Regulations on labor contracts, probationary contracts, overtime…

Read the article now to understand clearly: What is a labor contract? What is a probationary contract? Regulations on overtime, regional minimum wage, termination of labor contracts…

I. What is a labor contract? Regulations on labor contracts

1. What is an employment contract?

An employment contract is an agreement between an employer and an employee on paid work that both parties commit to each other. Each party must ensure their rights, obligations and conditions in the employment relationship.

2. Types of employment contracts

According to the provisions of the 2019 Labor Code effective from January 1, 2021, employers and employees may only enter into one of the following two types of labor contracts:

• Fixed term employment contract;
• Indefinite term employment contract.

➧ A fixed-term labor contract is a contract in which the employer and employee determine the time and term of termination of the contract from the date the contract takes effect, but the period does not exceed 36 months.

➧ An indefinite-term labor contract is a contract in which the employer and employee cannot determine the time and term of termination of the contract from the date the contract takes effect.

3. Subjects of labor contract

When hiring employees, employers must directly sign contracts with the employees.

An employer is a representative of an enterprise, household, individual, agency, organization, or cooperative that hires, leases, or uses labor under a labor contract and must have full civil act capacity.

According to Article 14 of Circular 30/2013/TT-BLDTBXH guiding Decree 44/2013/ND-CP:

➧ Employers

• Legal representative of the enterprise or individual authorized by the representative under the Law on Enterprises;
• Representative of the organization, cooperative, cooperative union or authorized person as prescribed;
• The head of a unit, organization, agency or a person authorized by the head of an organization or unit for a state agency or unit that employs employees working under a labor contract;
• Authorized person or head of a foreign or international agency, organization or branch located in Vietnam;
• The user, employer of labor when being the head of household or representative of the household;
• The direct employer is an individual.

➧ Workers

• Must be 18 years of age or older;
• For employees from 15 years old to under 18 years old, there must be legal written consent from the employee’s representative;
• With the consent of the person under 15 years old and the legal representative for the person under 15 years old;
• Sign a written labor contract with the employee authorized by the group of employees, along with a list of full name, age, gender, occupation, signature and permanent address of each authorized employee.

4. The employment contract includes a probationary period.

• In the labor contract or probationary agreement, the content can be agreed upon by the employee and the employer;
• Depending on the nature and complexity of the job, the probationary period varies: no more than 180 days, 60 days, 30 days, 6 days;
• Employees only have to undergo probation once for each job;
• Salary is at least 85% of the salary for that job during the probationary period;
• Both parties have the right to terminate the probationary period without notice and without compensation during the probationary period.

5. Contents of the employment contract

According to regulations, from January 1, 2021, labor contracts must have the following contents:

• Information about the address, name and position of the employer;
• Full name, date of birth, gender, ID card/passport number, residence and permanent residence of the employee;
• Work location and work to be performed;
• Term of employment contract;
• Salary level, form of salary payment, salary allowances, salary payment period and other amounts (if any);
• Salary increase and salary grade increase regulations;
• Working and rest time of workers;
• Protective gear for workers (if any);
• Contribution levels for salary deductions according to current regulations;
• Improve professional qualifications and skills of workers.

6. Cases of termination of employment contract and notice period for termination of employment contract

6.1. Cases of termination of employment contract

➧ For employers

• The term of the employment contract is no longer;
• The work specified in the employment contract has been completed;
• The employer and employee mutually agree to terminate the contract;
• The employer has lost civil capacity due to a court ruling, is missing or has died. The employer is an agency or organization that has ceased operations or has been notified by a specialized agency such as the provincial People’s Committee that it has no authorized person or legal representative;
• The employer arbitrarily terminates the contract;
• Probationary content in the contract when the probationary period does not meet requirements or one party cancels the agreement.

➧ For workers

• Employees sentenced to imprisonment without a suspended sentence or not subject to the death penalty, are released or are prohibited from doing the work stated in the contract according to the verdict;
• Foreign workers working in Vietnam are expelled by decision of a state agency;
• The employee has died or been declared by the Court to have lost civil capacity, is missing or has died;
• Dismissed, disciplined;
• Employees voluntarily terminate the labor contract;
• Employees are dismissed by their employers according to regulations;
• Foreigners working in Vietnam are workers whose work permits have expired as prescribed in Article 156 of this Code.

