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Giles Cooper - PartnerDuane Morris Vietnam LLC

Vietnam Labor Law HighlightsAsia Employment Law Congress 2017 - Singapore

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© 2017 Duane Morris LLP. All Rights Reserved. Duane Morris is a registered service mark of Duane Morris LLP. Duane Morris – Firm and Affiliate Offices:New York | London | Singapore | Los Angeles | Chicago | Houston | Hanoi | Philadelphia | San Diego | San Francisco | Baltimore | Boston | Silicon Valley | Washington, D.C.Las Vegas | Atlanta | Miami | Pittsburgh | Newark | Oman | Boca Raton | Wilmington | Cherry Hill | Myanmar | Lake Tahoe | Ho Chi Minh City | Shanghai | Yangon | Taipei

Duane Morris LLP – A Delaware limited liability partnership

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Duane Morris – a leading international law firm• Duane Morris LLP is a law firm founded in Philadelphia in the United

States with more than 750 attorneys in 27 offices worldwide• In Asia, the firm has offices in Singapore, Ho Chi Minh City, Hanoi,

Shanghai, Taipei, Yangon, giving the firm’s clients access to legal services in markets throughout the Asia Pacific region and beyond

• Supporting these regional offices, the firm operates a series of country desks for India, Indonesia, Nepal, Korea and Japan, as well as an alliance in Sri Lanka.

• Regularly top-ranked by Chambers & Partners, Legal 500, ILFR1000• Advising on:

– Major projects in Vietnam and Myanmar– International banks, investment houses and private equity funds– First-of-its-kind deals requiring creative solutions in a complex legal landscape

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• 750 attorneys in 27 offices• Regularly top-ranked by

Chambers & Partners, Legal 500, ILFR1000

• First-of-its-kind deals requiring creative solutions in a complex legal landscape

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TOPICS

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1. Work Permits & Work Permit Exemption Certificates

2. Internal Trade Unions

3. Social Insurance – Health Insurance –Unemployment Insurance

4. Severance allowances – finally a thing of the past?

5. New Labor Code is coming!

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Work Permits & Work Permit Exemption Certs.

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WORK PERMIT WORK PERMIT EXEMPTION CERTIFICATE

Labor contract

Service provider

Intra-corporate transferee

Contributing Member LLC

Offering services less than 3 months

Board Member of JSC

Interns

NOPAPER WORK

Short-term entry(less than 30 days at a time and no more than 90 days per year)

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Work Permit – Work Permit Exemption Certificates• Validity: max 2 years for both

• Exceptions: 17 work permit-exempt categories, e.g.– Intra-company transferees– Individuals “offering services” for less than 3 months– Individuals working in Vietnam for less than 30 days at a time and

up to 90 days per year in total

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Grey areas: work permit exempt or not?

Capital contributor of an LLC, concurrently acting as CEO: exempt under Art. 172, Labor Code but fall directly into the “manager” category for work permits under Decree 11.

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Conditions forwork permit exemption?

1. The expat must be manager, executive director, specialist or technician;

2. Offshore entities having their Vietnam-based commercial presence;

3. The Vietnam-based commercial presence operates in one of 11 WTO service sectors;

4. The expat transferee recruited by the offshore enterprise in at least 12 months prior to his/her secondment to Vietnam.

Circular 35: Intra-corporate transferees

Do overseas Vietnamese need a work permit to work in Vietnam?


Circular 40: Work permit for service providers

Requirements: 1. The service provider must be qualified as an expert.

2. The service provider must have worked for the offshore entity at least 24 months prior to his/her entering Vietnam to provide services.

3. The offshore entity has NO commercial presence in Vietnam.

Who will play the role of employer?

The partner entity in Vietnam will apply for work permit.(though there is no employment relationship)

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SUBMISSION RESPONSENormal

applicationOnline

applicationNormal

applicationOnline

Application

In-principleapproval for foreign staff

need

At least 30 days

At least 10 days

Within 15 days

Within 10 Days

in advance of the proposedrecruitment date

from the date of receipt

Work permit issuance

At least 15 working days

At least 10 days

Within 7 working days

Within 5 working days

in advance of the proposedrecruitment date

from the date of receipt

Draft Circular: Online Work Permit Application

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Case Study 1

An expat CEO is appointed to replace the previous CEO and will work in Vietnam as the new legal rep of the Company. There are two procedures, which to conduct first?

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STEP AChange Legal Rep

at Department of Investment

(DPI)

STEP BObtain work permit

at Department of Labor

(DOLISA)

or

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Case Study 2

There is an expat regional manager who needs to visit the affiliate entity in Vietnam on a monthly basis.

What are options for him?

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Option 1:Short-term

Entry

WP: NOWPEC: NO

WP: Work PermitWPEC: Work Permit Exemption Certificate

Option 2:Intra-Company

Transferee

WP: NOWPEC: YES

Option 3:Service Supply

WP: YESWPEC: NO

Option 4:Labor

Contract

WP: YESWPEC: NO

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Case Study 3An offshore investor previously established a representative office (“RO”) in Vietnam. Now the investor plans to ‘upgrade’ its presence in Vietnam to a full fledged entity and close the RO.

