On November 20 2019, the Vietnam National Assembly adopted a new Labour Code, which will come into effect on January 1 2021.

The new Labour Code is considerably impacted by Vietnam's commitments under new-generation free trade agreements, including: the Comprehensive and Progressive Agreement for Trans-Pacific Partnership, the Free Trade Agreement between the EU and Vietnam, and Vietnam's commitments as a member of International Labour Organization (ILO).

The following is an overview of the key points that have been added to the new Labour Code.

Expansion of entities governed
For the first time, people who are working without labour relations (i.e. without labour contracts), who reportedly account for a major part of the labor force in Vietnam, will become 'applicable entities' under the Labour Code (meaning that they will be among the entities governed by the code). This represents an attempt by lawmakers to improve the working conditions and social welfare of these targeted labourers. However, it is a cautious move, as a number of provisions of the Labour Code will be applicable to these workers, as the government's guidance documents will further specify.

Labour contracts
Under the Labour Code, the term 'labour contract' will refer broadly to any and all agreements, whether labeled as labour contracts or as something else, which contain terms describing the work/job to be done, salary, remuneration, and designate management and supervision by one party; this is an attempt by lawmakers to address a practice whereby various arrangements are designed to avoid or minimise protection of employees' statutory interests, such as services supply agreements, agency contracts, and consulting contracts.

There will be only two types of labour contract: definite term labour contracts (with a 36-month maximum), and indefinite term labour contracts. Seasonal and short-term (12-month maximum) labour contracts will no longer be available for use under the new Labour Code. The legislators now deem these contract forms to be the same as a definite term labour contract.

Currently, the term of a labour contract may be amended (extended) once by means of an appendix to the relevant contract, provided that the amendment/extension does not change the contract's type. However, amendment/extension of a labour contract term by means of an appendix will no longer be allowed after the effective date of the new Labour Code.

Employers' and employees' rights to terminate labour contracts unilaterally
Under the Labour Code, an employee may terminate a labour contract unilaterally, by means of a notice properly given in advance. However, advance notice will not be required if the employee is maltreated or sexually harassed at the workplace, when the salary is not paid in full or on time, when the employee reaches retirement age, or in other statutory cases.

Employers' rights to unilaterally terminate labour contracts are still limited, although the Labour Code does introduce some new situations whereby employers will be entitled to terminate labour contracts, including when: (i) employees reach retirement age; (ii) employees take five or more consecutive days off of their own accord without proper reasons; and (iii) employees have provided untruthful information when entering into labour contracts, in a manner that affects the employees' recruitment.

Probation period
A probationary period of up to 180 months is newly provided for managerial positions in enterprises, as defined by the Laws on Enterprises, and Laws on Management of State-Owned Capital.

In addition, the Labour Code explicitly provides that a probationary period can be included in a labour contract, whereby termination of probation by any party will terminate the signed labour contract.

Normal working time and overtime
The legislators approved no changes to normal working hours, due to concerns about the potential impact of a change in working hours on economic growth, the country's competitiveness, and domestic enterprises, as well as low actual labour productivity.

The overtime limit of 200 hours per year will remain unchanged; however, there will be some new situations whereby an employer may arrange for employees to work up to 300 hours of overtime, such as: (a) where urgent jobs cannot be delayed due to the seasonality or the timing of raw materials; (b) in situations involving production and processing for export of electrical products, electronic products, and salt products; or (c) in jobs requiring high levels of professional or technical qualifications, but where the labour market cannot sufficiently and promptly supply employees.

Retirement age
The retirement age for employees who work in normal working conditions shall be raised gradually from 60 to 62 years for males (by 2028), and from 55 to 60 years for females (by 2035).

Foreigners working in Vietnam
It is explicitly allowed under the Labour Code for Vietnamese employers and foreign employees to enter into multiple labour contracts with a definite term not exceeding the term of their work permits.

There will be additional requirements for employees to be exempt from work permits. Specifically, foreigners who are owners or members of a limited liability company or the chairman or members of the board of management of a joint stock company will be exempt from work permit requirements, subject to the satisfaction of a new requirement on the minimum amount of contributed capital, to be prescribed by the government.

The term of a work permit under the Labour Code is a maximum of two years, and can be extended only once, for another maximum two-year term.

Representative organisations of employees
For the first time, the Labour Code introduces a representative organisation of employees, which is independent from the Vietnam General Confederation of Labour. This representative organisation and trade union shall have equal rights and obligations to represent and protect employees' legitimate rights and benefits in labour relations.

Notably, consultation with or the presence of a representative organisation of employees will not always be required to formulate internal labour rules, wage scales and wage tables, and bonus policies, or to impose disciplinary actions against a breaching employee, if a representative organisation of employees is not established at the workplace. This move will help to simplify relevant procedures in workplaces which have a limited number of employees.

Labour disputes and strikes
Parties to individual labour disputes will be allowed to resolve their disputes at the labour arbitration council, as an alternative to traditional court proceedings. Arbitration procedures for dispute resolution are generally faster and simpler than going to court; however, labour arbitral awards are not final.

The parties to collective labour disputes regarding interests can follow the process of statutory steps for a labour strike if the disputes are not successfully settled by a labour conciliator, without the requirement to undergo another dispute resolution procedure through the labour arbitration council.