In the dynamic business landscape of Vietnam, labor disputes can present significant challenges to organizations of all sizes. The complexities surrounding labor disputes often stem from various factors, including differing interpretations of labor laws, cultural nuances, and evolving employment practices. These disputes can disrupt operations, damage employer-employee relationships, and result in financial losses.

At Viettonkin, we recognize the importance of resolving labor disputes swiftly and efficiently. With years of experience in providing dispute resolution services in Vietnam, we have developed a deep understanding of the local labor landscape and legal framework. In this article, we explore common causes of labor disputes, the legal framework, and our approach to handling labor disputes in Vietnam. 

Understanding labor disputes in Vietnam

Under Article 179, Clause 1 of the Labor Code 2019, labor disputes involve 

• a dispute over rights, obligations and interests among the parties during the establishment, execution or termination of labor relations; 
• a dispute between the representative organizations of employees; 
• a dispute over a relationship that is directly relevant to the labor relation.

Labor disputes are a common occurrence in Vietnam. In 2022, the whole country had 157 collective work stoppages stemming from labor disputes between enterprises and their employees (an increase of 50 compared to the same period in 2021) with a total number of over 102,540 workers participating.

Some issues that often lead to labor disputes in Vietnam are:

• Benefits of the employee (salary, bonus, social insurance): These disputes are typically over unpaid wages, overtime pay, or bonuses.
• Unilateral termination of labor contract: These disputes are typically over the unilateral termination of employment, the main point is whether the termination was justified or whether the employee was properly compensated in case the employer illegally terminates the labor contract.
• Discrimination: These disputes are typically over discrimination on the basis of race, gender, religion, or other protected characteristics.

There are a number of ways to resolve labor disputes in Vietnam. These methods include:

• Direct negotiations: This is the most common way to resolve labor disputes. In direct negotiations, the employer and employee or their representatives meet to try to reach an agreement.
• Mediation: Mediation is a process where a neutral third party helps the employer and employee or their representatives reach an agreement.
• Arbitration: Arbitration is a process where a neutral third party hears the case and makes a decision that is binding on both parties.
• Court: The process of resolving disputes in court in front of a judge or court officials follows the procedures and legal provisions prescribed by law.

If compulsory mediation fails, the involved parties can opt for either a Labour Arbitration Committee or an authorized Court, but not both at the same time, and within 6 to 12 months. The procedure for establishing an Arbitration Committee takes around 7 to 30 days and involves three steps: 

• Submitting a dispute resolution request to the Labour Arbitration Committee, 
• Establishing a Labour Arbitration Board, 
• Making a final judgment to settle the labor disputes.

Labor disputes can have a significant impact on businesses in Vietnam, both financially and operationally. According to the Supreme People’s Court of Vietnam, the fee for settling labor disputes is variable, from only 9 USD to over 2000 USD depending on the dispute value. While a labor dispute case can last 6 months to arrive at a resolution under the method of mediation, it often takes 9 months to a year for a resolution in Court. Some of the most common impacts of labor disputes include:

• Lost productivity: When employees are involved in a labor dispute, they are distracted from their work, leading to lost productivity and increased costs.
• High legal fees: Businesses may have to pay for legal fees, mediation fees, or arbitration fees to resolve a labor dispute, which can be significant, especially for small businesses.
• Damage to reputation: A labor dispute can damage a business's reputation if it is seen as being unfair to its employees. This can lead to lost customers and investors.
• Increased turnover: Employees who are involved in a labor dispute may be more likely to leave their jobs, leading to increased turnover for businesses.

Effective approaches for handling labor disputes in Vietnam

Resolving labor disputes requires a strategic and proactive approach. In Vietnam's dynamic business environment, understanding the most effective methods for handling labor disputes is essential.

Under Viettonkin’s perspectives, effective approaches involve clear communication, negotiation, and mediation. Open dialogue can often lead to mutually beneficial solutions, preserving employer-employee relationships. Mediation, facilitated by experienced professionals, provides a neutral platform for parties to discuss and find resolutions.

However, the latest Labor Code has specified six labor dispute cases that do not require mediation, unlike the Labor Code 2012:

• Dismissal or unilateral termination of the labor contract;
• Compensation for damage and allowance upon termination of the labor contract;
• Disputes between domestic workers and their employers;
• Disputes related to social insurance, health insurance, unemployment insurance, and insurance against occupational accidents and diseases as per the respective applicable laws of Vietnam;
• Compensation for damage between employees being sent to work abroad under contracts and their company; and
• Disputes between the outsourced employee and the outsourced employer.

