EMPLOYMENT LAW ISSUES FOR MULTINATIONAL EMPLOYERS IN VIETNAM

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1 EMPLOYMENT LAW ISSUES FOR MULTINATIONAL EMPLOYERS IN VIETNAM Prepared for NYSBA International Section Seasonal Meeting in October, Hanoi, Vietnam Author: Thuy-Hang Nguyen Baker & McKenzie (Vietnam) Ltd. This paper provides an overview and assessment of Vietnam employment and labor law compliance issues for multinational companies doing business in Vietnam. I. RELEVANT EMPLOYMENT AND LABOR LEGISLATION 1. Civil Code and Civil Procedure Code The Civil Code No. 33/2005/QH11, which was adopted by the National Assembly of Vietnam on June 16, 2005, provides general guidelines on the relationship between an employer and the employee, especially with regards to those issues which are not covered by the Labor Code. The Civil Procedure Code No. 24/2004/QH11, which was adopted by the National Assembly of Vietnam on June 15, 2004 and amended once in March 29, 2011, specifies the labor cases over which the Labor Court has jurisdiction and provides for the procedure and formalities for lodging a petition to request the Court to resolve a labor dispute. 2. Labor Code The new Labor Code No. 10/2012/QH13, which was adopted by the National Assembly on June 18, 2012 (the "Labor Code"), took effect on May 1, 2013 and replaced the former Labor Code No. 35-L/CTN, originally promulgated on March 26, 1994 as amended in 2002, 2006, and The Labor Code regulates the labor relationship between employees and employers and the social relationships directly connected with this labor relationship in all economic sectors under all types of labor contracts. All Vietnamese citizens and foreign nationals working in both Vietnamese and foreign invested enterprises, and in foreign and international organizations operating in Vietnam, are subject to the application of the Labor Code. The Labor Code provides regulations on work, apprenticeships, employment contracts, labor outsourcing, dialogue at the workplace, collective labor agreements, wages, working and rest time, labor discipline and material liability, labor safety and hygiene, anti-discrimination, special protection for women and certain other types of employees, social insurance, labor unions, and settlement mechanisms for labor disputes. The Government encourages agreements providing employees with more favorable conditions than those stipulated in the Labor Code. Any term or provision which is less favorable to the employees than and/or is inconsistent with that which is stipulated in the Labor Code will be considered invalid. The Labor Code is implemented by various decrees which are issued by the Government, and circulars which are issued by the relevant ministries, mainly by the Ministry of Labor, Invalids, and Social Affairs ( MOLISA ), and decisions/ guidelines issued by the provincial/city Departments of Labor, Invalids, and Social Affairs ( DOLISAs ). 3. Law on Trade Unions The Law on Trade Unions No. 12/2012/QH13, which was adopted by the National Assembly on June 20, 2012 (the "Law on Trade Union"), took effect on January 1, 2013 and replaced the 1

2 former Law on Trade Unions No. 40-LCT/HĐNN8 originally promulgated on June 30, Pursuant to the Law on Trade Unions, Vietnamese employees working at an enterprise have the right to establish a corporate trade union which is subject to the recognition, management and supervision of the Vietnam General Confederation of Labor, being a member of the political system of Vietnamese society. Employers are responsible for facilitating the establishment of a corporate trade union as soon as possible, and for guaranteeing the means necessary for the union to operate. In fact, the Law on Trade Unions imposes a trade union contribution of 2% of the employer's total payroll used to determine social insurance contribution on the employer, whether domestic or foreign, and even if the enterprise has no corporate trade union. 1 In practice, logistics for complying with this regulation are still unclear as further guidance from the Government is needed. 4. Law on Social Insurance The Law on Social Insurance No. 51/2001/QH10 was adopted by the National Assembly on June 29, 2006 and took effect on January 1, This Law regulates the social insurance regime and policy; the rights and responsibilities of workers, agencies, organizations and individuals participating in social insurance; social insurance organizations; social insurance funds; the procedures for implementing social insurance; and State management of social insurance. This law also introduces an unemployment insurance scheme for the first time. The Law on Social Insurance is currently under revision in the direction of diversifying the types of social insurance and expanding the scope of participants of social insurance. 