Date: 21 April 2021
Writer: Truc Nguyen
From 1 January 2021, a new Labor Code adopted by the National Assembly took effect. This new law entirely replaces the previous Labor Code 2012. In this column, we would like to talk about some of the fundamental changes for employers’ consideration to comply with the new laws.
1. Changing to work permit obtainment
According to the Labor Code 2019, if you are a company’s owner, you can obtain a work permit if your holding capital is less than VND3 billion. It is different from the regulation of the Labor Code 2012 which allowed owners of a company to get a work permit exemption if they held partly or wholly the company’s charter capital.
So, what happens to the granted work permit exemption? Such exemptions for an owner are still valid despite the enforcement of such new regulation, but once the permit expires, the company must obtain a new work permit.
The work permit is valid for a maximum of two years on a case-by-case basis. Labor Code 2019 additionally provides instructions for an extension for another two years. Therefore, a work permit could last for four years if extended.
2. Broadening the terms of an employment relationship
The Labor Code 2019 applies to all employment relationship. The employment relationship is determined regardless of the name of the document signed between employers and employees. Before the Labor Code 2019, an employer could sign a “service contract” with its employees, in which the employee would provide “service” and the employer would pay a “service fee” but not pay social insurance. Now, a “service contract” could be considered as a labor contract if covering agreements on the job, working time, wage, salary, management, and supervision of the employer.
You should note that a contractual relationship between a company with a freelancer, individual service provider or contractor could constitute an employment relationship if it covers the above-mentioned elements. Why? Because in this case, the termination of such a contract must follow the regulations of Labor Code 2019, rather than a simple regulation on such a contract.
3. Adjusting the regulations of labor contracts
Since 1 January 2021, there have been lots of changes to the regulation of labor contracts as well as labor contract engagement that employers should take into consideration. Some notable changes include:
- Electronic labor contracts can now be signed via electronic devices and have the same validity as the written form.
- There are only two types of labor contract: indefinite-term labor contracts and definite-term labor contracts (maximum of 36 months). The seasonal labor contract/work-specific labor contract is no longer applicable.
- Employers and employees can sign the appendix to a supplement and amend the valid labor contract without extending or changing its duration.
- Employers can now enter into more than two definite-term labor contracts with the following persons:
- Directors of State-owned enterprises;
- Elderly employees (senior employees) who still work after reaching their retirement age;
- Expats; and
- Members of an executive board of organizations representing employees when the current labor contract expires.
4. Updating Internal Labor Rules (ILRs)
Labor Code 2019 requires employers to issue ILRs for internal operations with their employees. If having 10 employees or more, the ILRs must be in writing. The ILRs must comply with the labor laws and relevant regulations. In addition, it should include the following issues:
- Working hours and rest periods;
- Order at the workplace;
- Occupational safety and health;
- Actions against sexual harassment in the workplace;
- Protection of the assets and technological and business secrets and intellectual property of the employer;
- Cases of employee reassignment are permitted;
- Violations against labor regulations and disciplinary methods;
- Material responsibility; and
- The person with the responsibility for handling labor discipline.
If an employer employs less than 10 workers, a written ILRs is not compulsory but the employer should specify labor discipline and material responsibility in the labor contract.
To ensure compliance with such the labor code, companies should check the above-mentioned items and make the necessary changes.
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