Vietnam Labor Relations in the Context of Digital Transformation

The objective in the context of Vietnam’s phenomenal digital transformation in recent years is to build progressive, harmonious, and stable labor relations for businesses and workers at the national and regional levels.  Promoting a positive cooperative spirit in resolving issues helps companies achieve profits while fulfilling the needs of workers and minimizing conflicts leading to conflicts of interest between parties.  In addition, the developing social context and economic situation generate new issues in labor relations, requiring novel approaches to labor relations challenges. It is becoming a necessity to bring the labor law and labor relations institutions more in line with international labor standards, strengthen the state management role in labor relations, enhance the role and responsibility of labor representative organizations, comply with international labor relations regulations, consolidate and complete the tripartite consultation mechanism for labor relations, and raise workers’ awareness. These are the requirements and challenges for Vietnam’s labor relations in the digital age.


Legal provisions for building labor relations in the context of integration

Due to their key role in production, labor relations are particularly focused on building a solid foundation for economic and business development. Labor relations are also legal relationships arising between subjects, including workers, employers, representative organizations of both sides and competent state agencies. Due to their importance, Vietnamese law provides for the construction of labor relations in Article 7 of the 2019 Labor Code as follows:

  • Labor relations are established through dialogue, negotiation, and agreement based on the principles of voluntariness, goodwill, equality, cooperation, and respect for each other’s legitimate rights and interests.
  • Employers, employer representative organizations, workers, and worker representative organizations build progressive, harmonious, and stable labor relations with the support of competent state agencies.
  • The trade union participates with competent state agencies to support building progressive, harmonious, and stable labor relations; supervises the implementation of labor law provisions; and protects the legitimate rights and interests of workers.
  • The Vietnam Chamber of Commerce and Industry, the Vietnam Cooperative Alliance and other employer representative organizations established under the law, have the role of representing and protecting the legitimate rights and interests of employers, as well as participating in building progressive, harmonious, and stable labor relations.


Characteristics of labor relations in enterprises doing business in Vietnam

Vietnam is operating pursuant to a market economy mechanism oriented towards socialism. From a global perspective, labor relations in countries with market economies have their own characteristics. The interaction of historical, cultural, legal, and economic factors have formed a unique model of labor relations in Vietnam, which contribute to improving working conditions, ensuring workers’ rights, and promoting sustainable economic development. The characteristics of labor relations for enterprises doing business in Vietnam can generally be described as follows:

  • Labor relations are both individual and collective: The labor relationship naturally connects individuals to form collective labor relations recognized and adjusted by law through forms such as dialogue and recruitment. Workers in enterprises establish labor relations for both individual and collective motivations. Individual labor relations are the nucleus of labor relations and are influenced by personal interests. However, these individual labor relations are increasingly tending to shift to collective labor relations because the labor market is increasingly competitive. Therefore, in order to compete and develop, the parties tend to link together to form large and tightly-knit interest groups to increase their negotiation power. These collective labor relations, influenced by collective interests, have great potential, helping businesses to survive and develop a firm foundation as well as ensuring personal interests. Overall, from a broad perspective it can be said that individual labor relations are the basis for establishing collective labor relations, and collective labor relations support the improvement and development of individual labor relations.
  • Although equal in status under the law, labor relations are not equal in reality: Labor relations in enterprises operating in Vietnam are established by the imbalance in the labor market. As such, the state of labor relations depends greatly on the relationship between the supply and demand of labor. Currently, in most economic sectors in Vietnam, the supply of labor nearly always exceeds the demand for labor. This imbalance affects, not only the quantity, but also the quality of labor relations. The result is that workers are almost continuously in a weaker position compared to employers in negotiating labor-related issues. In theory, labor relations are considered equal because the parties voluntarily participate in this relationship based on the consideration of individual or collective benefits. If any party is not satisfied with this relationship, they can and have the right to refuse or terminate the labor relationship. However, labor relations are not equal due to the actual position and power of the parties in the labor market according to the supply-demand relationship, where employers generally have an advantage in negotiations. This is due to the fact that, employers legally have the right to organize and manage the labor process of workers and require workers to comply. Further, employers often hold the property rights, so the factors constituting production relations will always be influenced by ownership relations. Finally, employers must spend money to buy workers’ labor power which they want to use effectively, which requires suitable and scientific management.
  • Contradictory yet unified: Labor relations are both contradictory and unified which is evident throughout the operational process. Between employers and workers, this depends on economic and cognitive aspects. Economically, employers are usually driven by profit and look to minimize usage costs, including wages for workers, to increase business profits. However, wages and income in labor relations are the main source of living for workers, who always desire to increase wages. Cognitively, workers and employers have different positions and awareness levels which rarely are in harmony. These differences often are the sources of conflict and disputes. However, despite these contradictions, labor relations are also unified. Labor relations are a system of dialectical relationships between workers and employers which are protected by state law. Without the cooperation of both parties, the other cannot achieve its goals and benefits. Economically, if wages and benefits for workers are ensured, production will be stable, labor productivity will increase, and workers will tend to take the initiative to contribute to the business, thereby increasing business profits. Therefore, workers and employers have the potential to share a common ideology, establish useful workplace dialogue, satisfy mutual benefits, build a strong corporate culture, and enhance brand value.
  • Highly economic yet social: The essence of labor relations is inevitably influenced by economic benefits, which is at its core. Each enterprise may be considered one cell of the economy. Workers and employers aim for a basic motivation: profit and wages. This relationship affects the production of most social wealth which is the result of the interactive relationship between workers and employers. Harmonious and stable labor relations enable the economy to maintain growth and for labor productivity to remain high. However, labor relations are also human-to-human relationships that must satisfy human spiritual needs. This is the social essence of labor relations. Specifically, labor relations always take place in a certain space under certain conditions and workers and employers must meet at the workplace. Therefore, there is often a conflict between human living conditions and production conditions. It must not be overlooked that workers are often key family members, so stable labor relations not only bring joy to individuals but also maintain family happiness and extend to society as a whole. As such, it is not wrong to say that labor relations are both highly economic and social.


