On 20 November 2019, the National Assembly approved the 2019 Labour Code which will be effective as from 1 January 2021 and replace the 2012 Labour Code. The new Labour Code sets out some remarkable issues as follows:

1. Applicable entities

The 2012 Labour Code only governs matters relating to the employment relationship between employees and employers. Meanwhle, the 2019 Labour Code additionally governs one more applicable entity “employee having no labour relationship”. It means that although there is no labour relationship between the employer and the employees but if it satisfies some criteria, it may be governed by this Labour Code.

2. Organization representing employees at grassroots level

The 2012 Labour Code stipulates that an organization representing the labour collective is the executive committee of the grassroots trade union, or the executive committee of the trade union at the directly superior level to the grassroots level in a place where a grassroots trade union has not yet been established.

Meanwhile, in addition to the executive committee of the grassroots trade union, the 2019 Labour Code adds “organization of employees at the enterprise” which means that an organization representing employees at grassroots level. Accordingly, trade union at the directly superior level to the grassroots level is not an organization representing the labour collective any longer.

3. Apprenticeship and practical training in order to work for an employer

The 2012 Labour Code does not stipulate on the duration for apprenticeship and practical training at an enterprise before signing a labour contract. This cause a disavantage for employees if the enterprise intentionally extends the duration. In addition, as the labour contract has not been signed, the employees have not participated in compulsory social insurance.

To protect the employees as mentioned above, the 2019 Labour Code stipulates that the duration for apprenticeship and practical training in order to work for the employer does not exceed 3 months.

4. Type of labour contracts

From the effective date of the 2019 Labour Code, there is no longer the term of “seasonal or specific job labour contract with a duration of less than 12 months”. Following that, the 2019 Code only stipulates 02 types of labour contracts including (i) Indefinite-term labour contracts and (ii) Definite-term labour contracts with a term not exceeding 36 months.

The 2019 Labour Code also stipulates that within 30 days from the expiry date of the labour contract, both parties shall conclude a new labour contract. Before such a new labour contract is concluded, the parties’ rights, obligations and interests specified in the old labour contract shall remain effective. Meanwhile, under the 2012 Labour Code, it is not clear about the parties’ rights, obligations and interests as from the expiry date of the old labour contract to the date of conclusion of the new labour contract.

In addition, an important issue under the 2019 Labour Code is that it allows the employer and the foreign employees to conclude multiple definite-term labour contracts, in which the term of a labour contract must not exceed the duration of a work permit.

5. Form of labour contracts

Under the 2012 Labour Code, a labour contract must be entered into in writing. The parties may enter into an oral labour contract for temporary work of less than 3 months.

Meanwhile, the 2019 Labour Code stipulates that the parties may enter into an oral labour contract for temporary work of less than 1 month. In addition, the 2019 Labour Code adds one additional form that is the form of electronic data conformable with electronic transaction laws. Accordingly, a labour contract in such form shall have the same value as that of a physical contract.

6. Termination of labour contracts

In addition to circumstances in which labour contract is terminated under the 2012 Labour Code, the 2019 Labour Code stipulates 3 additional circumstances as follows:

• Foreign citizens working in Vietnam are deported from the territory of Vietnam in accordance with a judgement or a decision of courts or competent authorities;
• Work permit of foreign employees working in Vietnam expires;
• In case agreement on probationary work is mentioned in the labour contract, but probationary work does not satisfy the requirements or each party rescinds the agreement on probationary work.

7. Unilateral termination of labour contract of the employees

The 2019 Labour Code creates favorable conditions for employees to unilaterally terminate labour contract in comparison with the 2012 Labour Code.

Under the 2012 Labour Code, the employees are only entitled to unilaterally terminate the labor contract in some special cases and must ensure the obligation of noticing in a certain period of time.

Under the 2019 Labour Code, it is not necessary for the employees to give reasons for unilaterally terminating the labour contract, but they must also ensure the obligation of noticing at least 45 days, 30 days or 03 working days depending on the type of contract. In addition, in the following special cases, the employee is entitled to unilateral terminate the labour contract without an advance notice:

(a)     The employee is not assigned to the correct job or workplace or is not ensured the working conditions agreed in the labour contract;

(b)     The employee is not paid in full or on time the salary due as agreed in the labour contract;

(c)     The employee is maltreated, assaulted, physically or verbally insulted by the employer in a manner that affects the employee’s health, dignity or honor; or is subject to labour coercion;

(d)    The employee is sexually harassed in the workplace;

(e)     A female employee is pregnant and must cease working;

(f)     The employee reaches the retirement age; or

(g)     The employee finds that the employer fails to provide truthful information in a manner that affects the performance of the labour contract.

