Overview

The Vietnam Labor Code 2019 (effective January 1, 2021) governs all employment relationships in Vietnam. For foreign employers operating in Vietnam — whether through a wholly foreign-owned enterprise, joint venture, or representative office — compliance is mandatory and strictly enforced.

Employment Contracts

Types of Contracts

Vietnam recognizes only two types:

  1. Indefinite-term contracts: No expiry date
  2. Fixed-term contracts: Maximum 36 months

The old seasonal/job-specific contract category has been abolished.

Key Requirements

  • Must be in writing (Vietnamese language required)
  • Must include: job description, salary, working hours, workplace, contract term
  • Probation period: maximum 60 days for management positions, 30 days for others
  • Electronic contracts are now legally valid

Working Hours and Overtime

Standard Hours

  • Maximum 8 hours/day, 48 hours/week
  • At least one 24-hour rest period per week

Overtime Limits

  • Maximum 40 hours/month
  • Maximum 200 hours/year (300 hours for certain industries)
  • Employee consent required for overtime

Overtime Pay Rates

  • Normal working days: 150% of normal wage
  • Weekly rest days: 200%
  • Public holidays: 300%
  • Night work premium: additional 30%

Termination

Employer-initiated termination

Valid grounds include:

  • Repeated failure to perform duties
  • Prolonged illness (12 months for indefinite contracts)
  • Force majeure (natural disaster, pandemic)
  • Business restructuring

Required notice:

  • 45 days for indefinite-term contracts
  • 30 days for fixed-term contracts

Employee-initiated termination

Major change: Employees can now resign without providing a reason. They only need to provide advance notice:

  • 45 days for indefinite-term contracts
  • 30 days for fixed-term contracts

Severance Pay

  • 0.5 months' salary per year of service
  • Applies when employment exceeds 12 months
  • Does not apply in cases of disciplinary dismissal

Mandatory Insurance

Employers must contribute to:

| Insurance | Employer | Employee | |-----------|----------|----------| | Social Insurance | 17.5% | 8% | | Health Insurance | 3% | 1.5% | | Unemployment | 1% | 1% |

Total employer burden: 21.5% of gross salary.

Foreign Employee Work Permits

Requirements

  • Work permit required for all foreign employees
  • Valid for up to 2 years (renewable)
  • Must apply before the employee starts working
  • Exemptions: intra-company transferees (<90 days), experts providing emergency assistance

Common Violations

  1. Employing foreigners without work permits (fine: up to 150 million VND)
  2. Exceeding work permit duration
  3. Assigning work outside the permitted scope

Practical Recommendations

  1. Use bilingual contracts: Vietnamese is legally binding, but include English for clarity
  2. Update internal labor regulations: Must be registered with the labor authority if you have 10+ employees
  3. Keep meticulous records: Attendance, overtime, leave — authorities can audit at any time
  4. Budget for total labor costs: Base salary + 21.5% insurance + bonuses + leave

Conclusion

Vietnam labor law compliance requires ongoing attention and expert guidance. Non-compliance can result in significant fines, reputational damage, and operational disruption.

Contact Attorney Vo Thien Hien at Apolo Lawyers for comprehensive labor law advisory tailored to your business needs.