With a “flat” world and a rapid increase in foreign investment in Vietnam, more and more expats enter Vietnam for work. However, not all enterprises and expats can correctly understand the regulations of Vietnam law on the employment of expats.
Therefore, through the below FQAs below, BLawyers Vietnam would like to introduce an overview of relevant legal issues to help enterprises and expats understand.
1. What are the conditions that an expat must satisfy to work in Vietnam?
For working in Vietnam, an expat must satisfy the following conditions:
- Being full 18 years or older, and having full civil act capacity;
- Possessing professional and technical qualifications, skills, and working experience;
- Possessing a work permit (“WP”) granted by a competent Vietnamese state agency; and
- Other conditions provided by laws.
2. Can expats enter the indefinite-term labor contract with the employer?
Expats shall not enter the indefinite-term labor contract with employers because the term of labor contract for expats working in Vietnam does not exceed the period of the WP. The WP has a term of 2 years normally.
3. Can Vietnamese laws govern the case of an expat working in Vietnam but signing a labor contract with an employer overseas?
Vietnamese laws can govern the labor relation between an expat works in Vietnam but signs a labor contract with an employer abroad if: (1) The International Labor Agreement that Vietnam is a member, has a provision on applying Vietnamese laws; or (2) An international agreement has no provisions different from Vietnamese law, then Vietnamese laws shall be applied; or (3) An international agreement allowing the parties to choose the applicable law and the parties chose the Vietnamese laws.
4. When legally unilaterally terminating the labor contract, what types of benefits and allowances an expat can receive?
In case the expat legally unilaterally terminates the labor contract, he/ she shall receive the following allowances and benefits:
- Severance allowance (if applicable);
- Salary includes working days salary which has been not paid, salary for annual leaves that expats have not used and other allowances; and
- Contribution of compulsory social insurance (“SI”), health insurance (“HI”), and unemployment insurance (“UI”) premiums into such insurance funds paid by the employer; or
- An amount equivalent to SI, HI, and UI premiums payable by the employer in case the employer has not paid this amount in addition to and at the same time with the employee’s salary payment during the working period.
5. When the employer legally unilaterally terminates the labor contract, what types of benefits and allowances an expat can receive?
In case the employer legally unilaterally terminates the labor contract, the expat shall receive the following allowances and benefits:
- Severance allowance (if applicable);
- Salary includes working days salary which has not been paid, salary for annual leaves that expats have not used and other allowances; and
- Contribution of compulsory SI, HI, and UI premiums into such insurance funds paid by the employer; or
- An amount equivalent to the employer’s payment of compulsory social insurance, health insurance, and unemployment insurance in case the employer has not paid this amount to the employee during the working period.
6. When an expat illegally unilaterally terminates a labor contract, what obligations he/ she is subject to? In this case, can he/ she receive any allowances?
An expat illegally unilaterally terminates the labor contract if he cannot give advance notice to the employer in due course. Such expat will have to bear the following obligations:
- Not being entitled to receive severance allowance;
- Compensating to the employer for half a month’s wages under the labor contract;
- Compensating an amount equivalent to the salary under the labor contract in the days without prior notice; and
- Refunding the employer the training costs (if any).
However, in this case, the expat still has the right to claim other benefits belongs to his/ her basic rights such as:
- Salary includes working days salary which has not been paid, salary annual leaves that expats have not used and other allowances; and
- An amount equivalent to the employer’s payment of compulsory social insurance, health insurance, and unemployment insurance in case the employer has not paid this amount to expats during the working period.
7. When the employer illegally unilaterally terminates the labor contract, what kind of benefits and allowances an expat can receive?
The employer illegally unilaterally terminates the labor contract if it is (i) without grounds for unilateral termination of the labor contract and/ or (ii) a violation of the advance notice. Then, the expat shall receive the following allowances and benefits:
a. In case the employer agrees to reinstate the expat to work, the expat shall receive the following benefits:
- The amount of salary for the period during which the expat was not allowed to work;
- Being contributed to social insurance, health insurance for the period during which the expat was not allowed to work;
- Paying an additional amount of at least 02-month salary under the labor contract; and
- An amount equivalent to the salary under the labor contract for unannounced days in case of breach of notice obligation.
b. In case the expat does not wish to return to work, in addition to the amount prescribed at point a, the expat shall additionally receive severance allowance.
c. In case the employer does not wish to reinstate the expat and such expat agrees, in addition to the amounts prescribed at points a and b above, the expat shall receive the additional compensation which is equivalent to at least 02 months of salary under the labor contract.