Is there any automatic scheme to ‘convert’ the RO’s employees into employees of the new entity?

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STEP 1

RO to terminate relationship

withits employees

STEP 2

Newly-formed Entity to re-hire the

RO’s employees

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TRADE UNION FEES

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Employers are required to contribute 2% of monthly payroll as the Trade Union fee from 01 January 2013 regardless of whether or not the employer has an Internal Trade Union.

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TRADE UNION FEE PAYMENT

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Employers in Vietnam are subject to fines of up to VND75 million (equivalent to US$3,400) for failure to make Trade Union fee contributions (plus back payment and interest)

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TRADE UNION FEE PAYMENT

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The Internal Trade Union is eligible to utilize the contributed TU fee:

Year ITU’s entitlement

2015 backwards 65%2016 66%

2017 - present 67%2018 - 2024 68% - 74%

2025 onwards 75%

How to utilize the Trade Union Fee in the absence of an Internal Trade Union?


Which activities need involvement ofInternal Trade Union?

• Execution of Collective Labor Agreement

• Registration of Internal Labor Regulations

• Preparation of Employment Usage Plan in case of retrenchment

• Preparation of Criteria to assess level of completion of work (a ground for unilateral termination)

• Implementation of labor discipline

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Compulsory Insurance Contribution Rates as of 1 June 2017

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Insurance Employer Employee Total

Social17.5%

(previously 18%)

8% 25.5%(previously 26%)

Health 3% 1.5% 4.5%

Unemployment 1% 1% 2%

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Will mandatory social insurances apply to expat employees as of Jan 2018?

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Severance allowances – are they finally history?

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SEVERANCE ALLOWANCE

UNEMPLOYMENT INSURANCE

Before 2009 All employers None

From 2009to 2014

Employers withLESS THAN

10 employees

Employers withAT LEAST

10 employees

From 2015 None* All employers

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December 2016: MOLISA released first draft

January 2017: First draft submitted to the Government

April 2017: Draft submitted to the National Assembly for review

September 2017: Prepare final draft based on the National Assembly’s comments

October 2017: Submit final draft to the National Assembly for promulgation

2018: Come into effect

New Labor Code – Schedule for Promulgation

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Labor Code 2012 Proposed Revisions

Automatic conversion

Once

• the labor contract expires;• Employee continues working; and• NO new labor contract signed within

30 of previous expiry date.

Definite-term contract → Indefinite-term contract

Seasonal contract → 24-month definite-term contract

Once:

• the labor contract expires;• Employee continues working; and• NO new labor contract.

Definite-term contract → Indefinite-term contract

Seasonal contract → Indefinite-term contract

New Labor Code – Proposed Changes


Labor Code 2012 Proposed Revisions

Labor Contract Extension


1st Definite-

termcontract

2ndDefinite-

termcontract

Indefinite-term

contract

Oneextension

ofthe 1st

contract

Oneextension

ofthe 2ndcontract

1st Definite-

termcontract

Extensionof

the 1stcontract

Indefinite-term

contract

2nd Definite-

termcontract

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Labor Code 2012

Proposed Revisions

Termination by Employer

N/A Employee provides false information which affected the recruitment.

Termination by Employer

once employees:• reach retirement age; and• have fully contributed social

insurance.

once employees: • reach retirement age.

Increase of Retirement Age60 (for male)55 (for female)

62 (for male)60 (for female)


Labor Code 2012

Proposed Revisions

Definition of

EmployeeRepresentatives

Employee Representatives are:• Internal Trade Union; or• District-level Trade Union

Employee Representatives are:• Internal Trade Union; • District-level Trade Union; or• Labor Organizations (NOT operating under Vietnam Labor Federation)



Labor Code 2012

Proposed Revisions

Overtime (“OT”) hours

OT hours may not exceed:• 50% of normal working

hours per day;• 30 hours per month; and• 200 hours (or max. 300

hours in some cases) per year.

• Total working hours (including normal and OT hours) may not exceed 12 hours per day nor exceed 5 consecutive days in an OT period;

• Max. 400 hours per year;• The overtime cap can be unlimited

extended in urgent cases.


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Case Study 4

The number of overtime hours of an white collar employee reaches the annual overtime cap.

What can be done?

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Option 1:

IncreaseOT Cap

Option 2:

Increase weekly working

hour

Option 3:

Service contract

with Employer

Option 4:

Service contract

with different entity

Option 5:

NewEmployee

Consideration

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Thank you very much!

Giles T. CooperTel: +844 3946 2210

[email protected]

Duane Morris Vietnam LLC

mailto:[email protected]

Vietnam Labor Law Highlights - Duane Morrisblogs.duanemorris.com/vietnam/wp-content/uploads/sites/... Duane Morris – a leading international law firm • Duane Morris LLP is a law

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