IS SOCIAL INSURANCE PAYABLE DURING PROBATIONARY PERIOD OF A LABOUR CONTRACT IN VIETNAM?

According to Social Insurance Law 2014, from 1 January 2018, any employee working under a labor contract with a term of from one month to three months must participate in the compulsory social insurance scheme (SI Requirement). The social insurance contributions are paid by both employer and employee subject to the contribution rate, of which the employer usually pays larger part. However, it is not clear whether an employee working under a “probation labour contract” (hợp đồng thử việc) with a term of from one to two months (Probationary Contract) must comply with the SI Requirement. There are various views on this issue.

OVERVIEW ON LABOUR CONTRACT IN VIETNAM

Under the Labour Code 2012, a labour contract means an agreement between an employee and an employer on a paid job, working conditions, and rights and obligations of each party to the labour relationship. A labour contract between an employer and its employee can fall into one of the following types:

Seasonal Contract: a seasonal contract (or contract for a specific job) is a labour contract with the duration of less than 12 months;
Definite Term Contract: a definite term contract means a labour contract with the duration of between 12 months and 36 months. The term of a definite term contract can be extended one time only. Thereafter, the employer must enter into an Indefinite Term Contract (see below); and
Indefinite Term Contract: an indefinite term contract means a labour contract in which the two parties do not fix the term nor the time of termination of the contract.

CAN AN EMPLOYER UNILATERALLY TERMINATE AN EMPLOYMENT CONTRACT BASED ON A RESTRUCTURING REASON WITHOUT AN ADVANCE NOTICE?

The Labour Code 2012 does not expressly require an employer, who intends to terminate an employment contract on the grounds of companies restructuring, change of technology or economic reasons (Company Restructuring), to give advance notice to the relevant employees.

The advance notice requirement is provided in Article 38.2 of the Labour Code 2012. Article 38.2 follows Article 38.1 which only covers termination of an employment contract on other grounds such as poor performance, prolonged illness, or force majuere events. Therefore, one can argue that Article 38.2 only applies to the scenarios contemplated under Article 38.1 of the Labour Code 2012 but not a Company Restructuring.

On the other hand, the above view may be not reasonable since:

Although in terms of presentation, Article 38.2 follows Article 38.1, the wording of Article 38.2 can cover any termination of an employment contract by the employer including termination on the ground of Company Restructuring.
An advance notice period may give the terminated employee an opportunity to (1) look for a new job before leaving his/her current job; or (2) make a complaint against the employer’s decision in case of wrongful termination. Therefore, there is no reason why a termination due to Company Restructuring should be treated differently from other cases.
This interpretation has been adopted by the courts in certain cases.

This post is contributed in parts by Nguyen Hoang Duong, a trainee at Venture North Law Limited.

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INCORPORATE BY REFERENCES IN LABOUR CONTRACTS IN VIETNAM

In practice, instead of providing rights and obligations of the employees specifically in the labour contract, an employer may cross-refer to its existing “internal regulations” (quy chế) to impose such internal regulations on the employees. Unfortunately, there is no clear definition of the internal regulations as well as a legal basis for issuing the internal regulations by an employer under labour law. However, there are various provisions, which suggest that employer has rights to issue the internal regulations (such as bonus regulations, regulation on raising wage grade, recruitment, etc).

Article 5.2(b) of the Labour Code 2012 provides that employees have obligation to be subject to the lawful management by the employer. From the view of the employer, one may argue that the issuance of internal regulations is to manage the employees. Theoretically, a labour contract which cross-refers to the employer’s internal regulations will be valid if:

· The employees have agreed with the contents of such internal regulations before entering into the labour contracts; and

· The contents of such internal regulations comply with relevant laws.

Vietnam Business Law