Challenges for Vietnam’s labor relations in the digital economy

Labor relations in the digital age have undergone many changes, even though workers and employers are still required to interact. However, the digital working environment has upended the traditional forms, posing many challenges for Vietnam’s labor relations. This requires the parties in these relationships to continuously adapt and find suitable solutions.


Training for labor relations in the digital age. The digital age is an era of connectivity and performing labor on virtual systems. With robots, artificial intelligence, and the internet, the virtual world of work is becoming more prevalent. This new environment has created a changing labor relations landscape. Direct interaction and issues formerly arising and being resolved through face-to-face contact, are now settled through connected tools in the virtual environment. The parties in this virtual world learn about and interact with each other through data. It follows that training for labor relations in the digital age will also change. In a physical workplace, the training focuses on direct interaction techniques, while a virtual environment relies on additional techniques and data tools such as human analysis, analysis of the competition based on stored data, tools for remote working interaction and communication, and other information provision techniques.


Improving the labor law and labor relations institutions. There are many structural tasks to be performed to improve the labor law and labor relations institutions.  This includes continuing to improve the labor law in line with the roadmap and plan for ratifying ILO conventions. Further, it is necessary to develop the mechanisms for resolving labor disputes, clearly define the role of state management agencies in supporting and promoting labor relations, and ensure compliance with ILO labor standards and commitments with other countries. Also, prioritizing research, development, and promulgation of the laws on legal labor proceedings, the laws on the organization and operation of employer representative organizations, and clearly defining the organizational model and functions of employer representative organizations in labor relations. Furthermore, clarifying workers’ and employers’ rights to join and form their own organizations, recognizing the right to participate in organizations, and the right to collective bargaining for the parties in labor relations are also of importance.


Strengthening state management functions in labor relations. Another important factor in the digital age, particularly for Vietnam, is to strengthen the state management system for labor relations from central to local levels in order to perform state management functions concerning labor relations and effectively support labor relations development. Additionally, it is critical to ensure coordination with labor representative organizations and employer representative organizations to disseminate the labor laws and raise awareness and discipline in complying with labor laws. Other improvements include enhancing the capacity of labor inspection agencies and ensuring effective control over labor law enforcement; promoting and effectively implementing workplace dialogue mechanisms to raise workers’ awareness and responsibility towards businesses and to display businesses’ concern in addressing workers’ proposals; implementing collective bargaining and signing collective labor agreements effectively and substantively, safeguarding the legitimate rights and interests of workers and employers; and researching the establishment of organizations under state management agencies to manage and supervise the activities of workers’ organizations and employers’ organizations.


Raising awareness of labor relations subjects. Vietnamese enterprises have developed significantly in recent years. However, 98% of businesses are micro, small, or medium-sized enterprises with low competitiveness. The transition to a socialist-oriented market economy has led to various levels of awareness among labor relations subjects. In a digital society, all social and human life activities are generally applied and integrated with digital technology, changing all aspects of social organization and human awareness. Further, the digital working environment has created many new jobs resulting in the disappearance of traditional labor relations. For example, in the transportation sector, drivers currently do not sign labor contracts with companies but sign contracts in the form of business cooperation, such as franchise contracts and car rental contracts. Companies then refuse to abide by labor law obligations and responsibilities towards drivers. The new form of the labor relationship makes the labor relations between parties “seemingly” disappear with drivers not dependent on companies and vice-versa.  However, in reality, parties still interact on labor issues, and challenges arising from the relationship still need resolution. This means labor relations remain unchanged, only the interaction method has somewhat altered. Therefore, the digital society now compels labor relations subjects to raise their awareness, either independently or with support from competent authorities or agencies, on all issues arising from labor relations in order to proactively and successfully handle labor-related issues.


In summary, labor relations are not only an important aspect of social and professional life, but also play a decisive role in the sustainable development of a country. In the context of digital transformation, building and maintaining positive labor relations requires a higher sense of responsibility from labor relations subjects.


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