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V
ietnam
B
riefing
•
Issue 28
•
December 2016
Requisite documentation
Labor contracts are required to outline the
following information concerning various aspects
of the planned employment. While indefinite,
definite, and seasonal labor contracts are required
to include all the information outlined above,
probationary employment contracts are subject
to a reduced list of requirements.
Selecting optimal
contract terms
Ranging from under a year to indefinite in length,
labor contracts in Vietnam can give employers
significant room to maneuver in terms of reduced
demand, sudden receipt of large orders, or, as will
be discussed further, instances where severance
becomes an issue.
Under one year (seasonal contracting)
Contracts under a year in length are reserved
for seasonal or task specific employment. While
the relatively short periods of time under these
contracts can afford a significant degree of
maneuverability, there are several limitations that
should be noted. First, and foremost, probationary
periods – outlined in greater detail below – are
currently not permitted for contracts falling under
the year mark.
In addition, seasonal contracting is currently
restricted for any work that is normally completed
under definite or indefinite employment contracts.
Exceptions to this include workers filling in for
employees contracted under longer labor contracts
are indisposed due to pregnancy, military service,
sickness, or other temporary leaves of absence.
In the event that the end of a seasonal contract is
reached and the employee continues to work for
more than 30 days without the introduction of a
new labor contract, theworker will be automatically
transitioned to a 12 month definite contract.
12 to 36 months (definite
term contracting)
Any employer in need of workers for more than
a year but on temporary basis, or unsure of their
long term needs, will likely find definite term
contracts to be an attractive option. Ranging from
one to three years, these contracts permit the use
of probationary periods but come at the cost of
increased contract specificity. For most employers,
particularly those hiring skilled workers, definite
term contracts are the most effective contract
structure that is available in Vietnam.
Similar to seasonal contracts, and in the event that
a new contract is not signed within 30 days of the
expiry of a definite term contract, the contract of
an employee will be automatically upgraded to a
definite term employment contract.
It should also be noted that employers may only
renew a definite term contract for a particular
employee once. Following this renewal, the
employee must be hired via an indefinite labor
contract as outlined below.Themaximum length of
time that employers are currently allowed to retain
employees on definite term contract is six years.
Indefinite contract terms
As the name suggests, indefinite term employment
contracts are effective until the employee or
employer decides to terminate the contract.
As it becomes more difficult to terminate an
underperforming employee on an indefinite term
contract, it is generally advisable that employers
engage employees on a definite term contract for
the first six years and then transition their employees
to an indefinite structure following the expiry of the
second, and final, definite term contract.
Utilizing probationary periods
Prior to the formal onboarding process,
probationary periods provide both employers
and potential employees the opportunity to
assess their relationship. With reduced contract
compliance and compensation requirements
on the part of employers, and fewer restrictions
surrounding termination of these contracts, the
use of probationary periods can be an effective
tool to safeguard operations and reduce costs in
an environment characterized by an increasingly
mobile skilled workforce.
Companies that will primarily benefit from
probationary periods are those seeking to employ
workers in high-skilled positions. Not only are the
skills required for these jobs more subjective and
difficult to assess within an interview, the nature of
probationary periods permitted for skilled positions
have been expanded relative to unskilled positions
under current laws.