One of the key tax services provided by RSM is Payroll and Labor Calculation Services. During the process of providing this service, RSM has observed that a majority of employers and employees still lack a clear understanding of labor contracts, labor utilization mechanisms, insurance, and salary payment. This lack of understanding creates difficulties for both employers and employees in obtaining information and confidence in labor agreements.
The Labor Code of 2019 was passed during the 8th session of the XIV National Assembly on November 20, 2019, and came into effect on January 1, 2021. However, by the end of the year, many businesses and employees still lack a clear understanding of the provisions directly related to their rights and obligations in this new Law.
Therefore, in this article, RSM will help readers go through some key points that businesses and employees should take note of in the Labor Code of 2019.
1. There are only 2 types of labor contracts
Fixed-term labor contract is a contract in which both parties agree on a duration, specifying the termination point of the contract within a period not exceeding 36 months from the effective date of the contract.
When a fixed-term labor contract expires but the employee continues working: Within 30 days from the contract's expiration date, both parties must sign a new labor contract. During the period without a new contract, the rights, obligations, and benefits of both parties are governed by the previously agreed-upon contract.
If the 30-day period lapses without signing a new labor contract, the fixed-term labor contract previously established becomes an indefinite-term labor contract.
In the case where both parties sign a new fixed-term labor contract, this can only be done once. Subsequently, if the employee continues working, they must sign an indefinite-term labor contract.
Regarding older employees, Article 149, Clause 1 of the 2019 Labor Code stipulates that employers may agree to enter into multiple fixed-term labor contracts with older employees instead of extending the duration of the labor contract or signing a new labor contract as previously done.
2. Contracts can be concluded electronically or verbally
To keep pace with the advancements in digital technology and in conjunction with the signing of labor contracts in written or verbal form, the 2019 Labor Code has introduced the form of concluding labor contracts through electronic means. Article 14, Clause 1 of this Code stipulates: Labor contracts concluded through electronic means in the form of data messages, as regulated by the laws on valid electronic transactions, are deemed equivalent to labor contracts in written form.
Moreover, Article 14, Clause 2 of the 2019 Labor Code specifies that the parties can enter into labor contracts verbally for contracts with a term of less than 1 month, except as provided in Clause 2 of Article 18, Point a of Clause 1 of Article 145, and Clause 1 of Article 162 of this Code. This replaces the application of verbal labor contracts for temporary work with a term of fewer than 3 months, as previously regulated by the 2012 Labor Code.
3. Supplementary provisions on probationary periods
Regarding the work of managers, Clause 1 of Article 25 of the 2019 Labor Code stipulates that the probationary period shall not exceed 180 days for the work of business managers as regulated by the Enterprise Law, the Law on management and use of state capital invested in production and business at enterprises.
For labor contracts with a duration of less than 1 month, Clause 1, Clause 3 of Article 24 of this Code specifies that the employer and the employee may agree on probationary content stated in the labor contract or agree on probation by signing a probation contract. Probationary periods do not apply to employees who sign labor contracts with a duration of less than 1 month.
Furthermore, the 2019 Labor Code adds 4 cases in which the employee's labor contract may be temporarily suspended. Specifically, Clause 1 of Article 30 supplements the cases of labor contract suspension, including: (1) employees fulfilling obligations to participate in People's Self-Defense Force; (2) employees appointed as business managers of 100% state-owned LLCs; (3) employees authorized to exercise the rights and responsibilities of representatives of the state owner in state-owned capital portions at enterprises; (4) employees authorized to exercise the rights and responsibilities of the enterprise in the capital portion invested by the enterprise in other enterprises.
4. Employees unilaterally terminate contracts without needing a reason
Accordingly, Article 35 of the 2019 Labor Code stipulates that employees have the right to unilaterally terminate labor contracts without needing to state a reason but must notify the employer in advance: At least 45 days for indefinite-term labor contracts; at least 30 days for fixed-term labor contracts with a duration from 12 months to 36 months; at least 3 working days for fixed-term labor contracts with a duration of less than 12 months.
In some cases, employees have the right to unilaterally terminate contracts without prior notice, such as: Not being assigned to the correct job, workplace, or not provided agreed-upon working conditions; not being paid in full or receiving delayed wages; being subjected to maltreatment, physical abuse, verbal insults, behavior affecting health, dignity; being forced to work; experiencing workplace sexual harassment; pregnant female workers required to leave work; reaching retirement age, except under other agreements; the employer providing dishonest information affecting the implementation of the labor contract.