8. Could an expat work for multiple employers at the same time?
The Labor Code 2019 allows employees to enter some labor contracts with multiple employers but he/ she must fully perform all terms and conditions contained in the labor contracts. So, an expat must have respectively WPs for each employer he/ she works for.
9. Could an expat who has paid insurance premiums overseas under the regulations of that country deduct this part of insurance when making tax finalization in Vietnam?
The expat working in Vietnam will be deducted from insurance premiums paid overseas when calculating Personal Income Tax (“PIT”) on salaries and wages if they satisfy the following conditions:
- Such compulsory premiums must be like those prescribed by Vietnamese law such as social insurance, health insurance, unemployment insurance, compulsory professional liability insurance, and other compulsory insurance (if any); and
- Having documents proving participation in the above-mentioned insurances.
10. If an expat voluntarily contributes to the death pension fund of social insurance for a period of 20 years, can he/ she receive a pension upon the prescribed retirement age?
In fact, a foreigner voluntarily contributes to the death and retirement pension fund, the social insurance agency will refuse to collect this amount because the expat is not eligible to participate in voluntary social insurance. In addition, before 01 January 2022, expats are not eligible to contribute to death and retirement pension fund, but from 01 January 2022, expats are subject to contribute to death and retirement pension fund; therefore, if they fully contribute to such funds for at least 20 years since 01 January 2022, they can receive pensions in accordance with the laws.
11. When terminating the labor contract with the employer, is the WP term automatically invalid?
Yes, it is. One of the cases causing the WP to expire is the termination of the labor contract. Therefore, when the labor contract is terminated, the WP is automatically invalid.
12. If the expat is the head of the representative office of a foreign entity in Vietnam and he receives his salary from the foreign entity, who is responsible for declaring and paying tax for him?
He is responsible for completing tax finalization and is obliged to declare PIT quarterly and finalization of PIT as prescribed.
13. Are there any regulations restricting the rights of expats when working in Vietnam?
No. Vietnamese laws do not have specific provisions on limiting the rights of expats when working in Vietnam. However, to work in Vietnam, expats must meet the conditions under Vietnamese law to carry out the procedures for applying for a WP unless they are subject to WP exemption. At the same time, expats are only allowed to work in positions such as manager, executive, specialists, and technical worker for which cannot be met by Vietnamese employees.
14. Must a foreigner who comes to Vietnam to teach at English language-teaching centers sign a labor contract and apply for a WP?
The expat who works in the education field can sign some types of contracts that are not required to be labor contracts as prescribed. However, in this case, the expat still must apply for a WP and provide a contract or agreement concluded between Vietnamese and foreign partners on appointing the expat to Vietnam or a contract between the expat and educational centers in Vietnam.
15. When terminating the labor contract and the expat returns to their home country, does the employer have grounds to initiate a claim for the damage incurred when the expat worked for the employer?
Yes, it does. Unless the International agreement has provisions that differ from Vietnamese laws, the expat working in Vietnam must comply with Labor Code 2019. If an expat works in Vietnam and does not comply with Labor Code 2019 causing damage to the employer, the employer can claim damage by law.
16. What are the procedures for applying the WP?
Expat, when meeting the working conditions in Vietnam, must apply for a WP with the following procedures :
- Step 1: Employer applies for approval of the need to employ the expat. Specifically, at least 30 days prior to the expected working date of the expat, the employer shall make a report explaining the need to employ the expat to the provincial People’s Committee.
- Step 2: Employer applies a dossier for a WP at a competent agency. At least 15 days before the date the expat will start working in Vietnam, the applicant shall submit the application to the local Department of Labor, Invalids and Social Affairs (“DOLISA”) where the expat will work.
17. What are the procedures for re-insurance of the WP?
Procedures for reinsurance of a WP includes the following steps:
- Step 1: Preparing a dossier for re-issuance of a WP as prescribed by law.
- Step 2: Submitting a dossier for re-issuance of a WP to the DOLISA.
Within 03 working days after receiving a complete application for re-insurance of a WP, the DOLISA re-grants the WP. If the application is rejected, the authority will issue a document with reasons.
18. What are the procedures for renewing the WP?
Procedures for the extension (renewal) of a WP include the following steps:
- Step 1: Preparing a dossier for renewal of a WP as prescribed by law.
- Step 2: At least 5 days but not exceeding 45 days before the expiry date of the WP, the employer shall apply to the DOLISA which issued that WP.
Within 05 working days from the date of receiving a complete application, the DOLISA shall renew the WP. If the application is rejected, the authority will issue a document with reasons.
