Vietnam Labor Code 2019: What’s new?

Since it was first promulgated in 1995, The Labor Code of the Socialist Republic of Vietnam has undergone amendments and additions on four separate occasions, the last of which, in 2012, was considered the most fundamental and comprehensive revision. However, in the process of trade integration and legal application, the code still harbors many limitations.

In addition, with the enactment of the 2013 Constitution, the Labor Code needs to be adjusted to comply with the Constitution and ensure the balance of interests between employees and employers.

Regarding international integration, Vietnam has signed 25 new generation Free Trade Agreements including CTPPP and EVFTA, which require member states to comply with the international labor standards of the International Labour Organization (ILO).  Therefore, it is of paramount importance to apply and supplemental ILO regulations into the amended Labor code.

On November 20th, 2019, the new Labor Code was voted and approved by Vietnam National Assembly (NA). The amended content will focus on the following key aspects:

First of all, in terms of application scope, the code has extended to include freelance workers, those of which are not involved in an official employee-employer relationship. As currently, the number of freelance workers in Vietnam accounts for a significant proportion, therefore the labor code also needs to protect their legitimate rights.

The issue of working-hours is also attracting many opinions. NA acknowledges the comments which are focused on requesting to raise an additional day as a national holiday, increase overtime limitations, as well as debating if it is acceptable to increase retirement age, and has made some changes accordingly.

The increase in the retirement age will follow a specific schedule. Despite concerns that raising the retirement age will reduce labor quality and more specifically the well-being of employees’ health, the NA believes that the raise of retirement age is necessary for relieving the labor shortage situation in the future. The retirement age for employees under normal working conditions shall be adjusted to 62 years old for men by 2028 and 60 years old for women by 2035 respectively.

Regarding overtime limitations, in a business briefing with European companies in Vietnam, Mr. Bui Sy Loi, Vice Chairman at National Assembly’s Committee for Social Issues stated that even though the demand to raise overtime limitations comes from both employers and employees, it is also necessary to consider the attrition and long-term impact on employees’ health. Following on from this on from these comments, the amended Labor Code set the limit for overtime at 50% of normal-working hours per day, 40 hours per month and 200 hours per year. In special cases such as the production of textiles, garments, electronics, processing of agricultural, forestry, and aquatic products for export, the maximum overtime hour is 300 hours per year, despite some previous suggestions to raise the maximum overtime limitations to 400-500 hours per year.

Furthermore, another important matter was added in the amended Labor Code,  the right to establish a representative organization of employees in the enterprise other than that of a labor union. The representative organization shall be registered with the competent authority, as well as operating according to its Articles of Association.

The probation period under the current law – ranging from 6 to 60 days, depending on the qualifications of the recruited position- is considered to be quite short, not enough time for employers to train and evaluate the suitability of employees to the company standard. Therefore, the new code determines a probation period of a maximum of 180 days for management positions.

The code also considers a more flexible mechanism regarding the termination of an employee contract within the probation period, in which employees have the right to terminate the labor contract without any objective reason, and only need to notify the employer within a specific period.

The revised Labor Code will be effective from January 1st, 2021.