On 20 November 2019, the National Assembly of Vietnam adopted the new Labor Code (Labor Code 2019) to replace the Labor Code 2012. The Labor Code 2019 will come into effect from 1 January 2021. The table below (download here) cover notable points of the Labor Code 2019 in comparison with the Labor Code 2012. This post is written by Nguyen Hoang Duong and edited by Nguyen Quang Vu.

When a company hires a senior manager, it usually wants to (1) hire the manager for a fixed term only, and (2) have the flexibility to fire the senior manager if he/she does not perform as expected. However, under the Labour Code 2012, a fixed-term contract is limited to three years, and to fire or to change the work of an employee, the employer must satisfy various strict conditions.

To overcome these restrictions, the employer may specify in the employment contract with the senior manager that the senior manager is employed to work for two different jobs. These two jobs are:

·         The senior-level job that the employee is recruited for. The senior-level job will provide the senior manager with all the salaries and benefits associated with such job; and

·         an entry-level job with minimum wage and benefit.

A good employment contract for a senior position, like any other employment contract, is the one that can balance the needs of the employer and the employee. A senior-level employee usually seeks attractive salary, incentives, benefits, while problems like non-competition and non-disclosure are the major concerns of an employer. On the other hand, both sides may want certain same things in an employment contract, for example, long-term contract (fixed or indefinite term), ability to terminate the contract without cause, indemnification for wrongful termination of employment contract, and so on.

Unfortunately, under Vietnamese employment laws, there are certain restrictions that prevent the parties, especially the employer side, from having an employment contract that can reflect accurately their commercial needs. This is because Labor Law 2012 is drafted in favor of the employee side due to the view of the State that the employee is the one who is in a weaker position in a labor relationship.

One potential solution to overcome the restrictions under the Labour Code 2012 for contract with a key personnel is to have a separate “civil contract” between the key personnel and the key shareholder or director of the employer in addition to the normal employment contract.

On 15 October 2018, the Government issued Decree 143/2018, which details regulation on compulsory social insurance (Social Insurance) applicable to foreign employees under the Social Insurance Law 2014. Before the issuance of Decree 143/2018, the Social Insurance Law 2014 only provides that foreign employees would be “allowed” to participate in Vietnam’s Social Insurance from 1 January 2018. For a long time, this vague regulation has given rise to concern as to whether the Social Insurance contribution for foreign employees is compulsory or voluntary. Decree 143/2018 now officially confirms that this is compulsory. In particular,