The new Labour Code

The new Labour Code (the revised Labour Code) has been ratified by the National Assembly in an official meeting on 18 June with 455 out of 466 votes and will take full effect as from 1st May 2013. Having gone through four drafts and been actively debated by different classes of the society over the past three years, the new Labour Code is regarded as being very much in favor of the employees, however lessening the rights of enterprises. The new Code with all its progress and remaining concerns will definitely have a big impact on the labour market in Vietnam for the coming years.

 

The new Labour Code contains 242 articles, including several new sections on invalid labour contracts; outsourcing; training and improving professional skills; collective labour bargaining; and industrial collective labour agreements.

 

Overall, the new Code provides an improvement in employees’ working conditions in most of the regulated aspects including, but not limited to, a minimum salary level during the probation period; a minimum salary level in case of a change of duty, a re-allocation; official holiday leave; maternity leave; and rest time. Besides these improved conditions, a good smattering of scattered regulations currently provided in other by-law instruments will be incorporated into the new Code, making it more comprehensive. In addition, the new Code introduces substantial amendments with respect to contract terms; overtime work; special treatment for some particular types of workers; and collective labour agreements.

 

Followings are the most important changes introduced by the new Labour Code.  

According to the new Code, female employees will be entitled to maternity leave prior to and after birth of a total period of 6 months (compared to 4 months under the current Code). Where a female gives birth to more than one child at one time, she shall be entitled to an additional month of leave for every child counted from the second child onwards. Maternity leave before birth shall not exceed 2 months and the total 4 months of leave is mandatory. In case women workers give birth before the date of 1st May 2013 but still in the maternity leave period as defined by the Law on Social Insurance, they shall be entitled to maternity leave provided under the new Labour Code.

 

Under the new Code, workers are not allowed to work more than 50% of the official working hours in a day. In case the weekly working hour is applied, the total time of normal work and overtime work shall not exceed 12 hours in a day, 30 hours in a month and 200 hours in a year, except for some special circumstances defined by the Government where total working time shall not be more than 300 hours in a year. These provisions have been stipulated in different by-law instruments and now incorporated into the new Labour Code.

 

Under the new Labour Code, the minimum (mandatory) salary during both probation period and temporary re-assignment will be increased from 70% to 85% of the full salary.

 

Regarding overtime pay, the employee will be paid at least at the rate of 150% of normal wage for overtime work on normal working days and 200% of normal wage on weekends. For overtime work on official public holidays and paid leaves, overtime pay shall be at least 300% of normal wage; besides, the employee is always entitled to normal wage paid on such official public holidays and paid leave days. Employees doing overtime work at night are entitled to additional payment of 20% of normal wage, plus 30% of normal wage just for working at night and 150%, 200% or 300% of normal wage, as the case may be, for overtime work.

 

For the first time, a section on labour outsourcing is introduced to the Labour Code. The new Code imposes substantial requirements and restrictions on labour outsourcing business, including the requirements of manpower agents to have sub-licenses and money deposit; the limitation on the types of job eligible to labour outsourcing; the limitation on the term of outsourcing contracts to maximum 12 months, etc. Notably, the manpower agent is requested under the new Code to ensure that the salary of a leased employee be not less than that of a normal employee of the end-user and/or the agent who has the same skills and performs the same or similar job. The end-user, in its turn, has the obligation to have direct agreements with the employee on night-work or overtime work if such contents are not specified in the labour outsourcing contract.

 

The new Labour Code reinstates the Decree 46/2011/ND-CP (Decree 46) in tightening the permission to foreign workers. Specifically, under the new Code, the maximum term of a work permit for foreigners working in Vietnam will be reduced to 2 years (instead of 3 years as per current regulations).

An important change under the new Labour Code compared to Decree 46 is that the new Code has removed the work permit exception for foreign workers who work in Vietnam for less than 3 months. Under the new Labour Code, the 3-months exception only applies to the foreign workers who enter into Vietnam to resolve complicated technical or technological problems that have impacts or cause risks to business activities (which problems cannot be resolved by Vietnamese experts and foreign experts currently in Vietnam).

 

Three new sections are added to the chapter on collective labour agreement.

 

Dialogue at the workplace aims to share information, enhance mutual understanding between the employers and workers for a good labor relation in the workplace. Some of the main contents of the dialogue are requests of employees to employers and reverse. Dialogue at the workplace shall take place on a regular basis every 3 months or at the request of a party. The employer is obliged to arrange venues and other material conditions to ensure the dialogue at the workplace.

 

Regarding the collective bargaining, the new provisions set out the principles of bargaining, representatives to the bargaining, the contents and procedures of bargaining. Remarkably, the request for bargaining can be initiated by any of the parties, i.e. the employee or the employer, and within 7 days since the request is received, the other party must accept and propose the timeline to start the bargaining. Any refusal or delay to start the bargaining by one party may allow the other party to initiate the procedures of labour dispute settlement.  

 

The ICLA is a new feature of the new Labour Code. Notably, the ICLA shall supersede the enterprise collective labour agreement if the former offers more favorable conditions to the workers. Specifically, if the rights, obligations and legal interests of the workers provided in the enterprise collective agreement or in any other regulations of the employer are less favorable than those offered by the ICLA, the enterprise collective agreement must be amended accordingly within 3 business months from the date when the ICLA takes effect.  

The new Labour Code provides a new circumstance where retrenchment is allowed: retrenchment for economic reasons, together with 3 other circumstances of mergers & acquisitions, organizational restructuring and technological change. Particular cases to be eligible as economic reasons are expected to be defined further in guidance texts to come.

 

Under the new Code, in all retrenchment circumstances, the employer shall establish and implement a labour usage plan, and pay severance allowance to concerned employees for loss of job. Specifically for economic reasons, organizational restructuring and technological change, retrenchment can only take place once discussion with the workers’ representatives in the enterprise has been made and report to the provincial labour authority for 30 days in advance has been sent.