INSIGHTS

How to Maximize the Term of Definite Labor Contract to 06 Years before It Becomes Indefinite

April 17, 2019 Labor & Employment

1For the Vietnamese employees:

_The 1st fixed-term contract: 12 months to 36 months.

+If the 1st fixed-term contract is below 36 months and the renewal (not extension) to the contract is executed, the renewal will become the 2nd fixed-term contract.

+If the 1st fixed-term contract is below 36 months and extended (not renewed) by an annex, the extension is still a part of the 1st fixed-term contract, not becoming the 2nd fixed-term contract. The term of the extension is maximized to (36 months – the performed term).  The law only allows 01 time of extension.

_The 2nd fixed-term contract: 12 months to 36 months.

+If the 2nd fixed-term contract is below 36 months and the renewal (not extension) to the contract is executed, the renewal will become the indefinite-term contract.+

+If the 2nd fixed-term contract is below 36 months and extended (not renewed) by an annex, the extension is still a part of the 2nd fixed-term contract, not becoming the definite-term contract. The term of the extension is maximized to (36 months – the performed term).  The law only allows 01 time of extension.

_The 3rd contract is indefinite term.

For example:

_If the 1st fixed-term contract is 12 months, it is renewed for 15 months.  The renewal will be the 2nd fixed-term contract of 15 months.

_If the 1st fixed-term contract is 12 months, it is extended for 15 months (still in the allowable time of [36 months -12 performed months).  The extension is still a part of the 1st fixed-term contract, not becoming the 2nd fixed-term contract.

2For the expats:

Only fixed-term contract (under the term of the work permit) is applied, no definite-term contract is applied.  No limit on the number of fixed-term contracts are signed with an expat.

Thus, for the Vietnamese employees, the company should consider to use the right of extension (even below 12 months) of one fixed-term contract so that the total term of 02 fixed-term contracts may be used well up to 72 months (06 years).

– Written by LE & TRAN | Vietnam’s Premier Business Litigation Firm