Lawyer in Vietnam Dr. Oliver Massmann VIETNAM - NEW LABOR LAW - PROTECT THE PROTECTED - WHAT YOU MUST KNOW!

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AGENDA
1. Summary of Investment in Vietnam
2. Vietnam - New Labor Law - Protect
the Protected - What you must know!
3. Other Interesting Employment Topics
2

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SECTION 1
SUMMARY OF
INVESTMENT IN VIETNAM

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Vietnam 2019 Economy at a glance
• GDP: US$244.95 billion
• GDP per capita: US$1,964.50
• GDP Growth: 6.88% (record breaking since 2010)
• Inflation: 3.52%
• Population: About 96.4 million
• Labor force aged 15 and above: 59.1%
• Total export and import turnover of the first 6
months: US$ 245.48 billion (the highest-ever
level)
• Regional Minimum wage (Region I): VND 4.180
million (US$ 180) per month (Jan 2019)
• Vietnam’s average age: 30.9 years old
4

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WORLD BANK DOING BUSINESS 2020
REPORT
IMPROVEMENT
 GETTING CREDIT
 PAYING TAXES
WEAKNESS:
 RESOLVE INSOLVENCY
 CREDIT INFORMATION AND
FINANCIAL INCLUSION
 DIGITALIZATION IN
STREAMLINING
ADMINISTRATIVE PROCEDURES

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RESOLVE INSOLVENCY
6
GOVERNING LAWS:
 LAWS ON ENTERPRISES
2014
 BANKRUPTCY LAW 2014

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RESOLVE INSOLVENCY
Late payment
for 3 months Lenders can file for
the debtor's bankruptcy
Debt are paid by handling
collaterals
Pros: Easier for lenders to
cover their loans, because the
collaterals are handled after the
acceptance of the bankruptcy hearing
Cons: Many debtors have greater
lending than borrowing. They are only
temporarily insolvent because
their debts are not paid

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RESOLVE INSOLVENCY
1. INITATION AND FILING FOR BANKRUPTCY
2. NEGOCIATION
3. ACCEPTANCE OF BANKRUPTCY HEARING
4. DECISION ON THE LAUNCH OF BANKRUPTCY
5. INSOLVENT COMPANY UNDER RESTRICTION OF ACTIVITIES

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RESOLVE INSOLVENCY
6. APPOINTMENT OF THE MANAGEMENT OF PROCEEDINGS
8. CREDITORS MEETING
9. RECOVERY OF BUSINESS ACTIVITIES
(if approved in the creditors meeting)
10. DECLARATION OF BANKRUPTCY
(if approved in the creditors metting or unsuccessful business recovery)
11. ASSETS LIQUIDATION
7. HANDLE COLLATERAL TO PAY SECURED DEBTS

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RESOLVE INSOLVENCY
0 1 2 3 4 5 6 7
5
0.6
0.8
1
1.7
1.5
1.6
6
5
Vietn
am
Japa
n
Singa
pore
Unite
d
King
dom
Chin
a
Thail
andIndia
Cam
bodi
a
Mya
nmar
TIME TO RESOLVE INSOLVENCY (years)

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RESOLVE INSOLVENCY
PRIORITY OF PAYMENTS
1. Cost of bankruptcy
2. Salary and other benefits for employees
3. Debt for resuming business operations
4. The government, unsecured and secured debts

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RESOLVE INSOLVENCY
INTRODUCE REORGANIZATION
PROCEDURES IN THE LAWS
A step before filing for bankruptcy
Set clear rules on its commencement,
content and adoption of reorganization
plan and debt restructuring, the
mechanism to manage the debtors'
property.

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FINANCIAL INCLUSION
VIETNAMESE POPULATION USING
BANKING SERVICES
Unbanked Population using banking services

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CREDIT INFORMATION
PROVIDER
CIC
PCB
MARKET NEEDS
42 banks
27 finance and financial
leasing company
51 branches of foreign
banks
1.200 people's credit
funds

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CREDIT INFORMATION AND FINANCIAL
INCLUSION
NEW REGULATION IS UNDER CONTEMPLATION:

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CREDIT INFORMATION AND FINANCIAL
INCLUSION
Credit finfomation
- SMEs
- Poor, unemployed,
uneducated people
- Rural residence;
- All the subjects in the
society
- Lending for
business
- Invest for children's
study
- Insurance
- Etc

