this guide and to sublicense Lexis Nexis, a division of RELX Inc. and its affiliates certain rights to use and distribute this Guide.

The information in the How to Hire and Fire Guide provides a general overview at the time of publication and is not intended to be a comprehensive review of all legal developments nor should it be taken as opinion or legal advice on the matters covered. It is for general information purposes only and readers should take legal advice from a Multilaw member firm.

Publication Date: June 2021