Moreover, understanding the local culture and labor laws governing labor relations in Vietnam is crucial for employers. Compliance with regulations ensures a solid foundation for dispute resolution. 

In collaboration with experienced legal professionals, Viettonkin offers guidance on adhering to the legal framework. Our expertise in labor dispute resolution services ensures that businesses meet the necessary legal requirements when addressing labor disputes in Vietnam. Through mediation, negotiation, and compliance with Vietnamese labor laws, we help businesses navigate complex situations and maintain a harmonious work environment.

Practical advices in minimizing dispute resolution from Viettonkin

In prevalent practice, labor disputes result from various factors or reasons. When conflicts occur, first and foremost, the employer needs to double-check all personnel records and documentation pertaining to the employee in question and attempt to identify the root cause of the issues. Then a dialogue should be set up between the company and the employee in such a way that the issue is acknowledged, negotiations are made and both parties might reach an amicable agreement.

In case the direct negotiation between both parties fails, conciliation by labor conciliator or arbitration might be the next step. With over a decade of hands-on experience in the HR industry, Viettonkin has gathered some best practices that might be helpful to enterprises and investors doing business in Vietnam.  

Consider the role of trade unions

If the company and its employees have agreed to establish a grassroots trade union, it is important to consider the role of the union when labor disputes arise. Employees may seek the opinion of the trade union prior to negotiating with the company regarding any disputes. By working effectively with trade unions, companies can build trust with their employees and promote a positive work environment.

Understand the role of trade unions before the establishment

Before establishing a trade union, companies should clearly understand the role of one. This can ensure that relevant agreements or documents are made between the trade union and the company. Understanding the role of a trade union can also help companies comply with the labor laws and regulations in Vietnam, which can ultimately enhance their reputation and legal compliance.

Consult with a labor lawyer or counsel

Consulting with a labor lawyer or counsel is essential for companies to prevent and resolve labor disputes. The labor laws and regulations in Vietnam are complex, and seeking legal guidance can help companies understand their legal rights and obligations. By developing effective strategies, companies can avoid disputes and potential legal or reputational damage.

Client’s benefits: Viettonkin's labor dispute resolution services

Our clients benefit significantly from Viettonkin's labor dispute resolution services. Here are some key advantages:

• Time and Cost Savings: Our efficient conflict resolution methods often lead to quicker resolutions, reducing legal expenses and minimizing operational disruptions.
• Preservation of Relationships: We prioritize maintaining positive employer-employee relationships, ensuring that both parties can continue working together effectively.
• Compliance with Regulations: Our in-depth knowledge of labor laws and HR regulations  in Vietnam ensures that all resolutions align with legal requirements, mitigating future risks.
• Tailored Solutions: We customize our approach to suit each client's unique needs, addressing the specific challenges they face.
• Peace of Mind: Clients can focus on their core business activities while we handle the intricacies of labor dispute resolution.

These benefits demonstrate the value that Viettonkin brings to businesses handling labor disputes in Vietnam. Our client-centric approach set us apart in the field of conflict resolution.

Final Thoughts

In the dynamic business landscape of Vietnam, resolving labor disputes swiftly and effectively is paramount. Viettonkin stands as a trusted partner, offering specialized labor dispute resolution services tailored to your needs.

Our proven expertise and methods underscore our commitment to safeguarding your business interests. We understand the challenges you face, and our expertise in handling labor disputes in Vietnam ensures that you can navigate these challenges with confidence.Don't let labor disputes disrupt your operations or jeopardize your business. Contact Viettonkin today for expert assistance in resolvinglabor disputes in Vietnam, and experience the peace of mind that comes with having a dedicated and experienced partner by your side.

In the fast-paced and dynamic business environment of Vietnam, having an efficient and well-structured HR system is more critical than ever. As companies expand their operations and compete for top talent in this thriving market, the need to set up a human resource system in Vietnam that aligns with local regulations and international standards has become paramount.

Vietnam's business landscape is evolving, with increased globalization, a younger and tech-savvy workforce, and changing labor laws. Navigating this complexity while ensuring compliance and optimizing HR processes can be challenging. That's where the expertise of HR system setup comes into play.

Understanding the Challenges and Solutions for HR System Setup in Vietnam

Vietnam's thriving business environment presents numerous opportunities for growth and expansion. However, it also brings forth several challenges that necessitate a robust HR system. Here, we explore the significance of setting up a human resource system in Vietnam and the challenges that businesses encounter in this context.