5. Law on Health Insurance The Law on Health Insurance No. 25/2008/QH12 was adopted by the National Assembly on November 14, 2008 and took effect on July 1, This Law regulates the health insurance regime and policies covering target groups, contributory rates, responsibilities and method of contribution; health insurance cards; health insurance coverage; medical checks and treatment for covered persons; reimbursement of hospital fees for covered persons; health insurance funds; and the rights and responsibilities of concerned stakeholders in health insurance. For the first time, this law covers foreign entities and individuals in Vietnam. II. RELEVANT GOVERNMENT AUTHORITIES REGULATING EMPLOYMENT AND LABOR The MOLISA is responsible for State management of labor in the whole country. Delegated by the MOLISA, provincial-level DOLISAs and Labor Departments of provincial-level Industrial Zone Authorities carry out State management in their respective locations. In addition to MOLISA and DOLISA, labor supply agencies which are State-owned employment services enterprises, or bodies belonging to DOLISAs designated by the local People s Committees to supply Vietnamese staff to representative offices of foreign companies in Vietnam, also participate in the administration and management of the Vietnamese labor force in this sector. Employees are represented by the Vietnam General Confederation of Labor ("VGCL") and employers are represented by the Vietnam Chamber of Commerce and Industry ( VCCI ). 1 Trade Union Law, Article 26(2) 2

3 III. EXTERNAL DEVELOPMENTS OF SIGNIFICANCE 1. Restructuring of State Owned Enterprises Since the Doi Moi economic reforms of 1986, Vietnam has gradually relinquished its hold on commercial enterprises in the country. Nevertheless, state-owned enterprises ("SOEs") continue to play a significant role in Vietnam's economy and generate up to 40% of Vietnam's gross domestic product, which in itself is not a problem. However, in those areas, SOEs generally receive favorable treatment (e.g., loans, access to land, limited profit targets, etc.). By taking advantage of such favorable treatment, SOEs invest in various sectors, which are not relevant to their main functions. In addition, acts of bribery and corruption are often associated with SOEs. Therefore, SOEs can be viewed as inefficient and hampering the growth of Vietnam's economy. The Government decided to reorganize SOEs for higher efficiency and the Prime Minister has issued several decisions regarding such a plan. However, the current reorganization plan mostly discusses mergers and acquisitions of SOEs, and implementation of this plan is still pending. Assessment of Development The reorganization plan for SOEs may result in an increase of unemployment. Accordingly, the unemployment insurance fund may be reduced since many people will request for unemployment allowance from the authorities. The State needs to have practical solutions to address the potential risk of increased unemployment. 2. Amendment to the 1992 Constitution of Vietnam The Constitution was enacted during the early implementation of national reform in 1992 ("1992 Constitution"). The 1992 Constitution created a crucial political-legal base for the implementation of national reform. After over 20 years of implementation of the 1992 Constitution, Vietnam has made great achievements. However, many provisions of the 1992 Constitution need to be revised to meet current political-legal needs. Therefore, a draft Amended 1992 Constitution has been publicly circulated for opinions from all organizations and individuals in Vietnam. The National Assembly will approve the Amended 1992 Constitution by the end of The main contents of the Amended 1992 Constitution include: (i) further confirmation that the nature of the State is a socialist republic nation; (ii) further confirmation of the important roles of the Communist Party (i.e., the only party in Vietnam); (iii) addition of more rights of citizens in accordance with various international human rights treaties, which Vietnam is a member (e.g., right to life, right to donate organs and body parts, right to privacy, right to private property, right to be protected by social security, marriage and divorce rights, right to live in a healthy environment); and (iv) further confirmation that Vietnam's economy is a market economy with socialist orientation. Assessment of Development Once passed and in effect, the Amended 1992 Constitution will uundoubtedly have a positive effect on Vietnam's economy and society. However, the Constitution tends to provide only general provisions. Therefore, certain laws/codes may need to be revised to reflect important developments of the Amended 1992 Constitution. 3. International Agreements Related to Vietnam Vietnam's economy has grown significantly as a result of its participation in the global economy. In the past two decades, Vietnam has joined several international organizations as well as regional and bilateral agreements, such as the World Trade Organization, ASEAN Free Trade Area, and the United 3