8. Unilateral termination of labour contract of the employer

Under the 2012 Labour Code, the employer is only entitled to unilaterally terminate the labour contract in some special cases, but in any case it must provide an advance notice to the employee.

Under the 2019 Labour Code, there are 3 additional cases which the employer is entitled to unilaterally terminate the labour contract:

• The employee reaches the retirement age;
• The employee quits his/her job without plausible reasons for 5 or more consecutive working days; or
• The employee fails to provide truthful information during the conclusion of labour contract in a manner that affects the recruitment.

Accordingly, the 2019 Labour Code allows the employer to unilaterally terminate the labour contract without an advance notice in case the employee fails to attend the workplace after expiry of suspension of performance of labour contract or the employee quits his/her job without plausible reasons for 5 or more consecutive working days.

In addition, a new point of the 2019 Labour Code is that if the employer unilaterally terminates the labour contract illegally and the employee comes back to work, the employee must return the received severance allowance or redundancy allowance (if any) to the employer.

9. Increase overtime hours for the employees

The 2012 Labour Code stipulates that overtime hours of employees do not exceed 30 hours in one month, while the 2019 Labour Code stipulates that the overtime hours are increased and do not exceed 40 hours in one month.

10. Increase National holidays by 01 day before or after 2 September every year

Under the 2012 Labour Code, employees are entitled to have fully paid day off on 2 September for National Day of each calendar year.

Under the 2019 Labour Code, employees are entitled to additional 01 day on National Day. Therefore, employees are entitled to have fully paid days off on 2 September and before or after such day.

11. Bonus

The 2012 Labour Code stipulates that the employer may grant the employee a bonus being a sum of money based on annual production and business results and the level at which the employee has completed his or her work.

Meanwhile, the 2019 Labour Code stipulates that in addition to a sum of money, the employer may grant the employee a bonus being a piece of property or other items.

12. Increase retirement age of employees as from 2021

Under the 2019 Labour Code, the retirement age for employees in normal working conditions is adjusted according to the schedule until they reach full 62 years of age for male employees by 2028 and full 60 years for female employees by 2035. From 2021, the retirement age for employees in normal working conditions is full 60 years and 3 months for male employees and full 55 years and 4 months for female employees. Thereafter, male employees are entitled to additional 3 months for each year and female employees are entitled to additional 4 months for each year.

Thus, in comparison with the 2012 Labour Code, the retirement age for employees in normal conditions (men from full 60 years and women from full 55 years) has been increased.

13. Add more rights of employees

In addition to some new issues above, the 2019 Labour Code also adds more rights for employees on ensuring that employees are not forced to labor, are protected from sexual harassment at the workplace; are entitled to refuse to work if there is a clear threat to life and health during the course of work, etc.

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We hope that the above is beneficial. Our purpose is to provide an update on new legislation, we do not constitute any legal advice. Should you need any further information on any issue above, please do not hesitate to contact us.

Best regards,

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Currently, due to the complicated developments and serious impaction of the Covid-19 pandemic, many enterprises are facing difficulties. Therefore, they really hope to take appropriate and timely support measures from the Government of Vietnam. As a result, several policies are enacted to support enterprises to deal with the negative effects caused by the unpredictable outbreak of the Covid-19 pandemic in Vietnam as well as around the world. In particular:

1. Suspension for contribution of social insurance

On 9 March 2020, the Ministry of Labor, Invalids and Social Affairs  issued Official Letter No. 797/LDTBXH-BHXH to allow that enterprises in a difficult situation due to Covid-19 are going to be temporarily suspended to contribute to the retirement and survivorship fund for up to 12 months. Subsequently, on 17 March 2020, Vietnam Social Insurance also issued Official Letter No. 860/BHXH-BT to clarify that the suspend contribution of the retirement and survivorship fund will be applied for enterprises operating in the business lines of passenger transport, tourism, accommodation, restaurants and other special industries with more than 50% of employees participating in social insurance who are required to suspend from work or enterprises suffered a loss of over 50% of the total value of assets (excluding the value of land). It is also required that the relevant authorities should quickly handle the application for temporary suspension of contribution to the retirement and survivorship fund until June 2020 upon receipt of the application file of the enterprises. The late payment interest on the suspension period are exempted. In case the pandemic is not still in remission by the end of June 2020, if the enterprise so requests, coordinate with the concerned agencies to consider and resolve the temporary suspension of contribution to the retirement and survivorship fund till December 2020.

