This Letter would aim to keep you updated with some new laws/regulations in relation to employment and social insurance, in addition to new issues of the on-working draft of revisions of Labor Code 2012 as briefed hereinafter.

Monthly salary paid for social insurance premium which covers the salary rate, salary allowances and other additional payments shall be applicable from 1 January 2018 as stipulated under Regulation 959

Under Article 90.1 of Labor Code 2012, salary includes: (i) salary rate; (ii) salary allowances and (iii) other additional items, in which as defined under Decree 05/2015/ND-CP guiding the implementation of several provisions of Labor Code 2012:

(i) Salary rate for the job or position means the amount in the salary scale and salary table which the employer is required to formulate in accordance with Article 93 of the Labor Code;

(ii) Salary allowances means an amount of money to cover factors such as labor conditions, job complexity, living conditions or the need [an allowance in order] to attract labor which have not been included or completely included in the salary rate for the job or position;

(iii) Additional items means items of money in addition to the salary rate and salary allowance, and which are relevant to carrying out the job or taking the position stipulated in the labor contract but exclude bonuses, money for meals between shifts and subsidies provided by the employer and not relevant to carrying out the job or taking the position stipulated in the labor contract.

Currently, as required by laws, the monthly salary which is the basis for social insurance premium payment includes salary rate and salary allowances. However, from 1 January 2018, the monthly salary paid for social insurance premium not only cover the salary rate, salary allowances but also includes the additional items as set forth under Section 2.1, Article 6 of Regulation 959.

New Regional Minimum Wage Rates applied from 1 January 2017 as stipulated under Decree 153

Decree No.153 was issued by the Government on 14 November 2016 in replacement for Decree No. 122/2015/ND-CP to revise the regional minimum wage rate applicable from 1 January 2017. In accordance with such Decree, there are increases in the regional minimum wage rates compared to those of Decree 122, particularly: (i) VND 3,750,000 per month applied to enterprises operating within unit sub-regions of region I, (ii) VND 3,320,000 per month applied to enterprises operating within sub-regions of region II, (iii) VND 2,900,000 per month applied to enterprises operating within sub-regions of region III, and (iv) VND 2,580,000 per month applied to enterprises operating within sub-regions of region IV. Sub-regions of regions I, II, III and IV are defined in the Appendix attached to Decree 153.

Reduction on the rate of contribution to the labor accident and occupational disease insurance fund from 1 June 2017 as stipulated under Decree 44

According to Decree 44, from 1 June 2017, enterprises shall only contribute to the labor accident and occupational disease insurance fund at the rate of 0.5% of salary fund which is used as the basis for paying social insurance premiums for employees instead of the rate of 1% as previously required under Clause 1 Article 4 of Decree No. 37/2016/ND-CP.

Issuance of Electronic Visa to Foreign Nationals Entering Vietnam from 1 February 2017 to 31 January 2019 as stipulated under Decree 07

In accordance with Decree 07, foreign nationals who are citizens from any of the 40 nations prescribed in the Annex attached to Decree 07 (hereinafter as “Foreign Nationals”) shall be qualified to apply for electronic visa prior to entering Vietnam, such as: Korea, the United States of America, Germany, Japan, Italy, France, China (not applicable to Chinese e-passport holder), Russia, the United Kingdom of Great Britain and Northern Ireland and etc. A qualified applicant can access the online application for issuance of electronic visa at the Vietnamese Department of Immigration website https://www.xuatnhapcanh.gov.vn or the English domain name being https://www.immigration.gov.vn. The applicant shall complete and submit an online application along with a photo and passport data page. The applicant shall obtain the code of online dossier and pay the visa fee to the account specified on the electronic visa application Website. The Department of Immigration shall verify, process and makes its decision on the electronic visa application website within 03 (three) working days upon receiving all necessary information and payment from the applicant. Such policy is effective from 1 February 2017 to 31 January 2019.

Drafted Decree on compulsory social insurance applicable for foreign employees working in Vietnam

Please be noted that as required under Article 2.2 and 124.1 of the Law on social insurance, foreign employees shall become subject to the participation to the compulsory social insurance from 1 January 2018. Accordingly, the Ministry of Labor, Invalids and Social Affairs (MOLISA) has been drafting and shall present to the Government to approve and issue a Decree to guide the implementation of the abovementioned Articles. In accordance with such drafted Decree, foreign employees working under labor contract with indefinite or definite term or under a seasonal or specific job labor contract with duration from 01 month and more shall be subject to the participation of compulsory social insurance. Compulsory social insurance regimes applicable for foreign employees include sickness, maternity, labor accident and occupational disease, retirement and survivorship allowance. Foreign employees are required to contribute 8% of their monthly salary to the retirement and survivorship fund whereas the employer is required to contribute 18% of the foreign employees’ monthly salary, including 3% to the sickness and maternity fund, 1% to the labor accident and occupational disease fund and 14% to the retirement and survivorship fund.

