EOR and the Company Owner
A company owner may feel that expanding to or incorporating a business in Vietnam is advantageous. However, law related to employment and commerce can change often, and retaining the services of an EOR to assist with these matters is critical to avoid violations and legal entanglements. An EOR can provide the ability to tap into the local workforce without the standard employment relationship in the owner’s country of origin.
Sky Executive will handle legal liabilities for the employer as his or her Employer of Record. This places responsibility for payroll, administration of benefits and operations behind the scenes while the employer has control over the supplied employees’ daily activities. The owner does not need to create or establish a separate business entity in Vietnam when hiring an EOR. Sky Executive provides employment solutions for the owner quickly when workers are necessary for commercial enterprises.
The Employment Contract Drafted in Vietnam
Employment contracts are normally negotiated between the new hire and the employer. However, with an EOR, this is something accomplished through a written contract provided to the employer with all stipulations taken care of beforehand unless the employer wants to make changes. These documents will clearly identify and label the important provisions that include the following:
- Rate of pay
- Relevant benefits
- Sick leave
- Paternity or maternity leave
- Provisions regarding severance and/or termination
The contract itself is written in Vietnamese, since this is the local language for employees in this country. The Employer of Record will also understand and apply employment and labor laws in this country so the owner need not worry about such issues.
Contract Requirements in Vietnam
The Labor Code governs most employment matters in Vietnam. This involves statutory requirements regarding normal working conditions, leave, vacation, hazardous and dangerous conditions and the rights employees have.
There are three different types of contracts used in Vietnam for employment. These are the indefinite term or IDT, the definite term or DT and the seasonal contract. The IDT can last for as long as necessary. The DT usually lasts between 12 and 36 months. The seasonal contract is for a term of fewer than 12 months.
All contracts under the Labor Code must explain the work that the employee will perform, the expected work hours, rest hours and terms of salary. The work location, duration of the contract in specific language and the conditions the person will work under are also stipulations to include. Insurance is standard and part of the contract or supplied by the employer in a different manner. The DT contract can undergo an extension if signed within 30 days of expiration. If the employee continues to work for the employer after the expiration, the DT contract is then automatically considered an IDT contract.
Compliance with the Labor Code
The contract for labor in Vietnam requires compliance with laws, the labor agreement and the company. The employer does not specifically receive protections through the standard employment contract given by the Ministry of Labor, Invalids and Social Affairs or DOLISA. The organization may advise the owner to create a specific contract and internal rules and regulations for employees in the country when the owner is foreign.
If the employer has more than ten workers, he or she will need to issue and register with the DOLISA within six months of staring the business enterprise. Without this, dismissal and demotion are nearly impossible.
Working hours for employees in Vietnam involve a maximum of eight hours each day with a maximum of six days a week in standard working conditions. The employer must provide at least one entire day off each week, and this is normally Sunday. This is often similar to the United States’ workweek for full-time exempt employees. Normal work weeks are Monday through Friday.
Vietnam Minimum Wage and Wage Expectations
Standard wages for minimum wage are VND 1,150,000 or an equivalent of $50 in the United States. The Vietnamese Dong is the standard for payment to employees. The employer can provide higher wages than this depending on position, tenure and other conditions such as more dangerous work or greater stress on the body. For those who pass vocational training or are professionals and not brand new hires, the standard wage is usually at least seven percent greater than the minimum wage.
Vietnam Holidays and Annual Leave
In Vietnam, there are nine public holidays for which most employees will receive days off. The Tet Lunar New Year in Vietnam lasts a week and can provide employees with most or all of this time. Public holidays do not take away from vacation days. Per Vietnamese labor laws, employees have a minimum of twelve days of annual leave in addition to public holidays. The holidays include the following:
- New Year’s Day
- Tet Eve
- Tet Nguyen Dan
- Hung King Temple Festival
- Reunification Day
- Labor Day
- National Day
Vacation Leave in Vietnam
Vietnamese labor law stipulates the standard minimum annual leave which depends on the tenure of work the employee has at the time. The standard requirements are as follows:
- Working for twelve months with a company provides the employee with twe3lve annual leave days in the year with slight changes and pro-rata with less than these twelve months
- One additional day of paid vacation for the year accrues with each additional five years of employment with the company
- If annual leave is not taken by the end of the year, the employee will receive pay instead
- More hazardous working conditions provide the employee with more leave days based on negotiated benefits with the employer or EOR
- Annual vacation days are separate from sick leave days or maternity or paternity leave
- Additional days for leave are given to employees on top of the standard days for the following: weddings to spouses, children’s weddings, any death of a parent, spouse, or child if the employer approves the leave
Any illness or disability that requires the assistance of a doctor provides grounds for the employee to take sick leave. These days receive allowance paid by the social insurance fund in Vietnam and will require documentation for the employee to be able to use this benefit. Sick leave is based on salary and the social insurance premiums. These are as follows:
- 30 days each year of leave when the employee contributes to the fund for less than 15 years
- 40 days each year of leave if the employee contributes between 15 and 30 years to the fund
- 60 days each year of leave if the employee contributes to the fund for more than 30 years
Maternity and Paternity Leave in Vietnam
When female employees are expecting a newborn, they are eligible for up to six months of paid leave for maternity set at 100 percent of their current salary. This also provides an additional 30 days for each additional newborn.
Fathers become eligible for five to fourteen days of paid paternity leave when the mother is expecting. The length of time depends on whether it is a natural birth or a C-section birth and whether it is a single or multiple childbirth.
While not legally required by the employer, a thirteen-month bonus is standard in Vietnam. This can work as an annual bonus or as part of a commission program. To be eligible for the bonus, it is usually necessary to work for at least one year with the company. The bonus generally increases based on the employee’s tenure with the company. The owner of the company can negotiate these terms if the EOR does not provide this in the employment contract.
The Employer of Record (EOR) usually starts an employee with a probationary period for new hires that does not exceed 60 days for some occupations and 30 days for others. The labor code in this country gives the employer the ability to terminate employees with 30 days of advance notice for fixed labor contracts and 45 days for indefinite contracts. However, proper legal grounds must exist for termination, which could include the following:
- Performance issues
- Prolonged illness that lasts longer than the standard sick days provided
- The closing of the company
- Special conditions
Without the proper legal grounds for termination, early termination may be considered wrongful. This requires the company to reinstate the employee and provide additional salary for time not worked along with an additional two months of salary as a penalty.
Resignation or a settlement can provide severance pay to the employee leaving the company and can avoid the potential penalties associated with termination. This is something normally negotiated with the employee and the owner.
Statutory Social Insurance is a requirement for enterprises, companies and organizations with employees with an IDT or DT contract in Vietnam. The social insurance fund does provide allowances for necessary sick leave, maternity, accidents and disease or pensions. The employer normally contributes 23 percent to payroll while employees will contribute 10.5 percent of their pay.
The EOR and Additional Benefits in Vietnam
The national system of Vietnam provides basic insurance. However, supplemental programs and life insurance are something the employees can receive as added benefits. Employers may provide additional benefits to be more competitive, such as additional vacation or higher bonuses. The Employer of Record (EOR) usually provides a contract with these stipulations already in place.
If you would like to learn more about how Sky Executive can streamline the employment process and handle compliance matters on your behalf, contact our local experts today.