2. Delay of payment of a union fee

Another supportive policy was issued on 18 March 2020 by the Vietnam General Confederation of Labor, i.e. Official Letter No. 245/TLD. Accordingly, enterprises affected by Covid-19 (with 50% or more of employees subject to compulsory social insurance to be required to suspend from work) may delay the payment of a union fee for the first 06 months of 2020 until 30 June 2020. If after this time, the pandemic has not been relieved and the enterprises continue to face difficulties, the time will be delayed until 31 December 2020.

3. Deferment for payment of tax and land rent

It is noteworthy that on 08 April 2020, the Vietnamese Government issued Decree No. 41/2020/ND-CP on the deferment for payment of tax and land rent. Especially, this Decree became effective immediately. Accordingly, as from 8 April 2020, enterprises are allowed to defer the payment of corporate income tax (PIT), personal income tax (PIT), value added tax (VAT) and land rent. In particular:

• Applicable entities:
• Enterprises, organizations, households and individuals that are manufacturers in the following business lines: agriculture, forestry, aquaculture; construction; production and processing of food; textiles; garments; manufacture of leather and leather products; wood treatment and manufacture of products from wood, bamboo, rattan (except furniture); manufacture of products from straw and plaiting materials; manufacture of paper products; manufacture of rubber and plastic products; manufacture of products from other non-metallic minerals; metal production; mechanical working; metal treating and coating; manufacture of electronics, computers and optical products; manufacture of automobiles and other motor vehicles; furniture production.
• Enterprises, organizations, households and individuals that operate in the following business lines: transport and warehousing; accommodation, food and drink; education and training; healthcare and social assistance; real estate trading; employment services; travel agencies, tourism services and auxiliary tourism services; composing, art and entertainment; library, archive, museum operation and other artistic activities; sports and entertainment; cinemas.
• Enterprises, organizations, households and individuals that are manufacturers of prioritized ancillary industry products or key mechanical products.
• Small enterprises and microenterprises shall be determined in accordance with the Law No. 04/2017/QH14 on Assistance for Medium and Small Enterprises and the Government’s Decree No. 39/2018/ND-CP elaborating the Law on Assistance for Medium and Small Enterprises.
• Credit institutions and foreign bank branches (FBB) shall provide assistance for enterprises, organizations and individuals affected by Covid-19 as prescribed by the State bank of Vietnam (SBV). SBV shall publish the list of credit institutions and FBBs that provide assistance so that tax authorities grant deferral of tax and land rent.
• Deferment of payment of tax and land rent
• In relation to VAT (except for VAT at the import stage), the enterprises are allowed to defer the tax payment for 5 months as from the deadline for VAT payment for the taxable amount arising in period of March, April, May and June 2020 (for cases of monthly declaration) and in the period of the first and second quarters of 2020 (for cases of quarterly declaration). Particularly:

+       Time limit for VAT payment of tax period of March 2020 is on 20 September 2020 at the latest;

+       Time limit for VAT payment of tax period of April 2020 is on 20 October 2020 at the latest;

+       Time limit for VAT payment of tax period of May 2020 is on 20 November 2020 at the latest;

+       Time limit for VAT payment of tax period of June 2020 is on 20 December 2020 at the latest;

+       Time limit for VAT payment of tax period of the first quarter of 2020 is on 30 September 2020 at the latest;

+       Time limit for VAT payment of tax period of the second quarter of 2020 is on 30 December 2020 at the latest.

• In relation to CIT, the enterprises are also allowed to defer for 5 months as from the deadline for CIT payment for the remaining taxable amount of the tax period in 2019 and the provisional CIT amount to be paid in the first and second quarters of 2020.
• Regarding households and individuals, VAT and PIT shall be paid by 31 December 2020 for the taxable amount arising in 2020.
• Regarding the land rent, deadline for annual payment of rents that are due in beginning of 2020 for direct lease of land by the State under decisions or contracts of competent authorities will be deferred for 05 months.

4. Application for a loan with interest rate of 0% at Vietnam Bank for Social Policies

Last but not least, on 09 April 2020, the Vietnamese Government issued Resolution No. 42/NQ-CP on measures to support people in difficulties due to the Covid-19 pandemic. Accordingly, enterprises who has financial difficulties and has paid at least 50% of suspension allowance for employees from April to June 2020 may apply from Vietnam Bank for Social Policies, for an unsecured loan that is up to 50% of total regional minimum wage for each employee under the actual payment time but not more than 03 months with interest rate of 0% and maximum loan term of 12 months to monthly pay the remaining salary for the employees suspended from work.

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We hope that the above is beneficial. Our purpose is to provide an update on new legislation, we do not constitute any legal advice. Should you need any further information on any issue above, please do not hesitate to contact us.

Best regards,