Important implementing regulations of the Labour Code 2012

On 12 January 2015, the Government issued Decree 5/2015 implementing various provisions of the Labour Code 2012 in many different areas of the Labour Code 2012. Below are some important points introduced by Decree 5/2015. This post is contributed by Tran Thanh Tra, a VILAF associate.

Labour contracts

(1)          While there is no need to use a standard form labour contract as under the Labour Code 1994, Decree 5/2015 provides very specific requirements about the contents of a labour contract (more than a full A4 page). In addition, if the employer authorises a person who is not the employer’s legal representative to sign a labour contract, the authorisation must follow a prescribed form by the Ministry of Labour, War Invalids and Social Affairs (MOLISA) and no further authorisation is allowed.

(2)          The employer and the employee can now only agree to extend the term of a labour contract once without changing the type of labour contract (e.g. from fixed term to indefinite term). This new requirement seems to be intended to “force” the employer to offer the employee an indefinite term labour contract instead of continuing extending the term of a fixed term labour contract.

(3)          An employer must confirm to a newly employed employee three days before the last day of his/her probationary period whether the employee passes or fails the probation.

(4)          In the internal labour rules, an employer must specify the operation or production circumstances where the employer may temporarily transfer its employees from one work to another work.

(5)          An employer must have regulations detailing the criteria for assessing performance of the work of its employees in order to determine whether an employee repeatedly fails to perform his/her work. The regulations must be commented by the trade union. Decree 5/2014 does not specify how to assess “repeated” as it does under Decree 44/2003.

Unilateral termination of labour contracts by employers

(6)          An employer now has one more legal ground to unilaterally terminate a labour contract due to “labour restructuring” (to chuc lai lao dong). However, we may need further guidance on what event can be regarded as a labour restructuring event.

(7)          Decree 5/2015 also clarifies “economic reason” where an employer may unilaterally terminate a labour contract, to be (1) economic crisis or economic recession or (2) implementation of the State’s policies in the event of economy restructuring or implementation of international commitments. The definition is very broad and not practical. E.g. even when the economy is in good shape there is still companies going under bankruptcy or restructuring.

(8)          The previously accepted practice that two employees would be considered as “many” now has been codified under Decree 5/2015.

(9)          Decree 5/2015 expressly requires a current employer to pay the severance allowance (trợ cấp thôi việc) or job-loss allowance to the employees for the period that such employees have worked for the current employer as well as the period they had worked for previous employer if the employment termination occurs after a merger, consolidation, division or separation. In light of this provision, the parties involving in an M&A transaction should take this issue into account while negotiating the terms and price of the deal.

Collective bargaining (thương lượng tập thể)

(10)        Regular collective bargaining must be carried out at least once a year at the time as agreed between the employer and the labour collective.


(11)        From 1 March 2015, when encountering natural disasters, fire or any other force majeure events, an employer may delay paying salaries up to one month. However, the employer must pay interest if such delay last more than 14 days.

(12)        Under Decree 5/2015, the wages used as basis for payment for leave not taken are the average wage recorded in the labour contract for 6 months before the termination of the relevant contract or that for all employment period if the employment period is less than 6 months. The wages used as basis for calculation of compensation for damages to tools and equipment arising from an employee’s activities are net wages (after PIT and social insurance contribution).

Internal labour rules (nội quy lao động)

(13)        If a company operates in more than provinces then after registering the internal labour rules with the province where the head-office of the company is located, the company must send the registered internal labour rules to the provincial labour departments where the company has its branches or representative offices.