6.2. Time limit for notice of termination of employment contract

• For indefinite-term labor contracts, the notice period for termination of the labor contract must be at least 45 days;
• A fixed-term labor contract has a notice period of at least 30 days for termination of the labor contract;
• For labor contracts with a term of less than 12 months and in cases where the employee has an accident or illness and has been treated but the ability to work has not yet recovered, notice must be given at least 3 working days in advance;
• According to the provisions of Article 7 of Decree 145/2020/ND-CP, when an employer unilaterally terminates a contract with an employee working in a specific industry, profession or job, it is specifically implemented as follows:
  • Must give at least 120 days notice for fixed-term labor contracts of 12 months or more or indefinite-term labor;
  • Notice must be given at least one-quarter of the term of the employment contract for employment contracts with a term of less than 12 months.
• Specialized industries such as:
  • Aircraft crew members, flight dispatchers, flight operators, aircraft maintenance technicians, aviation repair specialists;
  • Business managers use state capital to invest in production and business at enterprises according to regulations;
  • Crew members working abroad are members of the crew working on Vietnamese ships;
  • Vietnamese enterprises re-lease crew members working on foreign ships.
• Employers arbitrarily terminate labor contracts with employees without prior notice:
  • According to the provisions of Article 31 of the 2019 Labor Code, when the suspension period of the labor contract expires, the employee is not present at the workplace;
  • Employees unilaterally quit their jobs for 5 or more consecutive working days without a valid reason.

II. What is a probationary contract? Regulations on probationary contracts

1. What is a probationary contract?

Probationary contracts ensure that employees enjoy certain benefits when there is no official contract.

Clause 1, Article 24 of the 2019 Labor Code stipulates: “Employers and employees may agree on the probationary content stated in the labor contract or agree on the probationary period by entering into a probationary contract.”

➞ Thus, it can be understood that a probationary contract is considered a “contract” established between the employer (NDSLĐ) and the employee (NLĐ) to agree on conditions related to employment. A probationary contract is an agreement between the employee and the employer on a trial job before being able to work officially. During the probationary period, the employee and the employer must comply with the regulations and obligations agreed upon in the probationary contract. This is the stage that determines whether or not the employee is officially recruited and determines the long-term cooperation and attachment between the employee and the employer.

2. Regulations on probation period

The probationary period is stated in the labor contract based on the agreement between the two parties, the employer and the employee. However, the probationary period must comply with the provisions of Article 25 of the 2019 Labor Code. Specifically, the provisions on the probationary period are agreed upon by the two parties based on the nature and complexity of the work, but the probationary period is only once for each job and must ensure the following conditions:

• For the work of a business manager as prescribed by the Law on Enterprises and the Law on Management and Use of State Capital Invested in Production and Business at Enterprises, the probationary period shall not exceed 180 days;
• For jobs with professional titles requiring professional or technical qualifications from college level or higher, the probationary period shall not exceed 60 days;
• For jobs with professional titles requiring intermediate technical expertise, technical workers, and professional staff, the probationary period shall not exceed 30 days;
• For other jobs not in the above groups, these jobs mainly do not require high technical and professional qualifications and do not require degrees, also known as simple jobs, do not require a long probationary period, so the unified probationary period is not more than 6 days.

3. Regulations on probationary salary

According to regulations, probationary workers are still paid, specifically stipulated in Article 26 of the Labor Code No. 45/2019/QH14: “The salary of employees during the probationary period is agreed upon by the two parties but must be at least 85% of the salary for that job”.