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DIGITALIZATION IN STREAMLINING
ACCESS TO E-GOVERNMENT PORTALS
Access to Certification Procedures from Local
E-Government Portal
3.48%
Access to Construction Permit Procedures from
Local E-Government Portal
0.84%
Access to Land Use Rights Certification
Procedures from Local E-Government Portal
1.35%

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3.48%
34.79%
49.82%
From E-Government Portals From the Internet Access to the Internet at home
ACCESS TO GOVERNMENT INFORMATION

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SECTION 2
VIETNAM - NEW LABOR LAW -
PROTECT THE PROTECTED
- WHAT YOU MUST KNOW!
NEW LABOR CODE 2019
(EFFECTIVE SINCE 01 JAN 2021)

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Latest Updates to Vietnam’s Employment
and Its Effect on Employers
LABOR CODE 2012 LABOR CODE 2019
Probation An employee entering into a
seasonal labor contract shall not
be subjected to probation.
Probation is not allowed if the employee
works under a labor contract with a
duration of less than 1 month.
Probationary
period
Probationary periods are up to 60
days.
Probationary periods can be up to 180
days for managerial positions.

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Termination of
probationary
period
If the probation work meets the
requirements, the employer shall
conclude a labor contract with the
employee.
During the probationary period, each
party shall have the right to terminate
the probation agreement without
prior notice and compensation if the
probation work fails to meet the
requirements as agreed to by both
parties.
If the result is satisfactory, the employer must
continue implementing the signed labor
contract or must sign a labor contract with
the employee.
During the probationary period, either party
has the right to terminate the signed
probation contract or labor contract without
prior notice and compensation.

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Types of labor
contract
a) Indefinite-term labor contract. An
indefinite-term labor contract is a
contract in which the two parties do
not determine the term and the time
at which the contract will terminates;
b) Definite-term labor contract. A definite
term labor contract is a contract in
which the two parties agree to fix the
term of the contract for a duration of
between 12 months to 36 months;
c) A labor contract for seasonal work or
a specific task which has a term of
less than 12 months.
a) An indefinite-term labor
contract is a contract in which
the two parties neither fix the
term nor the time of the
termination of the contract;
b) A definite-term labor contract
is a contract in which the two
parties fix the term of the
contract for a duration of up to
36 months.

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A mandatory
scheme of
indefinite-term
labor contract
Under all circumstances,
after two definite-term labor
contract (of up to 36
months per each), if the
employee continues
working, an indefinite-term
contract is a must.
According to the Labor Code 2019, parties may
sign multiple definite-term labor contracts for
• elderly employees;
• expat employees;
• members of executive boards of
organizations representing the labor
collective (including trade unions); and
• directors of state-owned enterprises.

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Annexes to a labor
contract
An annex to a labor contract is to
elaborate on some certain provisions
or to amend or supplement the labor
contract, including without limitation to
the labor contract term extension
An annex to a labor contract is to
elaborate, amend or supplement
some certain provisions of the labor
contract, except for the change of the
the labor contract term.

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Additional legal
grounds for
unilateral
termination by
employer
• An employee fully meets the
requirements of qualified contribution
period of social insurance and
reaches retirement age.
• An employee has reached
retirement age.
• [NEW] An employee is absent
from work without a legitimate
reason for 5 consecutive
working days or more.
• [NEW] The employee provided
false information that affects the
recruitment of the employee.

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Overtime work Overtime working hours shall not
exceed 30 hours per month.
Overtime working hours shall not
exceed 40 hours per month.
Forms of labor
contract
N/A A labor contract concluded in the form
of electronic data, in accordance with
electronic transaction laws, is valid as
a written labor contract.

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Employer-related
obligations upon
termination
Within 07 working days following the
termination of a labor contract, the two
parties shall settle all payments in
respect of the rights and interests of
the two parties.
Within 14 working days following the
termination of a labor contract, the two
parties shall settle all payments in
respect of the rights and interests of
the two parties.
N/A [NEW] The employer is responsible to
provide copies of the documents
relevant to the employee’s
employment history if requested by
the employee. The employer shall pay
the cost of copying and sending the
documents.

