Managing Contracts and Severance in Vietnam

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Vietnam Briefing • Issue 28 • December 2016
workers (including those with vocational degrees
that requiremore than threemonths of study) over
the age of 15 was 11 million, or 20.3 percent of the
total labor force. This represents an increase of 2.22
percent compared to Q4 2015. In urban areas, the
rate was even higher, with skilled workers making
up 36.88 percent of the labor force.
Staffing challenges in Vietnam
Labor market supply and
demand challenges
Currently, there is a labormarketmismatchbetween
the supply and demand for certain positions. The
jobs for which there are frequent openings do not
find enough applicants, while the jobs for which
openings are rare find too many.
In Q1 2016, recruitment demand was the highest
for manual/unskilled jobs, which sought 29,400
employees, and textile garment and garment
technology jobs, which sought 20,600 employees.
However, finance and accounting had the highest
number of job seekers with 79,500 people, an
increase of 12.8 percent compared to Q4 2015.
Human resource management followed with
22,700 job seekers, a decrease of 6.6 percent
compared to Q4 2015. People with secondary
vocational training were most often looking for
jobs, totaling 69,100 in Q1 2016.
Shortages in industry- and
enterprise-specific skills
For employers in manufacturing, the lack of trained
applicants can make hiring difficult. Sometimes,
foreign companies plan to use certain technologies
in their production lines in Vietnam, but have issues
finding workers with the knowledge and expertise
to property utilize them. Other common obstacles
include a lack of knowledge about standard safety
procedures, and an inability to adapt to new
technologies. As a result, foreign firms are forced to
incur extra costs andeither finda foreignapplicant for
theposition (whoareoftenunfamiliarwith theculture
and language), or find resources to train the local hire.
Employers looking for management-level hires
have the most difficulties in finding employees
with motivational skills, the capability to develop
and dispatch resources, and the ability to delegate
responsibilities among a team. Another common
complaint is a lack of foreign language skills.
Due to these shortages, workers that do have the
necessary technical and management skills find
themselves in high demand. There is competition
between firms to hire them, giving these workers
the ability to negotiate for significantly higher
wages. Foreign firms should be prepared to pay a
wage premium for these applicants, or risk losing
them.
Moreover, the labor turnover rate is quite high in
Vietnam. According to the findings of a 2015 survey,
the voluntary turnover rate in 2014 for multinational
companies (MNCs) was 12.7 percent, while it was
17.2 percent for local companies. In the first half of
2015 alone, this number was 6.2 percent for MNCs
and 8.4 percent for local companies.
In general, skilled workers tend to be the most
difficult to recruit and retain. Sales managers, senior
sales professionals, and marketing managers were
the three most difficult positions to recruit for.
Experienced sales professionals, sales managers,
and senior marketing professionals were the three
most difficult positions to retain.
Cost advantages
While the skills gap indicate that employers in
Vietnamwill need to spend more time and money
on training up and/or retaining their hires, labor
in Vietnam still remains relatively inexpensive
in comparison to its neighbors in the region. A
number of foreign MNCs, across services and
manufacturing, havemoved operations fromChina
to Vietnam in search of cost advantages, as well
as for its increasingly favorable business climate.
According to a recent survey, about 70 percent of
employers who participated said that they would
recommend Vietnam as a business location, while
about 75 percent said that they would re-establish
their businesses in the country.
In light of these realities, it is important that
employers understand how contracts work in
Vietnam, and employer obligations to workers if
they leave.
Professional Services
Dezan Shira & Associates can help companies understand, adapt, and maximize
profitabilitywithinVietnam’svibrantandconstantlyevolvinglabormarket.Toarrange
a free consultation, please contact us a t vietnam@dezshira.com