In Effort to Move to International Standards, Vietnam Labor Codes Updates Now In Effect

February 18, 2021

Updates to Vietnam’s labor codes are now in effect and bring about several important changes, including the ability of employees to set up their own representative organizations in the country.  The changes will bring about significant changes to firms operating in Vietnam and reflect an underlying effort by the APAC nation to plug itself into the global economy.  
Approved in late 2019, the Vietnam’s new labor codes are now effective.  As noted, the changes are aimed at ensuring compliance with labor standards outlined in multiple, recently signed international trade agreements including a major agreement with the European Union and the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP).  Key aspects of the code updates are below:  
Employee Representative Organizations:  Under previously existing laws in Vietnam, the only employee representative entity was the state-run Vietnam General Confederation of Labor (VGCL).  With the code updates, employees can now form their own employee representative organizations outside of the of the VGCL. 
Overtime Cap Increased:  In the new code, the monthly overtime cap was increased from 30 hours to 40 hours.  There are also provided limited circumstances where overtime work up to 300 hours per year.  
Salary Scheme Changes:  Employers are no longer required to submit the salary table, scale, and labor norms with the Vietnam Government.  However, the employers are still required to set up the salary schemes and consult with employee representative organizations.  
Now Only Two Labor Contract Types – Definite and Indefinite-Term:  Only two types of labor contracts are now recognized with “definite term” contracts having terms of less than 36 months and indefinite, permanent term contracts.  The new code also provides for seasonal labor contracts and will require foreign employees to sign definite-term labor contracts multiple times.  
HR Policy Global Take:  The changes in Vietnam are a prime example of the impact of international trade agreements on local labor practices.  This trend needs to be monitored in other APAC nations.  
HR Policy Global Director of Asian Affairs, Amy Lau led a webinar for HR Policy Global members on the Vietnam labor code updates in late January for member company APAC leads.  If you would like to participate in Amy’s future program and events, please email Henry Eickelberg.