Amendment to Labour Code scheduled to be passed this year

The Draft Amendment to the Labour Code is scheduled to pass through the National Assembly later this year and take effect from 1 January 2019.

It includes significant and much talked-about changes. In particular, the Draft Amendment includes proposals to (i) increase the retirement age by five years for female employees (from 55 years old to 60 years old) and by two years for male employees (from 60 years old to 62 years old); (ii) increase the number of public holidays from 10 days to 11 days a year; (iii) increase the maximum number of overtime working hours to 400 hours per year; and (iv) other more preferential treatment for enterprises with a higher number of female employees.

Increase in basic salary and increase in monthly regional minimum salary

The Government of Vietnam has increased the country's monthly regional minimum salary and basic salary for the second time within a year. Currently, the basic salary is VND 1,300,000/month (c. USD57.2/month). With effect from 1 July 2018, the basic salary will be increased by seven per cent to VND1,390,000/month (c. USD60.2/month).

In terms of the monthly regional minimum salary, the new rates applicable as of 1 January 2018 are as follows: Region 1, including Hanoi and Ho Chi Minh City: VND3,980,000/month (c. USD175/month); Region 2: VND3,530,000/month (c. USD156/month); Region 3: VND3,090,000/month (c. USD136/month); and Region 4: VND2,760,000/month (c. USD121/month).

The monthly salary of employees, including salary-related allowances, used to calculate monthly health insurance and social insurance contributions to the Social Insurance Fund of Vietnam is capped at 20 times the employee’s basic salary. Further, the monthly salary of employees used to calculate unemployment insurance is capped at 20 times of the monthly regional minimum salary. Accordingly, the increases of the basic salary and regional minimum salary mean that the corresponding amount of the compulsory insurance contributions will also increase.

Changes to social insurance contributions and criminal liabilities

From 1 January 2018 onwards, social insurance contributions will be calculated based on wages, perks and other allowances, including those based on designation, responsibility, hazardous work and seniority, that are not specifically mentioned in labour contracts. However, not all allowances and additional payments will be included in the calculation of a worker’s social insurance contribution. Certain additional welfares and benefits such as bonuses, telephone, patrol and lunch allowances will not be included.

As of 1 January 2018, violations of the Law on Social Insurance, health insurance and unemployment insurance will be dealt with in accordance with the Penal Code 2015, as amended in 2017. Accordingly, employers may face fines of up to VND3 billion (c. USD132,300) and imprisonment of up to 10 years for social insurance evasion.

Criminal liabilities for wrongful dismissal of employees

Under the Labour Code, enterprises that are found to have wrongfully dismissed or terminated employees are subject to several civil liabilities, including monetary compensation or an obligation to rehire such employees. Effective from 1 January 2018, such violations may also expose the legal representatives of enterprises to criminal liabilities under the Penal Code 2015, as amended in 2017. According to the law, if the legal representative of an enterprise dismisses an employee over private interests or for personal reasons, they will be subject to a fine of VND 10 million to VND 100 million (c. USD 441 to USD 4,441) and subject to a suspended sentence of up to one year, or imprisonment for three months to one year. Any cases of wrongful dismissal from employment which involves the dismissal of two or more people, a pregnant woman, those raising children under 12 months of age or those who later commit suicide as a result of the dismissal, or dismissals causing very serious consequences or other extremely serious consequences*, will attract a fine of VND 100 million to VND 200 million (c. USD 4,410 to USD 8,882) or imprisonment for one year to three years.

*as of the time of the publication of this update, there has been no official guidance as to what would constitute “very serious” or “extremely serious” consequences.