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Additional public
holidays
National Day: 1 day (the second day
of September of each calendar year).
National Day: 2 days (the second of
day September of each calendar year
and the previous or next day).
Personal leave An employee is entitled to take a fully
paid leave of 3 days for personal
reasons in case of the death of his/her
natural father or mother; or death of
his or her spouse’s father or mother;
or death of spouse, son or daughter.
An employee is entitled to take a fully
paid personal leave of 3 days as long
as they provide advance notice to the
employer in case of the death of
his/her biological or adoptive parent;
the death of his/her spouse’s
biological or adoptive parent; or the
death of his/her spouse or biological
or adopted child.

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Salary/wage N/A • [NEW] Employer is NO longer obliged to
register the salary table, salary scale, and
labor norms with the labor authorities.
• [NEW] In case of salary paid via bank
transfer, employers shall pay the costs of
account opening and fund remittance.
• [NEW] An employer can pay the salary to
the employee’s authorized person.

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Labor
discipline _
Violation of
sexual
harassment
N/A • [NEW] Sexual harassment at the work
place is explicitly defined under Labor
Code 2019.
• [NEW] Procedures and policies on the
prevention and handling of sexual
harassment at the workplace must be
addressed in the employer’s internal
labor regulations.
• [NEW] Sexual harassment is a now a
formal ground for dismissal.

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Expat
employees
The maximum duration of a
work permit is 2 years and it
can be renewed in some
cases specified under the
law.
The maximum duration of a work permit is 2 years
and can be extended ONLY once for up to 2 more
years.
Employers and foreign employees may sign multiple
definite-term labor contracts.
Additional
work permit
exemptions
• Chairman of the board of management;
• Person responsible for the operation of an
international organization or foreign non-
governmental organization; and
• Foreigners married to Vietnamese citizens and
living in Vietnam.

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Increase of
retirement age
An employee who meets the
conditions on the period of social
insurance payment, as prescribed
by the Law on Social Insurance, is
entitled to a pension at the age of
60 for men and 55 for women.
The retirement age will be gradually
increased to 62 years by 2028 for men, and
60 years by 2035 for women.
For example: From 2021, the retirement
ages of employees in normal working
conditions shall be 60 years and 3 months for
men, and 55 years 4 months for women
That is to say, the retirement age shall
increase by 3 months for men and 4 months
for women for each consecutive year.

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SECTION 3
OTHER
INTERESTING EMPLOYMENT TOPICS

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M&A Legal Due Diligence for labor –
What to check the Target Company
• Checklist of all staff
• Organizational chart
• Registration of Internal Labor Regulations
• Notification of Collective Labor Agreement
• Establishment of Internal Trade Union
• Contribution of Trade Union Fees
• Contents of Labor contract template
• Contribution of Social, Health and
Unemployment insurances
• Recruitment of of expat employees
• Labor disputes
• Payment of Personal Income Tax on
behalf of employees

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Social Insurance for Expatriate Workers
Sickness
and
Maternity
Labor
Accident
and
Occupation
Disease
Pension
and
Death
Allowance
Total
Since
1 December 2018
Employer 3% 0.5% 0% 3.5%
Expat Worker 0% 0% 0% 0%
Since
1 January 2022
Employer 3% 0.5% 14% 17.5%
Expat Worker 0% 0% 8% 8%

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Social Insurance for Expatriate Workers
• There is a statutory maximum cap for all Social Insurance contribution,
as with caps applicable to Vietnamese employees. If the expat
employee’s actual gross salary is higher than the maximum cap, the
cap becomes the basis of the % calculation.
• Specifically, in light of Social Insurance, the basis for % calculation
would be (i) the actual gross salary OR (ii) 20 times of ‘Base Salary’*,
whichever is lower. Accordingly, such cap shall apply equally to both
the employer % contribution and the employee % contribution.
*‘Base Salary’ is a measure set by the Vietnamese government from time to time.
• The current Base Salary applicable since 1 July 2019 is VND 1,490,000 / month,
corresponding to a monthly cap of VND 29,800,000.
• The current Base Salary applicable since 1 July 2020 is VND 1,600,000 / month,
corresponding to a monthly cap of VND 32,000,000.

