Significant Amendments to Regulations on Management of Foreign Employees in Vietnam

On 18 September 2023, the Government issued Decree 70 (Decree 70/2023) to amend various regulations on management of foreign employees under current Decree 152/2020. Decree 70/2023 took effect immediately upon its issuance. Below is our discussion on notable changes introduced under Decree 70/2023.

1)         Easing requirements for engagement of foreign employees

  • Under Decree 70/2023, a foreign employee is no longer required to have educational background to be relevant to his/her work experience and proposed job in Vietnam. Instead, the law now only requires the employee to have a minimum work experience suitable for the proposed jobs;

  • Decree 70/2023 now expands the type of documents that can be used to demonstrate educational background and work experience of foreign employees being expert and technician. In particular, previous work permits or exemption certificates can also be used as evidence for foreign employee’s experience; and

  • A foreign employees now can use passport copy which has been certified by their Vietnam-based employer to apply for work permit or renew its work permit, this would facilitate employees’ application for work permits from abroad. Previously, the employees had to provide their original passport for notarization in Vietnam.

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Written by Nguyen Quang Vu On In ,

NEW RESOLUTION LOOSENING EMPLOYEES’ OVERTIME CAP

To support enterprises to deal with the labor shortage during the Covid-19 pandemic, on 23 March 2022, the Standing Committee of the National Assembly of Vietnam passed Resolution 17 to loosen the overtime limit of employees as compared to the Labor Code 2019 (Resolution 17/2022).

Annual overtime hours

Under Article 107.2(c) of the Labor Code 2019 and Article 61 of Decree 145/2020, the overtime hours of employees is capped at 200 hours per year, except for certain specific cases where the employees can work overtime up to 300 hours/year. Exceptional cases are limited to some production industries, or certain circumstances (e.g. to resolve tasks requiring high expertise or technical skills where the labour market cannot satisfy, or in emergency situations), or other cases allowed by the Government.

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Can a foreign company retain a Vietnamese person as a service provider, not an employee?

Short answer: Yes, subject to some mitigants of risks as discussed below.

Vietnamese law has no clear-cut distinction between an employment relationship and a commercial relationship (e.g. service agreement). It is because the definitions of employment relationship and employment contract in the Labour Code 2019 are unclear and broad. For instance,

(1) The Labour Code 2019 defines “employment relationship” as social relations arising during the hiring and employment of workers and during wage payment as between employees, the employer, organizations representing the parties and the competent State agency. Under the Commercial Law 2005, “provision of services” is defined as a commercial activity whereby one party (hereinafter referred to as the service provider) is obliged to provide services to another party and receives payment; and whereby the party using the services (hereinafter referred to as the client) is obliged to pay the service provider and to use the services in accordance with an agreement. These definitions are broad and not specific enough to distinguish such relationships. In both cases, there will be an engagement and payment between the hiring party and the hired party.

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The concepts of employees, employment contracts, and a worker without an employment relationship under Vietnamese labour law

The Labour Code 2019 has significantly expanded its scope of application by expanding the definition of employees (người lao động), employment contracts (hợp đồng lao động) and introducing a new concept of workers without an employment relationship (người làm việc không có quan hệ lao động). The changes could have significant impacts on many individuals including gig workers.

Employees

Under the Labour Code 2019, an employee means a person working for an employer pursuant to an agreement, who is paid wages, and who is subject to management, instruction, and supervision by the employer. On the other hand, the Labour Code 2012 defines an employee to mean a person working under an “employment contract”. Accordingly, under the Labour Code 2012, an individual working for a company under a contract which is not named “employment contract” could argue that he/she is not an employee of the company. However, such an argument may not work under the Labour Code 2019 if it can be established that there is an agreement between the company and the individual and such individual is managed, instructed and supervised by the company.

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Written by Nguyen Quang Vu On In