4. Regulations on termination of probationary contract

According to Clause 1, Article 27 of the 2019 Labor Code and Clause 1, Article 7 of Decree 05/2015/ND-CP, the end of the probationary period and termination of the probationary contract are regulated as follows:

• For employees working in jobs with a probationary period as prescribed in Clauses 1, 2 and 3 of Article 25 of the 2019 Labor Code, within 3 days before the end of the probationary period, the employer must notify the employee of the probationary results;
• For employees working in jobs with a probationary period as prescribed in Clause 4, Article 25 of the 2019 Labor Code, at the end of the probationary period, the employer must notify the employee of the probationary results;
• In case the probationary period meets the requirements, after the end of the probationary period stated in the probationary contract, the employer and the employee will sign an official labor contract;
• However, during the probationary period, if the employee finds that the job is not suitable for him/her, he/she can voluntarily quit the job, or if the employer feels that the employee does not meet the agreed job requirements, he/she can terminate the job at any time without prior notice and without compensation.

III. Regulations on overtime and night work

1. Overtime regulations

Pursuant to the 2019 Labor Code, dated January 1, 2021, overtime is the working time outside of normal working hours according to the collective labor agreement or labor regulations prescribed by law.

The two parties agree to work overtime when fully meeting the following requirements:

• Must have the consent of the employee to work;
• Ensure that the number of overtime hours of employees does not exceed 50% of the normal working hours in 1 day. In case of applying the regulation on weekly working hours, the total number of normal working hours and overtime hours does not exceed 40 hours in 1 month and does not exceed 12 hours in 1 day;
• Except for the case specified in Clause 3, Article 107 of the 2019 Labor Code, ensuring that the number of overtime hours of employees does not exceed 200 hours in 1 year;
• Employees working overtime at night in 1 month must not exceed 40 hours and must meet other conditions as prescribed.

2. Regulations on night shift work

➧ From January 1, 2021, when the 2019 Labor Code takes effect, regulations on employees’ night working hours are as follows:

• Night working hours are calculated from 10:00 p.m. of the previous day to 6:00 a.m. of the following day according to Article 105 of the 2019 Labor Code;
• Employees normally work no more than 48 hours/week and no more than 8 hours/day;
• For employees working at night, they are entitled to a break of at least 45 consecutive minutes according to Clause 1, Article 109 of the 2019 Labor Code;
• Night work breaks are counted as working hours without any conditions;
• If working continuously for 6 hours or more at night, then the break time will be counted as working time;
• According to Article 98 of the 2019 Labor Code, employees working at night will be paid an additional 30% of their salary according to the salary of a normal working day.

➧ According to Article 7 and Article 8 of Circular 23/2015/TT-BLDTBXH:

➧ Actual hourly wages paid do not include additional wages for night work, wages such as: overtime, holiday and Tet wages, bonuses, paid leave, and other allowances.

 

➧ When employees work overtime at night, they are also paid an additional 20% of their salary calculated based on the salary of a normal working day or a holiday or a weekly day off.

 

3. Pregnant female workers or those with young children working at night

According to Clause 1, Article 137 of the Labor Code 2019, employers are not allowed to require employees to work overtime, go on business trips, or work at night in the following cases:

• Working in mountainous, remote, border, or island areas where female workers are 6th or 7th month pregnant;
• Raising children under 12 months of age, except in cases where the employee agrees.

Female workers who are under 7 months or under 6 months pregnant are allowed to work at night if they agree (for work in mountainous, remote, border, and island areas) with the employer.

IV. Regulations on regional minimum wages

1. What is the regional minimum wage?

• The lowest wage is paid to workers under normal working conditions but work must be guaranteed to maintain the minimum living standard of workers in accordance with socio-economic development conditions;
• The minimum wage is determined based on the number of months, hours worked and the region where the worker performs the work;
• Based on the minimum living standard of workers to adjust the minimum wage appropriately among many factors such as: minimum wage; consumer price index, socio-economic growth rate; business affordability; labor supply and demand relationship; labor productivity and market wage (according to Article 91 of the 2019 Labor Code).

2. Regulations on regional minimum wages 2022 

The regional minimum wage in 2022 according to Decree 90/2019/ND-CP is stipulated as follows:

 

➧ Lowest salary paid to workers

The salary level that businesses pay employees is based on the 2022 regional minimum wage:

• Workers doing simple work are paid no less than the regional minimum wage;
• At least 7% higher than the regional minimum wage for trained and apprenticed workers.

