Vietnam Labor Law Guide: Employment Contracts for Foreign Workers

Business expansion in Vietnam often necessitates hiring foreign talent. The Vietnam labor law for foreigners establishes comprehensive guidelines that govern employment relationships, making proper contract formation critical for operational success. Recent updates to the Labor Code and associated decrees have established specific requirements that differ significantly from those for local workers. Companies must navigate these requirements carefully while ensuring their contracts protect business interests and maintain compliance with Vietnamese labor law.

Work permit validity and alignment

The conditions for foreigners to work in Vietnam start with obtaining a valid work permit. Companies must ensure complete alignment between employment contracts and work permit validity periods to maintain legal compliance. The employment relationship cannot begin without proper documentation, and any mismatch between contract dates and work permit validity can invalidate the entire arrangement.

Employers bear responsibility for verifying work permit status before contract execution. This includes confirming that the foreign employee either holds a valid work permit or qualifies for an official exemption. The contract’s specifications regarding work location and job position must mirror exactly what appears on the work permit documentation.

To maintain continuous compliance, companies should implement a systematic approach to work permit management. The renewal process requires initiation at least 30 days before expiration, as any gap in validity can disrupt legal employment status and create complications for both employer and employee.

Contract type and duration

Under labor law Vietnam, significant changes to contract requirements for foreign employees, further clarified by Decree 152/2020/ND-CP. Foreign workers may only enter into definite-term contracts with a maximum duration of 24 months. This represents a key distinction from regulations governing local employee contracts.

Contract renewal options face strict limitations under current law. Companies may renew a foreign employee’s contract only once, with the renewal period not exceeding the original term’s length. This creates a critical decision point after two terms, where employers must either proceed with contract termination or pursue a new work permit application.

The law explicitly prohibits indefinite-term arrangements for foreign workers. Contract language requires careful review to eliminate any terms that might suggest ongoing employment beyond the definite term. Common problematic phrases to avoid include:

• Contract will automatically renew
• Employment continues until terminated
• Permanent position

Language and governing law

For foreign employees in Vietnam, contracts must include specific language requirements. Every employment agreement must have a Vietnamese language version, which holds legal precedence in dispute resolution. While dual-language contracts in Vietnamese and English promote clarity for international employees, the Vietnamese text serves as the authoritative version.

The contract must explicitly state Vietnamese law as the governing authority. This declaration ensures proper legal framework for dispute resolution and confirms the contract’s enforceability under local regulations. Companies should engage qualified legal experts for contract translation to ensure accuracy and compliance with legal terminology.

Precise job scope and responsibilities

Employment contracts require detailed documentation of position parameters that align with work permit specifications. The job title, duties, and reporting structure outlined in the contract must exactly match those approved in the work permit application. This precision helps prevent future disputes and ensures regulatory compliance.

The contract should establish clear performance expectations by detailing:

• Primary responsibilities and key performance areas
• Reporting relationships and authority levels
• Work location and any travel requirements
• Quality standards and evaluation criteria

Working hours, overtime, and leave

The Labor Code establishes strict parameters for working time and rest periods that apply equally to foreign employees. Standard working hours cannot exceed 8 hours per day or 48 hours per week. Overtime arrangements require careful documentation and must comply with Article 98 of the Labor Code, which mandates specific compensation rates for different working periods.

Rest periods and leave entitlements warrant precise definition in the contract. Foreign employees qualify for minimum annual leave of 12 days after completing one full year of service. The contract should specify weekly rest days and detail the process for leave requests and approval. Public holidays must align with Vietnamese regulations, though contracts may provide additional paid leave as part of the compensation package.

Overtime policies require particular attention in contract formation. The agreement should outline:

• Maximum overtime hours permitted
• Compensation rates for different types of overtime
• Approval procedures for overtime work
• Record-keeping requirements

Probation period

The Labor Code establishes strict limits on probation periods for foreign employees based on job classification. Management positions allow up to 180 days of probation, while skilled positions permit 60 days. During this period, compensation must reach at least 85% of the regular salary as mandated by Article 26 of the Labor Code.

Probation terms require explicit documentation in the employment contract. Both parties must understand their rights regarding early termination during this period, including notice requirements and performance evaluation criteria. The contract should specify the transition process to regular employment upon successful completion of probation.

Compensation and benefits

Compensation terms demand precise documentation in Vietnamese dong, though USD references may supplement when applicable. Salary payments must occur through traceable methods, with bank transfers offering the most secure option. The contract should detail payment schedules, typically monthly, and specify the handling of any variable compensation components.

Social insurance participation now applies to foreign employees under Decree 143/2018/ND-CP. The contract must outline mandatory contributions for health, social, and unemployment insurance. For comprehensive compensation packages, clearly separate:

• Base salary and payment schedule
• Allowances and their taxable status
• Performance bonuses and conditions
• Insurance contribution rates
• Tax withholding obligations

Contract termination

Article 34 of the Labor Code governs contract termination conditions. Employment agreements must specify legitimate grounds for termination by either party and establish proper notice periods. Standard notice requirements vary by contract type and duration, typically ranging from 30 to 45 days for definite-term contracts.

Severance obligations warrant careful attention in contract formation. The agreement should address calculation methods for severance pay when applicable under Article 46 of the Labor Code. Both parties require a clear understanding of their rights and obligations during the termination process.

Compliance and updates

Vietnamese labor regulations undergo periodic revisions through new decrees and circulars. Companies must maintain current knowledge of regulatory changes affecting foreign employment contracts. Recent examples include Decree 152/2020/ND-CP and Decree 145/2020/ND-CP, which modified various aspects of foreign employment requirements.

Organizations should engage a qualified labour law consultant to ensure ongoing compliance and competitiveness. These experts can help establish systematic processes for monitoring regulatory changes and updating contract templates accordingly. Complex employment situations often require consultation to ensure proper contract formation and maintenance.

Employment contracts for foreign workers must meet specific requirements under Vietnamese labor law. Companies need accurate work permit alignment, proper contract terms, and clear documentation of benefits and termination procedures. These elements form the foundation of legally sound employment agreements.

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