4 States-Vietnam Bilateral Trade Agreement. There are also several pending multilateral trade deals that offer opportunities for stimulus, such as the ASEAN Economic Community blueprint, the Regional Comprehensive Economic Partnership Agreement, and the European Union-Vietnam Free Trade Agreement. Recently, there have been significant developments in the negotiations of the Trans-Pacific Partnership Free Trade Agreement ("TPP"). The TPP has the following country members: Vietnam, United States, Australia, New Zealand, Singapore, Peru, Chile, Vietnam, Brunei, Canada, Malaysia and Mexico. The 18th Round of TPP Negotiations will be held in Malaysia in July 2013, and Japan will join the TPP negotiations. With Japan s entry, TPP countries will account for nearly 40% of the global GDP and about one-third of all world trade. Assessment of Development We view Vietnam's membership in these international agreements, especially the TPP, as helpful because these international agreements create more socio-economic opportunities and greater access to key markets for Vietnam. Specific to joining the TPP, other members of the TPP will be encouraged to invest in Vietnam, which will help Vietnam become more competitive in the global market. Membership in the TPP is also expected to provide an intermediate increase to Vietnam's GDP, increase exports of manufactures, increase imports of consumer and production goods, increase inward foreign direct investment, create strong links to international supply chains, and strengthen regional supply chains. However, Vietnam still needs to adequately prepare for such developments (e.g., legal systems, investment procedures, infrastructure, etc.). In addition, certain international agreements (e.g., the TPP) contain commitments specific to labor standards that may give rise to private causes of action in respect to failures by employers to comply with local and applicable international labor rules. 4. Labor and Skills Matching Many foreign companies invest in Vietnam to take advantage of low labor costs. In addition, Vietnam's current population is known as a "golden population structure" (i.e., the unique situation of a younger general population where the number of working people exceeds the number of dependents). While these traits are valuable to Vietnam, much of the population still lacks the education and skills necessary for advanced and highly skilled jobs. Thus, a common complaint for many foreign companies that do business in Vietnam is the shortage of advanced and highly skilled workers. The Government has addressed such complaints by implementing various plans to improve Vietnamese employees' education and skills, such as a current plan for training and improving professional skills of employees located in rural areas of Vietnam. Assessment of Development Foreign investors may encounter difficulty recruiting qualified middle-management positions (i.e., generally job positions ranging from manager to director). Foreign investors should prepare for this potential problem by reserving appropriate funds for adequate and extensive job trainings in various job sectors, such as management, administration, manufacturing, information technology, etc. Other strategies to attract and retain skilled workers include offering: (i) more competitive salaries; (ii) flexible work schedules; and (iii) employee incentives and awards for excellent performance. 5. Need for Adequate Infrastructure Vietnam has made substantial investments in infrastructure, such as transportation, construction, electricity, water supply, waste treatment, and communications. Despite this progress, Vietnam's 4

5 infrastructure development still needs significant improvement. In particular, certain transportation infrastructure projects in Vietnam have been delayed or terminated due to inadequate supporting infrastructure. For example, the recently opened ports in Ba Ria - Vung Tau province are currently not being utilized due to the inadequate road infrastructure. Due to such delays and terminations, the Government has recognized improvements in the infrastructure sector and need for proper supporting infrastructure as main priorities. Specifically, the Government has allocated a substantial amount of the State budget on infrastructure development. However, foreign investments in infrastructure development are still being sought to keep up with Vietnam's growing population and rapid urbanization. Assessment of Development Improving and upgrading the present infrastructure in Vietnam would expand trade and viability in certain areas of Vietnam. Accordingly, adequate infrastructure is necessary to keep pace with the growing needs of Vietnam's local and global economy. Specifically, foreign investors should be aware of such infrastructure issues when deciding on office and factory locations, because areas with adequate infrastructure conditions are generally better investment locations with higher numbers of skilled employees. IV. NEW AND SIGNIFICANT PROPOSED LEGISLATION IN EMPLOYMENT AND LABOR 1. Employment Relationship(s) 1.1 Labor Outsourcing The Labor Code recognizes regulations on labor outsourcing for the first time. "Labor outsourcing" or "labor sub-leasing" is defined as an activity where an employee is employed by an enterprise licensed to provide labor outsourcing services ("labor provider") and works for another employer ("outsourcing employer"). 2 The outsourced employee is subject to the outsourcing employer s management while the labor relation with the labor provider is maintained. 