The law also stipulates 2 cases in which the employer has the right to unilaterally terminate the contract without prior notice: Clause 3 of Article 37 of the 2019 Labor Code specifies that the employer has the right to unilaterally terminate the labor contract without prior notice in two cases: The employee is absent from the workplace for a period of 15 consecutive days from the expiration of the temporary suspension period of the labor contract; the employee voluntarily quits the job without justifiable reasons for a continuous period of 5 working days or more.
5. Raising the retirement age according to the roadmap
According to this Law, the retirement age for workers will increase according to a schedule starting from 2021. Article 169 of the Law stipulates that the retirement age for workers under normal working conditions will be adjusted according to a roadmap until reaching 62 years old for male workers by 2028 and 60 years old for female workers by 2035.
Starting from 2021, the retirement age for workers under normal working conditions is 60 years and 3 months for males; 55 years and 4 months for females. Afterward, each year will see an increase of 3 months for male workers and 4 months for female workers.
For workers experiencing a decrease in work capacity, performing strenuous, hazardous, or especially strenuous and hazardous jobs, or working in socio-economically challenging conditions, they may retire before the retirement age, but not more than 5 years in advance.
6. Adjustment of entitlements regarding rest days and overtime
Article 107 of the 2019 Labor Code stipulates that the extra working hours for employees should not exceed 50% of the normal working hours in a day. If the weekly working hours system is applied, the total normal working hours and extra hours should not exceed 12 hours per day, 40 hours per month, or 200 hours per year, except for specific cases allowing up to 300 extra hours per year.
Therefore, the 2019 Labor Code sets the limit for extra working hours per month at 40 hours, keeping the extra working hours per year at a maximum of 200 hours, except for specific cases allowing up to 300 hours per year as stipulated in the 2012 Labor Code.
Article 112 of the 2019 Labor Code specifies that employees shall be granted days off with full pay on the following public holidays: New Year's Day 1 day (January 1st of the Gregorian calendar); Lunar New Year 5 days; Reunification Day 1 day (April 30th of the Gregorian calendar); International Workers' Day 1 day (May 1st of the Gregorian calendar); Hung Kings Commemoration Day 1 day (10th of March in the lunar calendar). National Day has been extended to 2 days (September 2nd of the Gregorian calendar and one adjacent day, which could be either September 1st or September 3rd, depending on the year).
For cases of separate leave with full pay, previously, under Article 116, Clause 1 of the 2012 Labor Code, employees were granted separate leave with full pay in the following cases: marriage, 3 days off; child's marriage, 1 day off; death of father, mother, adoptive father, adoptive mother; death of spouse; death of child, 3 days off.
Now, as stated in Article 115, Clause 1 of the 2019 Labor Code, employees are entitled to separate leave with full pay and must notify the employer in the following cases: marriage, 3 days off; child's birth, child's marriage, 1 day off; death of father, mother, adoptive father, adoptive mother, father-in-law, mother-in-law; death of spouse; death of child, 3 days off.
Therefore, the 2019 Labor Code has added the provision of granting 1 day off with full pay for the child's marriage and 3 days off for the death of a foster father or mother.
Regarding payment for unused annual leave days, the 2019 Labor Code only mentions 2 cases where payment is made: termination of employment or dismissal. It eliminates the provision for payment for days of unused annual leave for other reasons, as stipulated in Article 114, Clause 1 of the 2012 Labor Code.
These regulations highlight the labor rights and limitations in labor contracts. Nowadays, many enterprises, especially those with foreign investments or representative offices of foreign traders, prioritize using labor and payroll calculation support services. However, businesses still need to stay informed about these regulations to avoid violating them and affecting the rights of employees and the organization itself.
7. How can RSM Vietnam assist employees and businesses?
As a tax services company with global advantages, RSM confidently offers comprehensive support services to businesses in labor and payroll matters, aiming to provide utmost convenience to enterprises. This enables them to focus on their long-term business plans without excessive concerns about tax compliance, payroll, and labor issues.
The services we provide include:
Post-establishment labor registration services
Payroll calculation and labor support services
Consultation services for constructing salary scales and cost optimization
Case-specific advisory services
Other services related to payroll and labor
>>> Read more Our Payroll Calculation and Personal Income Tax Services
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