Establishing compliant employment relationships in Vietnam requires a thorough understanding of the country's labor laws, particularly concerning employment agreements. These contracts serve as the foundational document outlining the rights and obligations of both the employer and the employee, ensuring clarity and legal protection for all parties involved. A well-drafted employment agreement is crucial for preventing disputes and ensuring smooth operations within the Vietnamese legal framework.
Navigating the specifics of contract types, mandatory clauses, and termination procedures is essential for any company operating or planning to hire in Vietnam. Adhering to the regulations set forth by the Vietnamese Labor Code is not just a matter of compliance but also key to fostering a stable and productive workforce.
Types of Employment Agreements
Vietnamese labor law primarily recognizes two main types of employment agreements, each with distinct characteristics regarding duration and renewal. Understanding these types is fundamental to structuring employment relationships correctly.
| Contract Type | Duration | Renewal |
|---|---|---|
| Indefinite | No fixed term | Not applicable; continues until terminated according to law |
| Fixed-Term | Up to 36 months | Can be renewed once for a maximum of another 36 months. After the second fixed-term contract expires, if the employee continues working, an indefinite contract is automatically established. |
It is important to note the implications of the fixed-term contract renewal limit, as it automatically converts the relationship to an indefinite one if the employee continues employment after the second fixed-term contract expires.
Essential Clauses
Vietnamese law mandates the inclusion of specific clauses in every employment agreement to ensure transparency and protect the rights of both parties. Omitting these essential terms can render the contract non-compliant.
Mandatory clauses typically include:
- Employer's Name and Address: Full legal name and registered address of the employing entity.
- Employee's Full Name, Date of Birth, Gender, Address, ID/Passport Number: Essential personal identification details.
- Job Title and Description: A clear definition of the position and the main duties and responsibilities.
- Work Location: The primary place where the employee will perform their duties.
- Term of the Contract: Specifying whether it is an indefinite or fixed-term contract and its duration if fixed-term.
- Working Hours and Rest Periods: Details on daily/weekly working hours, breaks, and days off.
- Salary and Allowances: Base salary, any allowances, and the method and timing of payment.
- Social, Health, and Unemployment Insurance: The employer's obligation to contribute to mandatory insurance schemes.
- Training and Skill Improvement: Provisions related to employee training, if applicable.
- Occupational Safety and Health: Employer's responsibilities regarding a safe working environment.
Probationary Period
Probationary periods are permitted under Vietnamese law to allow both the employer and employee to assess suitability. The maximum duration of the probation period is strictly regulated based on the nature of the job.
Maximum probationary periods are:
- Up to 60 days: For positions requiring high technical or professional skills.
- Up to 30 days: For positions requiring standard technical or professional skills.
- Up to 6 working days: For other types of jobs.
During the probation period, the employee must receive at least 85% of the agreed salary for the position. Either party can terminate the probation agreement without prior notice or compensation. If the employee successfully completes probation, an official employment contract must be signed or the existing one becomes official.
Confidentiality and Non-Compete Clauses
Confidentiality and non-compete clauses are common in employment agreements, particularly for roles involving sensitive information or specialized knowledge.
- Confidentiality: Clauses protecting confidential business information are generally enforceable in Vietnam, provided the information is clearly defined as confidential and the scope of the obligation is reasonable.
- Non-Compete: Non-compete clauses are more challenging to enforce under Vietnamese law. While not explicitly prohibited, their enforceability often depends on specific conditions being met, such as providing reasonable compensation to the employee during the non-compete period, limiting the geographical scope and duration, and ensuring the restriction does not unreasonably prevent the employee from earning a living. Without clear legal precedents and specific statutory guidance on enforceability requirements, employers often find it difficult to successfully uphold non-compete restrictions in court.
Contract Modification and Termination
Any modification to an existing employment agreement must be made in writing and agreed upon by both the employer and the employee. This ensures that changes to terms and conditions are formally documented and acknowledged by both parties.
Termination of an employment contract can occur under various circumstances, each with specific legal requirements regarding notice periods and potential severance pay:
- Mutual Agreement: The contract can be terminated at any time if both parties agree in writing.
- Employee Resignation: Employees can resign by providing the required notice period (typically 30 days for indefinite contracts, or as specified for fixed-term contracts, though immediate resignation is possible in certain circumstances).
- Employer Termination for Cause: Employers can terminate a contract based on specific grounds defined in the Labor Code (e.g., employee misconduct, repeated failure to perform duties, illness). Strict procedures and notice periods apply.
- Redundancy/Restructuring: Termination due to economic reasons, restructuring, or technological changes requires specific procedures, including developing a labor utilization plan and providing notice.
- Expiration of Fixed-Term Contract: A fixed-term contract automatically terminates upon its expiration date, unless renewed or converted to an indefinite contract.
Compliance with notice periods and severance pay obligations is critical during termination to avoid legal challenges. Severance allowance is typically required for employees who have worked for 12 months or more, except in cases of termination for specific types of misconduct or when unemployment insurance benefits are paid.