3 The authorities tend to strictly supervise such activity with the purpose of encouraging parties to enter into full-time labor contracts instead of using labor outsourcing services. To use the labor outsourcing service, the following conditions must be met: the use of labor outsourcing services must comply with the regulations on the purpose of labor outsourcing; the outsourced job must fall under the categories of work where labor outsourcing is permitted; and the labor outsourcing service contract must comply with regulations of the law. The purpose of the labor outsourcing is to: 4 temporarily satisfy the sudden increase of labor force in a certain period of time; temporarily replace employees taking maternity leave, suffering from work-related accidents or occupational accidents, doing citizen obligations, or being entitled to working time reduction; or satisfy the need for high technique/high-quality employees. There are 17 categories of work where labor outsourcing is permitted, including: 5 2 Labor Code, Article Id. 4 Decree No. 55/2013/ND-CP, adopted by the Government on 23 June 2013, guiding the Labor Code on labor outsourcing, which took effect on 15 July 2013 ("Decree No. 55"), Article 23. 5

6 Interpreter/translator/stenography; Secretary/administrative assistant; Receptionist; Tour guide; Sales assistant; Project assistant; Production machine system programmer; Production and installation of television and telecom equipment; Operation/maintenance/repair of construction machines, electric system for production; Building and factory cleaning and sanitizing; Document editor; Safe guard/security; Telephonic marketing/telephonic client service; Dealing with financial and tax matters; Automobile repair/maintenance; Scan, industrial art drawing/interior design; and Driver. The categories of permitted work are somewhat narrow and do not reflect actual business needs. These categories of permitted work will be periodically reviewed and amended by the authorities. The maximum term of a labor outsourcing contract is 12 months. 6 When an outsourcing contract expires, the labor provider is not allowed to continue to sublease to an outsourcing employer an outsourced employee who was immediately outsourced by such outsourcing employer under the expired outsourcing contract. 7 Decree No. 55 is silent on the definition of "immediately" and to date, the exact duration for the "break" required between the first outsourcing contract and the second outsourcing contract for the same outsourced employee is unclear. A draft Circular detailing the regulations on labor outsourcing is expected to be issued soon by MOLISA. However, the draft Circular mostly mentions detailed procedures for granting and withdrawing a labor outsourcing service license. The draft Circular contains no provision further guiding the purpose of use of labor outsourcing services, categories of works where labor outsourcing is permitted, or details of the required break between two outsourcing contracts for the same outsourced employee. 1.2 Democratic Mechanisms at Workplaces The Labor Code recognizes regulations on democratic mechanisms at workplaces for the first time. In addition, the Government issued Decree No. 60/2013/ND-CP dated 19 June 2013 guiding the Labor Code on implementation of democratic mechanisms at workplaces ("Decree No. 60"). The provisions of Decree No. 60 will take effect on 15 August Content of Democratic Mechanisms at Workplaces Democratic mechanisms at workplaces are regulations on the rights and obligations of the employer, employees and representative organization of the collective labor (i.e., corporate trade union or immediate upper level trade union if the company has no corporate trade union), including: 8 5 Id. Appendix 5. 6 Labor Code, Article Decree No. 55, Article Decree No. 60, Article

7 Contents which the employees have the right to know, such as: (i) business/production plans and implementation of business/production plans; (ii) internal regulations of the employer, such as the ILRs, recruitment and use of labor policies, labor norms, salary scale and table, regulations on labor safety and hygiene, regulations on confidentiality, and regulations on labor discipline; (iii) implementation of employees' benefits, such as severance allowances, job training, salaries and bonuses, and compulsory insurances; (iv) collective labor agreements; (v) contribution of union fees, of compulsory insurances; (vi) annual budget plan for employees; and (vii) company's charter and other contents in accordance with the law. 9 Contents which the employees have the right to contribute opinions, such as: (i) formulation or revision of the ILRs; (ii) solutions for saving costs and improving labor productivity as well as solutions for labor safety and hygiene, and environment protection; (iii) formulation or revision of collective labor agreements; (iv) resolutions of employee conferences; (v) procedures for handling of labor discipline and material responsibilities; and (vi) other contents related to employees' benefits under the law. 10 Contents which must be decided by the employees, such as: (i) execution, amendment, and termination of labor contracts in accordance with the law; (ii) contents of collective