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Complete Guide to Employment Contracts in Vietnam: Critical Clauses to Note

Detailed guide on essential clauses in employment contracts under Vietnam Labor Code 2019: wages, hours, discipline, termination, and protection clauses.

Complete Guide to Employment Contracts in Vietnam: Critical Clauses to Note

Detailed guide on essential clauses in employment contracts under Vietnam Labor Code 2019: wages, hours, discipline, termination, and protection clauses.

Employment contracts are critical legal documents between employer and employee. This guide summarizes the knowledge needed to draft and sign contracts properly. Especially important for foreign businesses unfamiliar with Vietnamese labor regulations.

1. Types of Employment Contracts

Definite-term employment contract: from 12 to 36 months. Can be renewed once. Then must convert to indefinite-term.

Indefinite-term employment contract: no specific term. Automatically terminates only with legal grounds.

Probation contract: maximum 60 days for jobs requiring college degree or above, 30 days for intermediate, 6 days for simple work.

2. Mandatory Contract Contents

Per Article 21 Labor Code 2019, contracts must contain:

  • Employer and employee names, addresses
  • Employee ID/Citizen ID number
  • Work and workplace
  • Contract term
  • Salary, payment form, payment schedule
  • Salary increase regime, allowances
  • Working hours, rest periods
  • Labor protective equipment
  • Social insurance, health insurance, unemployment insurance
  • Training, skill development

3. Salary and Allowances

3.1. Regional Minimum Wage

Must equal or exceed regional minimum wage (updated annually). 2024 reference:

  • Region I (HCMC, Hanoi): VND 4,960,000/month
  • Region II: VND 4,410,000/month
  • Region III: VND 3,860,000/month
  • Region IV: VND 3,450,000/month

3.2. Common Salary Structure

  • Basic salary: basis for social/health/unemployment insurance calculation
  • Position, responsibility allowances
  • Petrol, phone, lunch allowances
  • Performance bonus (KPI bonus)
  • Year-end bonus

Insurance-contributing wage = Basic salary + some fixed allowances, excluding bonuses and non-fixed allowances.

4. Working Hours

  • Maximum 8 hours/day, 48 hours/week (most businesses 40 hours/week)
  • Break between shifts: at least 30 minutes after 6 working hours
  • Weekly rest: at least 24 consecutive hours
  • Public holidays: ~11 days/year
  • Annual leave: 12-16 days depending on tenure

Overtime: must have employee consent, maximum 200 hours/year (300 hours some industries), overtime pay 150% normal days, 200% rest days, 300% holidays.

5. Labor Discipline

Four discipline forms: reprimand, extended salary increase period not over 6 months, demotion, dismissal.

Dismissal conditions: employee theft, embezzlement, gambling; disclosing business/technological secrets; unauthorized absence 5 days in 30 days or 20 days in 365 days; recidivism after handled.

Discipline process: hearing with employee and union representative present, employee right to self-defend, minutes recorded, decision issued, notification and filing. Discipline statute: 6 months from violation date.

6. Contract Termination

Employee unilateral termination: notice 45 days (indefinite-term), 30 days (12-36 months), 3 days (under 12 months).

Employer unilateral termination: only when employee fails to complete work, illness exceeds regulated time, due to natural disaster/fire/disease, or employee absent after contract suspension. Must give corresponding notice and consult union.

7. Termination Compensation

Severance allowance: each working year paid half month's salary (after deducting unemployment insurance period).

Loss-of-job allowance: when business restructures, changes technology or downsizes — each year 1 month's salary, minimum 2 months.

Contract breach compensation: if employer unilaterally terminates illegally, must reinstate employee and compensate wages for non-working time + 2 months' salary for mental damages.

8. Business Protection Clauses

Recommended contract clauses:

  • NDA: confidentiality of business information
  • Non-compete: restrict working for competitors after leaving
  • Non-solicit: no soliciting employees, customers
  • IP Assignment: all creations at work belong to company
  • Training cost reimbursement if leaving before commitment period

Post-employment non-compete has limited validity under Vietnamese law — must have reasonable financial compensation and duration (typically 6-12 months).

9. Special Considerations for Foreign Employees

When hiring foreign employees in Vietnam:

  • Work permit: required before starting work (some exemptions exist)
  • Temporary Residence Card: typically aligned with work permit
  • Personal income tax: applied per Vietnamese tax law (resident vs non-resident)
  • Social insurance: mandatory for some foreign workers from 2018
  • Cross-border data: HR data transfers may need assessment

This article is for reference only. Please contact a lawyer for accurate advice.

Frequently Asked Questions

Mandatory to sign written employment contracts?

Yes for contracts of 1 month or more. Contracts under 1 month can be oral. Failure to sign written when mandatory fined VND 5-100 million.

Do probation workers get full benefits as regular employees?

Probation salary minimum 85% of regular salary. Have social/health/unemployment insurance. Annual leave counts from probation start if converted to regular.

Employee resigns before notice period — must compensate?

Must compensate wages for insufficient notice days. No contract breach compensation needed if legal reasons (illness, retirement age).

Can business unilaterally reduce employee salary?

No, except with employee agreement or following contract change process. Unilateral reduction can be sued in labor court.

Improper dismissal — how is business handled?

Must reinstate employee + compensate wages for non-working time + 2 months salary for mental damages. May be administratively fined VND 20-100 million.

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