Vietnam's rapidly growing economy and increasing integration into global markets have made it a popular destination for businesses looking to expand. However, for foreign companies entering the Vietnamese market, understanding the local employment laws is crucial. This guide provides an
overview of the key considerations when hiring and terminating employees in Vietnam.
1. Hiring Employees in Vietnam
Hiring employees in Vietnam involves a series of legal steps to ensure compliance with local labor laws. Here are the main points to consider:
A. Labor Contracts
Vietnamese labor law requires that all employment relationships be formalized through a labor contract. There are three types of labor contracts:
- Indefinite-term contract: No specific end date.
- Definite-term contract: Duration ranges from 12 to 36 months.
- Seasonal or specific job contract: Less than 12 months.
Contracts must be in writing, except for those lasting less than one month, and must include essential terms such as job description, work location, salary, working hours, and duration of the contract.
B. Work Permits
Foreign employees must obtain a work permit to work legally in Vietnam, except for certain exempted cases (e.g., internal transfer within a multinational company). The process involves several steps, including obtaining a criminal record check, a health check, and submitting educational qualifications.
C. Probation Periods
Employers in Vietnam can require a probation period for new hires. The maximum probation period is 60 days for jobs requiring professional skills and 30 days for other positions. During probation, either party can terminate the employment with a minimum of three days' notice.
D. Minimum Wages and Benefits
Vietnam has a minimum wage that varies by region. Employers are also required to contribute to social insurance, health insurance, and unemployment insurance, typically amounting to around 30% of an employee's salary.
2. Terminating Employees in Vietnam
Terminating an employee in Vietnam can be more complex than in some other countries, as labor laws are designed to protect employees' rights. Understanding the permissible grounds for termination and following the proper procedures is essential to avoid legal disputes.
A. Permissible Grounds for Termination
Under Vietnamese labor law, an employer can terminate an employee's contract in the following cases:
- Mutual Agreement: Both parties agree to end the employment relationship.
- Contract Expiration: The employment contract reaches its end date, and neither party seeks to renew it.
- Dismissal for Misconduct: Termination due to serious misconduct, such as theft, embezzlement, or repeated failure to comply with job requirements. Employers must follow specific disciplinary procedures, including issuing written warnings.
- Incapacity: The employee is unable to perform the job due to illness or injury, and
there are no suitable alternative roles. - Redundancy: Due to changes in organizational structure, technology, or economic
reasons, the employer needs to reduce its workforce.
B. Notice Periods
When terminating a contract, employers must adhere to the following notice periods:
- Indefinite-term contract: At least 45 days' notice.
- Definite-term contract: At least 30 days' notice.
- Seasonal or specific job contract: At least three days' notice.
Employees may also terminate their contracts with similar notice periods.
C. Severance Pay
Employees who have worked for at least 12 months are entitled to severance pay, calculated at half a month's salary for each year of service. Severance pay does not apply if the employee is terminated for serious misconduct.
D. Unlawful Termination
Employers must follow proper procedures to avoid claims of unlawful termination, which can lead to reinstatement orders or compensation for the employee. Unlawful termination includes firing without valid grounds, failing to provide required notice, or not following the correct procedures.
3. Conclusion
Navigating the complexities of hiring and terminating employees in Vietnam requires a solid understanding of local labor laws. Employers must ensure compliance with contract requirements, follow the correct procedures for termination, and respect employees' rights to avoid legal
disputes and maintain a positive work environment. By understanding and adhering to these regulations, businesses can successfully manage their workforce in Vietnam and contribute to a productive and fair workplace.