What is A Labor Contract? A Foreigner Guide To Signing Contracts in Vietnam

Huy Tran

The Vietnamese labor market is dynamic, with its rapid growth and evolving employment landscape. In this ever-changing environment, labor contracts play a pivotal role in defining the employment relationship between employers and employees.

In this comprehensive guide, we delve deep into the intricacies of Vietnamese labor contracts. Whether you’re an employer looking to establish clear employment terms or an employee seeking to understand your rights, this guide aims to provide you with the knowledge and insights you need to navigate Vietnamese labor contracts with confidence.

Overview of The Labor Contract

What is a Labour Contract?

A labor contract or an employment contract is a legal document that outlines the terms and conditions of the employment relationship between an employer and an employee. It defines the professional dynamics between the two parties and sets clear expectations and responsibilities for both. It is not just a formality, but a vital framework that governs the employment relationship.

Why is it Important in Vietnam?

A labor contract is essential for both employers and employees in Vietnam, as it serves as a key element in defining and regulating their employment relationships. It protects the rights of employees, such as fair wages, reasonable working hours, and safe conditions, in accordance with Vietnamese labor laws.

Labor contracts also provide legal clarity and reduce misunderstandings for employers, especially foreign companies, thus creating a transparent work environment. It helps align the goals of employees with the objectives of the company, improving productivity and job satisfaction.

Moreover, it ensures compliance with local labor laws, balancing the interests of different stakeholders and promoting social responsibility. In case of disputes, it offers a reference for conflict resolution, maintaining harmonious workplace relations.

What is the Legal Framework of Labour Contract in Vietnam?

The main legislation that governs labor contracts in Vietnam is the Labour Code, which sets out the rights and obligations of employers and employees, as well as the procedures for entering, amending, and terminating labor contracts.

The Labour Code is supplemented by various other regulations and decrees issued by the government that provide further guidances on specific aspects of labor contracts. For instance, Decree 145/2020/ND-CP guides the Labour Code on working conditions and labor relations, provides detailed rules on how to calculate wages, overtime pay, bonuses, allowances, etc.

Employers and employees should familiarize themselves with the relevant provisions of the Labour Code and other applicable regulations to ensure compliance with the law and to protect their rights and interests. They should also seek legal advice or consult with labor authorities for more specific guidances on labor contract requirements and obligations in Vietnam.

Types of Labor Contracts in Vietnam

In Vietnam, understanding different types of labor contracts is essential for both employers and employees, as each type caters to specific employment needs and scenarios.

To provide a clear comparison, the following table breaks down the key characteristics and differences between the three primary types of labor contracts in Vietnam:

Type of Contract Indefinite-term Contract Definite-term Contract Seasonal/Work-specific Contract
Duration No specific end date, ongoing until termination. Fixed period, usually up to 36 months. Typically less than 12 months.
Renewal Can be renewed, but remains indefinite-term. Can be renewed, but total duration must not exceed 36 months. Not typically renewed, project or season-bound.
Termination Requires statutory grounds and notice. Ends automatically at the term’s conclusion, can be terminated earlier under specific conditions. Ends upon completion of the specified work or season.
Flexibility Less flexible, meant for long-term employment. More flexible, suited for medium-term needs. Highly flexible, tailored for short-term projects or seasonal work.
Employee Stability High stability and job security. Moderate stability, depends on contract duration. Low stability, often tied to specific tasks or seasons.
Typical Use Suitable for core, permanent positions in a company. Often used for mid-term projects or roles with foreseeable end dates. Ideal for temporary, seasonal, or project-based work.
Legal Protections Stronger employee protections and benefits. Defined protections, but less than indefinite-term. Basic protections, focus on specific job requirements.
Employer Commitment Indicates a long-term commitment to the employee. Reflects a need for medium-term employment with potential for extension. Limited commitment, focused on specific tasks or timeframes.

Key Elements of a Vietnamese Labor Contract

A Vietnamese labor contract encompasses several critical elements that define the employment relationship. Understanding these elements is crucial for both employers and employees to ensure compliance with local labor laws and to maintain a harmonious workplace.

Parties Involved

The labor contract begins by clearly identifying the parties involved – the employer and the employee. The employer could be a company, organization, or individual, while the employee is the individual hired to perform specific duties.

This section includes full legal names, addresses, and possibly other identifying details like business registration numbers for companies or identification numbers for individuals. The parties involved section should also specify how the parties can contact each other in case of any questions or concerns regarding the contract.

Work and Workplace Specifics

This section details the job description, including the specific duties and responsibilities of the employee. It outlines the following information:

  • Job title: The official name of the position that reflects the level and function of the role.
  • Job description: A brief summary of the main purpose and objectives of the role, as well as the expected outcomes and deliverables.
  • Duties and responsibilities: A list of the essential tasks and functions that the employee is required to perform on a regular basis, as well as the scope and authority of the role.
  • Nature of the work: A description of the types and category of the work, to see whether it is administrative, technical, creative, managerial, etc. It also indicates the degree of complexity, autonomy, and interaction involved in the work.
  • Location of the workplace: A specification of the physical place or places where the employee will perform the work, such as the office address, the home address, the client site, etc. It also states whether the employee is required or allowed to work remotely, and if so, under what conditions and arrangements.