➧ Minimum wage for compulsory social insurance

According to Point 2.6 Clause 2 Article 6 Decision 595/QD-BHXH dated April 14, 2017, it is stipulated as follows:

• Employees working under normal working conditions must not be lower than the regional minimum wage at the time of payment;
• At least 7% higher than the regional minimum wage for trained and skilled workers;
• At least 5% higher than the salary of complex work for workers working in arduous and dangerous conditions compared to normal working conditions;
• At least 7% higher than the salary of complex work for workers working in especially arduous and dangerous conditions compared to normal working conditions.

➧ Base level for salary payment when employees stop working

Article 98 of the 2019 Labor Code stipulates that the regional minimum wage is the basis for employees to be paid by their employers when they stop working.

➧ Employees must compensate employers for damages.

Employees are responsible for compensation under the 2019 Labor Code as follows:

• When the employer and employee have a written agreement on technology secrets, benefits, content, and business secrets, in case of violation, the employee violates the previously agreed regulations and must compensate the employer (According to Article 40 of the 2019 Labor Code);
• When an employee arbitrarily terminates the contract illegally, the employee must compensate the employer with half a month’s salary or an amount equivalent to the salary according to the labor contract for the days off without notice (Clause 2, Article 40 of the 2019 Labor Code);
• When employees damage equipment, tools or commit other acts that cause property damage, they must compensate according to regulations;
• According to Clause 3, Article 102 of the 2019 Labor Code, if an employee causes non-serious damage due to negligence with a value not exceeding 10 months of the regional minimum wage, the employee must compensate a maximum of 3 months of salary and have it deducted monthly from the salary. The monthly deduction level shall not exceed 30% of the actual monthly salary;
• When an employee loses equipment, tools, or property of the employer or other property assigned by the employer, or must compensate for partial or total damage according to market price or according to labor regulations when material consumption exceeds the permitted level;
• No compensation is required in case of fire, epidemic, natural disaster, danger, unforeseeable objective events, disasters and irreparable damage.

➧ The employer transfers the employee to perform another job 

• Depending on the work requirements, the employer may transfer the employee to a position other than that stated in the labor contract, but not more than 60 cumulative working days in 1 year, or if more than 60 days, the employee’s written consent is required. Before transferring the position, at least 3 working days’ notice must be given and the temporary working time must be clearly stated and the job must be suitable for the employee;
• According to Clause 3, Article 29 of the 2019 Labor Code, employers who transfer employees to perform a job different from the previously agreed labor contract must be paid according to the new job;
• If the new job salary is lower than the old salary, the salary will remain the same for 30 working days at the old salary level. The new salary will be at least 85% of the old job salary and must be higher than the minimum wage prescribed by the State;
• If an employee does not agree to do other work for more than 60 cumulative working days in 1 year, he/she must stop working and the employer must pay the employee a salary for the period of suspension of work according to the provisions of Article 99 of this Code.

V. Regulations on participation in social insurance, health insurance, unemployment insurance for each type of contract

1. Regulations on participation in social insurance, health insurance, unemployment insurance for labor contracts 

Employees working under a labor contract with a term of 1 month or more, an indefinite-term contract, and a labor contract including a probationary period are required to participate in social insurance (SI), health insurance (HI), and unemployment insurance (UI).

➧ Social insurance, health insurance, unemployment insurance contribution levels

Social insurance regime includes:

• Social insurance regime includes: Retirement regime, sickness and maternity insurance regime, occupational accident and disease insurance regime;
• Health insurance;
• Unemployment insurance regime.

➧ Social insurance participation level

2. Regulations on participation in social insurance, health insurance, unemployment insurance for probationary contracts

Employees who sign a probationary contract are not required to participate in social insurance, health insurance, and unemployment insurance during the probationary period. If the two parties agree in the probationary contract on participation in social insurance, health insurance, and unemployment insurance, they are still allowed to participate in social insurance, health insurance, and unemployment insurance during the probationary period.

VI. Frequently asked questions about labor contracts and probationary contracts