19. What are the procedures for applying for WP exemption?
Procedures for confirming a WP exemption include the following steps:
- Step 1: Preparing a dossier for exemption from WP as prescribed by law.
- Step 2: Submitting dossiers to the DOLISA.
Within 05 working days after receiving a complete dossier, the DOLISA provides a certification that expats are exempted from the WP. If the application is rejected, a written explanation is required.
20. Can the expats in Vietnam sign contracts with labor leasing enterprises?
The law does not prohibit expats in Vietnam from signing labor contracts with labor leasing enterprises. However, to work for other enterprises, expats must apply for a new WP in accordance with the laws.
21. Which tax obligations an expat must complete upon returning to his home country?
In case the foreigner is a non-resident, the tax finalization is not required when leaving if he/ she has declared and paid tax with the rate of 20% for each time income is generated. In case the expat is resident in Vietnam, they must perform tax finalization with tax authorities or authorize the enterprise paid income to do tax finalization for the last working year before the end of the labor contract and leaving Vietnam.
22. What are the responsibilities of expats to participate in SI, HI, UI?
Pursuant to the current regulations, the expats and employers using expats who are subjects to contribute to SI except for those (i) who are internally moved within the enterprise and (ii) have full retirement ages. Moreover, the expats are not a subject under the prevailing Law on Employment, so they are not subject to participate in UI. However, they are subject to be declared and pay HI.
The participation rate of SI and HI of expats and employers is summed up as follows:
The SI includes:
- Sickness and Maternity Fund (in which the participation rate are: Expat – 0%/Employer – 3%);
- Occupational Accidents and Occupational Diseases Fund (in which the participation rate are: Expat – 0%/Employer – 0.5 or 0.3%);
- Death, pension Fund (in which the participation rate are: Expat – 8%/Employer -14%) (This rate applied from 01 January 2022).
The participation rate of the HI is: Expat – 1.5%; Employer – 3%.
The Salary used as a basis for contribution is as follows:
- The salary for contribution includes monthly salary, salary surcharges, and other bonuses.
- The minimum monthly salary is not lower than the base salary; and
- The maximum monthly salary to calculate is 20 times the base salary.
23. Is there any regulation on the ratio of expats in comparison to local employees?
No, there is not.
24. In which cases a WP is not compulsory when hiring expats?
The following cases are not compulsory to apply for a WP:
- Manager of a representative office, project, or the person in charge of the operation of an international organization or a foreign non-governmental organization in Vietnam;
- A foreign lawyer who has obtained a lawyer’s practicing certificate in Vietnam in accordance with the Law on Lawyers;
- Foreigners married to Vietnamese citizens and living in the Vietnamese territory; and
- Other cases as prescribed by laws.
25. How many types of labor contracts can be signed with expats?
Expats who must apply for a WP only enter a fixed-term labor contract.
26. How to pay salaries for expats?
The prevailing law prescribes two forms of payment to employees (including expats) : (1) By cash; (2) By transferring to an employee’s personal account opened at the bank.
27. How is the reporting regime on the usage of expats?
Prior to July 5 and January 5 of the following year, the employer of expats shall send a first-half-year report and an annual report on the employment of foreign workers. The reporting period of the first 6 months is from December 15 of the previous reporting year to June 14 of the reporting year, the reporting period of the annual report is from December 15 of the previous reporting year to December 14 of the reporting year.
28. How many days of expats’ public holidays under the laws of Vietnam?
In addition to the 11 days off under laws, expats working in Vietnam can also have one more day off for their national traditional New Year and another one for their country’s National Day.
29. Do foreigners who marry Vietnamese citizens and resides in Vietnam need WPs for working in Vietnam?
No, they do not.
30. Can employers probate expats before hiring?
Yes. The prevailing law provides that expats must have a WP before starting to work in Vietnam. After obtaining a WP, employers must send a copy of the signed labor contract to the competent agency that has issued the WP. Based on this provision, the labor contract is the only document that expat can sign after obtaining a WP.
In addition, an employer and an employee may include the contents of the probation in the labor contract. Therefore, employers can probate expats by signing a labor contract, which states the probationary contents.
31. What are the penalties for employing expats without a WP?
According to prevailing regulations, in case an individual employer employs expats without the WPs, such employer is subject to a fine ranging from VND30,000,000 to VND75,000,000, depending on the number of expats who do not possess WP. The amount of monetary penalty imposed on violating entities shall be 02 times the one that imposed on violating individuals.
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