Salary and Compensation

Considered to be one of the most scrutinized parts of the contract, this section outlines the employee’s remuneration. This section outlines the employee’s remuneration, which is the amount and form of payment for their work. It includes the following information:

  • Salary or wage: The fixed or variable amount of money that the employee receives for their work, either per hour, week, month, or year. It should specify the currency, the gross and net amounts, and any deductions such as taxes or social insurance contributions.
  • Method and frequency of payment: The way and the time that the employee receives their salary or wage, such as by cash, cheque, bank transfer, etc. It should also state how often the payment is made, such as monthly, biweekly, weekly, etc.
  • Additional compensation: Any extra money that the employee receives on top of their salary or wage, such as bonuses, commissions, allowances, tips, etc. It should explain the criteria and conditions for earning and receiving these payments, such as performance, sales, expenses, etc.
  • Benefits: Any non-monetary rewards that the employee receives from the employer, such as health insurance, social insurance, pension, vacation, sick leave, education, training, etc. It should describe the scope and coverage of these benefits, as well as the eligibility and enrollment requirements.

Rights and Obligations of Each Party

In a Vietnamese labor contract, the section detailing the rights and obligations of each party is of paramount importance, as it establishes the foundation for a fair and lawful employment relationship. This section is comprehensive, covering a wide range of responsibilities and entitlements for both the employer and the employee.

Employee Rights and Obligations:

  • Adherence to Workplace Rules: Employees are required to comply with the company’s code of conduct, policies, and procedures. This includes following safety protocols, attendance requirements, and standards of professional behavior.
  • Performance Expectations: Employees must meet job performance standards as outlined in their job description. This can include achieving specific targets, maintaining quality of work, and contributing to team and company goals.
  • Confidentiality Agreements: Employees often have access to sensitive company information. They are obliged to keep this information confidential and not to disclose it to unauthorized parties, both during and after their employment period.
  • Professional Development: Employees may also be obligated to participate in training sessions or professional development programs to enhance their skills and stay updated with industry standards.

Employer Rights and Obligations:

  • Providing a Safe Working Environment: Employers are responsible for ensuring a safe and healthy work environment. This includes implementing safety measures, providing necessary protective equipment, and adhering to health and safety regulations.
  • Timely Payment of Salaries: Employers must pay employees their agreed-upon salary on time. This includes wages, overtime pay, bonuses, and other financial benefits as per the contract.
  • Respecting Employee’s Legal Rights: Employers are obliged to respect the legal rights of employees, which include non-discrimination, fair treatment, and the right to a work-life balance.
  • Employee Benefits: The employer must provide statutory benefits such as social insurance, health insurance, and any other benefits agreed upon in the contract.

Mutual Rights and Obligations:

  • The contract should outline clear procedures for resolving disputes or grievances. This includes steps for informal resolution, formal complaints, and possible arbitration or legal action if necessary.
  • Conditions under which the contract can be terminated by either party must be clearly stated. This includes the notice period required, severance pay (if applicable), and grounds for termination such as misconduct or redundancy.
  • The contract must specify the notice period required for resignation by the employee or termination by the employer. This allows both parties to make necessary arrangements and ensures a smooth transition.

This comprehensive outline of rights and obligations is crucial in creating a transparent, respectful, and legally compliant working relationship in Vietnam, balancing the needs and protections of both employees and employers.

Common Issues and Disputes

In the Vietnamese workplace, several common issues and disputes can arise, often stemming from misunderstandings or misinterpretations of labor contracts. Addressing these issues effectively is key to maintaining a harmonious work environment.

Wage and Salary Discrepancies

One of the most frequent disputes involves wage and salary discrepancies. These issues can occur due to misunderstandings about overtime rates, bonus eligibility, or pay increments. Discrepancies may also arise from errors in payroll processing or differing interpretations of the contract terms.

Workplace Safety Concerns

Safety in the workplace is another area prone to disputes, especially in industries with higher occupational hazards. Disagreements can arise over the adequacy of safety measures, provision of protective equipment, or compliance with safety regulations.

Discrimination and Harassment

Issues related to discrimination and harassment are increasingly recognized and challenged in the Vietnamese workplace. Disputes in this category can include unequal treatment based on gender, age, ethnicity, or unfair dismissal claims related to these factors.

Contractual Ambiguities

Vague or poorly drafted contracts often lead to disputes, particularly when it comes to job roles, responsibilities, and performance expectations. Ambiguities in contract terms can create confusion and conflict, leading to disagreements between employers and employees.

Termination and Severance

Termination of the employee frequently leads to disputes. Issues may arise over the legality of the termination, whether proper notice was given, or if the termination was conducted in compliance with the labor contract and Vietnamese labor law. Disagreements over severance pay, especially in cases of redundancy or wrongful termination, are also common.

Breach of Non-compete Clauses

For roles that involve access to sensitive company information or trade secrets, disputes may arise if an employee is perceived to breach non-compete or confidentiality clauses in their contract, either during or after their term of employment.

Leave and Benefits

Disputes related to leave entitlements, including annual leave, sick leave, or maternity/paternity leave, are common. Issues often arise from misunderstandings of entitlements, refusal of leave requests, or disputes over benefits provided versus those stipulated in the contract.

Le & Tran Law: Your Trusted Legal Partner

Le & Tran Law stands out in the realm of labor and employment law. We are known for our expertise and have built a reputation for providing clear, practical, and effective legal solutions. Our team of experienced attorneys specializes in labor law and is adept at handling a wide range of employment-related issues, from contractual disputes to workplace discrimination cases.

Whether you’re an employer facing a challenging labor dispute or an employee seeking to understand your rights, Le & Tran Law is equipped to provide the guidance and representation you need. Don’t let legal complexities hinder your business or career progress.

Contact us today at Hotline (+84 28)36 22 77 29 or at Email info@letranlaw.com for a consultation and take the first step towards resolving your labor law issues with confidence and expertise.