On-working draft of revisions on Labor Code 2012

The on-working draft of revisions on Labor Code 2012 includes significant changes in a range of clauses relating to the right to unilaterally terminate labor contracts; increase in overtime working; increase in retirement age, etc. Here below are the main contents of the draft:

Removal of the requirements of reasons for unilateral termination of labor contracts by employees

In accordance with Article 37 of the current Labor Code 2012, the employee is only entitled to unilaterally terminate the labor contract of before its expiry date if the following conditions are satisfied: (i) Reasons for unilateral contract termination shall fall in cases as provided by laws (except for the case of employees working under indefinite-term labor contracts); and (ii) Contract termination notice shall be provided to the employer within period as required by laws. Otherwise, he/she shall: (i) not be entitled to a severance allowance and pay compensation to the employer equivalent to one of his/her month’s salary in accordance with the labor contract; and/or (ii) pay compensation to the employer a sum of money equivalent to his/her salary during the period for which advance notice was not provide in case he/she breaches the provisions of advance notice period; and/or (iii) refund training costs to the employer in case the employee and the employer signed a training contract as stipulated under Article 62 of the Labor Code 2012.[1] A proposal to revise Article 37 as abovementioned is to remove the reasons for unilaterally termination of labor contracts by employees whereas the notice period requirement is still remained. As a result, the employees shall exercise the right to unilaterally terminate labor contracts without any reason and the consequence of unilateral termination of labor contract is only applicable to the violation of advance notice period requirement.

Increase in retirement age

Article 187 of the current Labor Code 2012 regulates that the retirement age of employees under normal conditions is 60 for men and 55 for women that is similar to Labor Code 1994. The increase of retirement age had been raised up for many times during the drafting process of the Labor Code 2012 as well as the Social Insurance Law 2014, however, have not yet been approved by the National Assembly. Up to this date, there is an option drafted in Article 148.1 of the Revised Labor Code 2012 that retirement age shall increase from 01 Januray 2021 which shall comply with route regulated by laws. Accordingly, from 01 Januray 2021, the retirment age shall increase for 06 months for each year until male employees reach the age of 62 and female employees reach the age of 60.

Increase in overtime working hours

Article 106 of the current Labor Code 2012 specifies that the maximum number of overtime working hours for employees is no more than 30 hours per month, no more than 200 hours annually, and not exceeding 300 hours in special cases as stipulated by laws. Many people have been supporting the increase in the maximum overtime working under laws to meet the needs of the majority of enterprises and a large number of the employees who have desire to work overtime to increase income; and push up the competitiveness of Vietnam’s labor market compared to other countries in the region. Hence, it is proposed in Article 82.2(b) the Draft of the Revised Labor Code that the total overtime working hours shall not exceed 400 hours annually.

Increase of salary for working overtime and working at night from 01 January 2019

According to the Article 97 of the current Labor Code 2012, an employee who works overtime shall be paid in accordance with his/her salary unit price or salary for current work as follows:

(i) One normal days, at a rate of at least 150%;

(ii) One weekly days off, at the rate of at least 200%;

(iii) On holidays and paid leave days, at the rate of at least 300% [exclusive of the wage for the holiday or the salary for the paid leave day of the employee entitled to the daily salary].

An employee working at night shall be paid an additional minimum 30% of his/her wage calculated at the salary unit price or salary for such work conducted during a normal day time.

An employee working overtime at night shall be paid in addition to the abovementioned salary an additional of 20% of wage caculated at the salary unit price or salary for such work conducted during day time.

It is recommended to revise such Article in the draft of the revised Labor Code [Article 73] in such a way that from 01 Janauray 2019 an employee who works overtime shall be paid in accordance with his/her hourly salary as follows:

(i) On weekdays: at least 150% for the first overtime working hour and 200% for the following working overtime hours;

(ii) On weekends: at least 200% for the first two working overtime hours, 300% for the following working overtime hours;

(iii) On public holidays and paid holidays: at least 300% for the first two working overtime hours, 400% for the following working overtime hours.

Employees working at night shall be paid an additional minimum 30% of his/her hourly salary of the normal working day for an hour.

Employees working overtime at night shall be paid, apart from being paid as extra working in daytime, they shall be paid, in addition to the abovementioned, an additional of at least 50% of the hourly salary in the daytime for an hour.

Labor contracts with its term of one month and more shall be in writing

As stipulated under Article 16 of current Labor Code 2012, the parties may enter into an oral labor contract for temporary work of less than three months, or in other words, in this case, the contract in writing is not required under laws. In the draft of the revised Labor Code, it is proposed that the parties are only allowed to enter into oral labor contracts in case of labor contracts with term of less than 01 month. Or in other words, all of labor contracts with term of more than 01 month shall be made in writting.

[1] Article 43 of the Labor Code 2012.