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How to Craft Excellent Internal Labor Rules
• To include ‘Working time and rest time’;
• To include ‘Order at workplace’;
• To include ‘Occupational safety and hygiene at workplace’;
• To include ‘Protection of assets and technological and business secrets and
intellectual property of the employer’;
• To include ‘Employees’ violations of labor discipline, forms of dealing with
violations of labor discipline, and material responsibilities’;
• To localize all global-standard policies as annexes of Internal Labor
Rules, as long as such regulations are NOT contrary to laws of Vietnam

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How to Register Internal Labor Rules (ILR)
Step 1: Legal Representative of Employer to issue the ILR
Step 2: Employer to consult internal trade union’s opinion on the issued ILR
Step 3: Employer to register ILR (approved by trade union) with labor authority
Step 4: Labor authority to recognize the Employer’s ILR registration
Step 5: Employer to publish the registered ILR at work place
Step 6: Employer to collect employees’ confirmation on their understanding and
acknowledgement of registered ILR
Step 7: Employer to amend and supplement the ILR, where necessary, and
register with labor authority again with the same initial procedure.

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What New Investors Need to Know in Termination process
1. Mutual termination • Highly recommended
2. Non-renewal of labor
contract
• Only applicable to an definite-term labor contract
• Notice on non-renewal is required at least 15 days
prior to labor contract expiration
3. Unilaterally termination
by employer
• Legal ground (e.g. under-performance) is mandatory.
• Notice in advance is required
4. Dismissal
(highest level of labor
discipline)
• Registered ILR is required
• Violation subject to dismissal is required
• Trade union involvement is required
• Cumbersome procedure for handling labor discipline
5. Redundancy • Labor Usage Plan on redundancy is required
• Trade union involvement is required
• Labor authority is required

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Post Termination Restrictive Contracts
• Current law is silent whether (i) a non-
competition agreement, (ii) a non-
solicitation agreement or (iii) a non-
disclosure agreement is enforceable after
labor termination.
• Case study: There exists a precedent
where the employer wins under the final
judgement of VIAC (Vietnam International
Arbitration Centre) once its former
employee violates a contractual
commercial-law non-competition
agreement.

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Obtaining Expats’ Work Permits Swiftly
However
• Documents need to be obtained, legalized,
translated etc – 5 weeks assumes
documents are in order.
• Be aware of online lodgements – timelines
published are shorter than manual
lodgements, BUT, delays in
witnessing/evidencing documents can
remove any benefits and cause additional
issues.
Practical Timeline – Total: 5 weeks:
• 2 Weeks for approval from People’s Committee for employing foreign labor
• 1 Week for documentation finalization post initial approval
• 2 weeks for lodgement and Work Permit approval with Department of Labor

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Data Protection and Employee Privacy
EU General Data Protection Regulation
• Regulation (EU) 2016/679, the European
Union’s new General Data Protection
Regulation (‘GDPR’), came into force on May
25, 2018
• Protection of personal data is a fundamental
right in the European Union.

Obtaining Employee’s Consent
to provide and update personal information
during employment
• Labor Code: The employee shall provide the employer with
information about his/her full name, age, gender, residence address,
education level, occupational skills and qualification, health conditions
and other issues directly related to the entry into a labor contract as
requested by the employer before entering the Labor Contract.
(Article 19.2)
→ This is arguable whether or not the employee is not obliged to
provide information after entering the Labor Contract.
→ The Employer should seek Employee’s consent to provide and
update the information as requested by the Employer during the
employment.

Data Protection Principles
• In principle, personal information can only be collected,
stored and processed after CONSENT of the data subject
is obtained.
• Legally speaking, civil transactions/relationships will
include matters relating to personal data protection.
→ Civil Code is to set out main principles for individual’s
ultimate rights with respect to his or her personal
information and the protection of those rights.
• E.g. Parties to a contract may not disclose information
about each other's private life, personal secrets, or family
secrets during the establishment and performance of the
contract, unless otherwise agreed upon (Article 38.4, Civil
Code).

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CONNECTIONS ARE BUSINESS
PLEASE CONNECT WITH ME ON
LINKEDIN:
OLIVER MASSMANN
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WHEREVER YOU ARE - BE ALL THERE
Jim Elliot
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Lawyer in Vietnam Dr. Oliver Massmann VIETNAM - NEW LABOR LAW - PROTECT THE PROTECTED - WHAT YOU MUST KNOW!

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