labor agreements; (iii) adoption of resolutions of employee conferences; (iv) participation in trade union activities; (v) participation in strikes; and (vi) other contents in accordance with the law. 11 Contents which must be inspected and supervised by the employees, such as: (i) implementation of business/production plans; (ii) implementation of labor contracts and other employees' benefits; (iii) implementation of the ILRs; (iv) implementation of collective labor agreements, resolutions of employees conferences and resolutions of the corporate trade union; (v) contribution of union fees and compulsory insurances; (vi) implementation of labor discipline, labor complaint and denunciation; (vii) implementation of company s charter; and (viii) implementation of contents of the democratic mechanisms at work places. 12 Form of Implementation of Democratic Mechanisms at Workplaces Democratic mechanisms at workplaces can be implemented in three main forms, including: (i) dialog at workplaces; (ii) employee conferences; and (iii) other forms. (i) Dialog at Workplaces Dialog at workplaces are aimed to share information and increase understanding between the employer and employees in order to formulate the labor relationship at workplaces, which will be conducted via direct discussion between the employer and employees or between the labor collective representative and the employer. 13 The dialog must be held at workplaces once every three months or on one-off occasions at the request of either party. The employer is responsible for arranging locations and other material conditions to ensure that the discussion is able to take place at the workplaces. 14 Dialog participants include: (i) representatives of the employer, (ii) representatives of the trade union, and (iii) representatives of the collective labor. The employer must consult with the representative organization of the collective labor to formulate regulations on periodical dialog at workplaces and announce these regulations to all employees. 15 At the end of the dialog, the minutes of the dialog must be signed by the representatives 9 Decree No. 60, Article Id. Article Id. Article Id. Article Labor Code, Article Id. Article Decree No. 60, Article 11.2(a). 7

8 of the parties. The minutes of dialog must include contents which the parties agreed to and solutions for such contents as well as contents which the parties have not reached an agreement and solutions for such contents. The minutes must be displayed at the company's premises. 16 (ii) Employee Conferences An employer with at least 10 employees must organize an employee conference once a year. 17 The employee conference will be organized in the form of either: (i) employee conferences with all employees if the company has less than 100 employees; or (ii) delegation conferences if the company has 100 employees or more. 18 Conference participants include: (i) the employer; (ii) all employees or delegations of employees; and (iii) the representative of the trade union. 19 The contents of the conference include: (i) implementation of business/production plans and other contents related to employees' benefits; (ii) implementation of labor contracts, collective labor agreements, and the ILRs; (iii) labor complaints and denunciation and the implementation of labor complaints and denunciation; (iv) working conditions; (v) requests of either party; (vi) voting for representatives of the collective labor to participate in periodical dialog; and (vi) other contents that concern the parties. 20 The employer must consult with the representative organization of the collective labor to formulate regulations on organization of employee conferences and announce these regulations to all employees. 21 (iii) Other Forms Democratic mechanisms at workplaces can be implemented in other forms, such as: (i) provision and exchange of information in meetings; (ii) publication of information at workplaces; (iii) provision of information via intranet or internal information systems; (iv) suggestion boxes; (v) direct calls for opinion of employees; and (vi) labor complaints and/or denunciation. 1.3 Draft Law on Employment The National Assembly is currently considering Draft No. 6 of Law on Employment ("Draft No. 6") and the draft is expected to be approved by the end of This is the first time that regulations on employment are specified in a separate law. Draft No. 6 provides regulations on: (i) job creation support; (ii) employment market information; (iii) national professional skill certificates; (iv) employment services; and (v) unemployment insurance. There are many changes in the regime of unemployment insurance under Draft No. 6. Accordingly, the regulations on unemployment insurance will replace the current unemployment insurance regulations under the Law on Social Insurance. Below are the key changes on unemployment insurance under Draft No. 6. Extension of Participants to Unemployment Insurance Under Draft No. 6, all employees who have signed labor contracts or working contracts with the term of 3 months or more must participate in unemployment insurance 22 (i.e., the same participation conditions of compulsory social insurance). As a result, Draft No. 6 contains stricter regulations 16 Id. Article Decree No. 60, Article Id. 19 Id. Article Id. Article Id. Article Draft No. 6, Article 35. 8

9 regarding the participation of employees in unemployment insurance since the current regulations on unemployment insurance provide that an employee must participate in unemployment insurance only if: (i) the employee enters into a labor contract or working contract with a term of 12 months or more; and (ii) the employee works for the employer who has employed at least 10 employees. 23 In addition, Draft No, 6 allows other employees who are not qualified for participation of unemployment insurance to voluntarily participate in accordance to future guidance of the Government. Changes on Regimes of Unemployment Allowances Draft No. 6 adds one more type of allowance called "Job Training Support" to current allowance regimes (i.e., apprenticeship support, job introduction support; and unemployment allowance). 24 Therefore, there are four types of allowances under Draft No. 6. Changes on Unemployment Allowance The unemployment allowance level is 60% of salary (i.e., average salary of 6 months preceding the unemployment) used to contribute to the unemployment insurance, but will not exceed five times the respective minimum regional salaries at the time of entitlement. 25 The entitlement period will depend on the length of contribution period. Specifically, the employees will be entitled to 3 months of allowance if the contribution period is from 12 months to 36 months. For the contribution period exceeding 36 months, the employee will be entitled to one additional month s allowance for each 12 months of contribution. However, total entitlement period will not exceed 12 months. 26 In addition, Draft No. 6 provides the establishment of a new fund called Un-employment Fund, which is separate from the Social Insurance Fund. 1.4 Decree Guiding the Labor Code on Management of Foreign Employees Working in Vietnam The Government has issued Decree No. 102/2013/ND-CP on Management of Foreign Employees Working in Vietnam ("Decree No. 102"). Decree No. 102 takes effect on 1 November 2013 and replaces Decree No. 34/2008/ND-CP dated 25 March 2008 regarding recruitment and management of foreigners working in Vietnam, as amended by Decree No. 46/2011/ND-CP ( Decree No. 34 ). The main developments of the Decree No. 102 include: Annual report and explanation for the necessity of using foreign employees Previously, under Decree No. 34, the employers just need to annually register the need of using foreign employees to the Department of Labor, Invalid wars and Social Affairs ("DOLISA"); 27 no approval of the DOLISA to the registration is required. However, Decree No. 102 specifically requires employers (except foreign contractors) to annually submit an annual plan for foreign employee usage, which lists out positions which must be performed by the foreign employees and provides an explanation on the same, to the Chairman of the provincial People s Committees where 23 Law on Social Insurance, Articles 2.3, 2.4, and Id. Article Draft No. 6, Article Id. Article Decree No. 34/2008/ND-CP dated 25 March 2008 regarding recruitment and management of foreigners working in Vietnam, as amended by Decree No. 46/2011/ND-CP ( Decree No. 34 ), Article

10 the employer is located. 28 The Chairman of the provincial People s Committees then issues an approval for the employer to carry out the recruitment of foreign employees according to the submitted plan. 29 Any change regarding the plan must also be reported to the Chairman of the provincial People s Committees. 30 Removal of the requirement to submit the training contract for work permit renewals Decree No. 102 removes the requirement to submit the training contract in order to obtain a work permit renewal. 31 However, an application for a work permit extension must include the approval of the Chairman of the provincial People s Committees on the use of the foreign employee. 32 Other significant changes In addition to a number of controversially skewed requirements, Decree No. 102 also sets out a number of significant changes that, in our evaluation, may be either benefit or restrict the employment of foreign expats in Vietnam. 1. In addition to other work permit exemption cases, Decree No. 102 provides that work permit exemption also applies for (i) teachers working for foreign organizations assigned to Vietnam by the foreign country s authority to teach at international educational institutions that are under the management of the foreign diplomatic missions or international organizations in Vietnam; (ii) foreign volunteers; (iii) foreigners who hold a Master s Degree or equivalent assigned to work in Vietnam for consultation, teaching, conducting research at universities/ colleges for a period of less than 30 days; and (iv) foreigners working in Vietnam within the framework of an international agreement involving central authorities and political/social organizations at the central level Decree No. 102 provides that (i) certain documents issued in a foreign language need to be legalized, translated into Vietnamese and certified in Vietnam; 34 and (ii) certain documents issued in a foreign language do not need to be legalized, but need to be translated into Vietnamese and certified in Vietnam Decree No. 102 confirms the removal of the general exemption from obtaining a work permit for foreign employees whose working term in Vietnam is less than three months, 36 which was introduced in the new Labor Code adopted on 18 June Wages and Hours Establishment of National Wage Council The creation of the National Wage Council ("NWC") is another recent development in the Labor Code. The NWC advises the government on amending and announcing minimum area wage rates. Further, the NWC was created to address criticisms that minimum area wage rates were being created without the input from the business community in Vietnam. As such, NWC members consist of both 28 Decree No. 102/2013/ND-CP on Management of Foreign Employees Working in Vietnam ("Decree No. 102"), Article Id. Article Article Decree No. 34, Article 10.2(a). 32 Decree No. 102, Article 14.3(b). 33 Id. Article Id. Article Id. Articles 10.8, 8.3 and Id. Article 7. 10

11 government officials and representatives of organizations representing employers at the central level. To provide further guidance on the NWC, the Prime Minister issued Decision No. 1055/QD-TTG dated 3 July 2013 on establishment of the NWC ("Decision No. 1055"). Specifically, the NWC includes representatives from the MOLISA, the VGCL, the Vietnam Chamber of Commerce and Industry and the Vietnam Cooperative Alliance. 37 With these new regulations on the NWC, the process for determining minimum wages will be more transparent to the public. 3. Social Security and Taxes 3.1 Draft Amended Law on Social Insurance The Government is currently gathering opinions on the Draft Amended Law on Social Insurance from enterprise communities. The National Assembly plans to approve this draft by the end of The main developments of this draft includes: Retirement age under the proposed option will increase from 55 years old for females and 60 years old for males to 62 years old for both males and females; Contribution period subject to entitlement of pension will be increased; and Increase of administrative sanctioning for violations in social insurance. 3.2 Draft Amended Law on Health Insurance Draft No. 2 of the Amended Law on Health Insurance ("Draft No. 2") 38 is expected to be approved by the National Assembly by mid The main developments under Draft No. 2 includes: Participant groups will be changed from 25 groups to four main groups; Additional responsibilities for employer to contribute health insurance for certain cases, such as maternity leave and employees facing illness which require long treatment; Additional responsibilities for employees to contribute to health insurance for their dependents; and Increase entitlement of health insurance allowance in certain cases. 4. Trade Unions/Works Councils Draft Decree Guiding the Law on Trade Union on Financial Matters of Trade Union The Draft Decree guiding the Law on Trade Union regarding financial matters of trade union will be issued soon. Under this draft, a Company must contribute 2% of the employer s total payroll used to determine social insurance contribution for the employer, whether domestic or foreign and even if the enterprise has no corporate trade union. Regarding the contribution and distribution of union fees, the draft decree provides that the employer must contribute the union fees directly to the Immediate Upper Trade Union. After that, the Immediate Upper Union will allocate 65% of union fees back to corporate trade union. If the company has no corporate trade union, the Immediate Upper Trade Union will keep this amount and pay for employees' activities at the grassroots level upon the employees' request. The remaining unused fees will be kept by the Immediate Upper Trade Union. This amount will be transferred to the 37 Decision No. 1055, Article You can see the draft at detail&_piref135_27935_135_27927_27927.id=812 11

12 corporate trade union when it is established at the grassroots level. We consulted with representatives of the MOLISA and VGCL on how to claim money from Immediate Upper Trade Union for employees' activities at the grassroots level if the company has no corporate trade union. The representatives confirmed that the employees must send written requests and follow certain procedures with supporting documents to request money from the Immediate Upper Trade Union. We anticipate that requesting payment for employees' activities from the Immediate Upper Trade Union will likely be difficult. 5. Health and Safety Draft Law on Labor Safety The Government is currently gathering opinions on the Draft Law on Labor Safety from enterprise communities. The National Assembly plans to discuss this draft by the end of The main contents of the draft include: Specific obligations of employer and employees regarding the implementation of labor safety and hygiene; Extension of people who are responsible for implementation of labor safety and hygiene activities; Importance of labor hygiene and employee health care; and Improvement of labor authority inspections. 12