Regulatory and Compliance Challenges

Navigating Vietnam's intricate labor laws and compliance requirements can be daunting for both local and foreign businesses. The country's legal framework is constantly evolving, and staying updated is crucial to avoid legal complications. Establishing an HR system that ensures compliance with local regulations while adhering to international standards is imperative for long-term success.

Vietnam's labor laws encompass a wide range of aspects, including employment contracts, working hours, minimum wages, social insurance, and taxation. Staying compliant with these regulations is essential to avoid penalties and disputes that can negatively impact business operations.

Talent Acquisition and Retention in Vietnam

Vietnam boasts a young and dynamic workforce, but the competition for top talent is fierce. Effective talent acquisition and retention strategies are vital for businesses aiming to secure the best professionals. An adept HR system can streamline recruitment processes, identify suitable candidates, and implement employee retention programs to keep valuable talent within the organization.

In a highly competitive job market, companies need to differentiate themselves to attract and retain skilled employees. Offering competitive salary packages, professional development opportunities, and a positive workplace culture are essential components of a successful talent retention strategy.

Adapting to Cultural Differences

Vietnam's rich cultural diversity is a hallmark of its society, and this extends to the workplace. Businesses must be sensitive to cultural nuances and adapt their HR practices accordingly. An HR system that integrates cultural awareness and inclusivity fosters a harmonious work environment and enhances employee morale and productivity.

Understanding Vietnamese cultural norms, communication styles, and social hierarchies is crucial for effective HR management. Moreover, recognizing and celebrating cultural festivals and holidays can contribute to a more cohesive and engaged workforce.

Key Components of an HR System in Vietnam

To establish an efficient HR system in Vietnam, businesses need to focus on key components that contribute to effective human resource management.

Recruitment and Onboarding

Recruitment and onboarding are pivotal processes for businesses in Vietnam, where the competition for top talent is fierce. In a dynamic job market, attracting the right candidates requires a well-structured approach. HR system setup services play a vital role in this phase by providing the technological infrastructure needed for efficient recruitment.

These services assist in posting job vacancies on various platforms, including online job boards and social media. They also offer Applicant Tracking Systems (ATS) that help businesses manage candidate applications, schedule interviews, and perform background checks. Moreover, they can provide data-driven insights into the most effective recruitment channels and strategies, helping companies optimize their hiring processes.

Once candidates are selected, a seamless onboarding process is essential. HR systems offer tools to streamline the onboarding experience, including digital document management for contracts and employee handbooks. This ensures that new hires receive all necessary information and complete essential forms promptly.

Payroll and Benefits Management

Payroll and benefits management require precision and compliance with Vietnamese labor regulations. The Vietnamese government has established a number of labor regulations that govern minimum wage requirements, working hours, and benefits for workers in Vietnam. These regulations are designed to protect the rights of workers and to ensure that they are treated fairly. 

Minimum wage requirements, working hours, and benefits are all important factors that should be included in company regulations which are the rules and procedures that govern the workplace. They are typically set by the employer and are designed to ensure that the workplace is safe and productive.

By including these factors in company regulations, employers can ensure that they are complying with the law and that they are providing their employees with the benefits they are entitled to.

Minimum wage requirements

The minimum wage in Vietnam is set by the government and varies by region. The following are the minimum wage requirements from July 01, 2022:

• Ho Chi Minh City and Hanoi: 4,68 million dong (around $192) per month
• Da Nang: 4.16 million dong (around $170) per month
• Other regions: 3.25-3.64million dong (around $133-$150) per month

The minimum wage is reviewed and adjusted on an annual basis.

Working hours

The standard working hours in Vietnam are 8 hours per day and 48 hours per week. 

Article 109 of the Labor Code 2019 outlines provisions for rest breaks during working hours in the following manner:

• An employee engaged in at least 6 hours of work per day, as stipulated in Article 105 of the Labor Code 2019, is entitled to a rest break lasting a minimum of 30 consecutive minutes. 
• For night work, this rest break extends to a minimum of 45 consecutive minutes. If a shift spans at least 6 consecutive hours, the rest break is considered part of the total working hours.
• Beyond the rest break detailed in Section 1 of Article 109 of the Labor Code 2019, employers are required to identify additional short breaks and specify them in the internal labor regulations.

Overtime pay

Overtime is permitted, but the number of overtime working hours of the employee does not exceed 50% of the normal working hours in 01 day. 

In case of weekly work, the total normal working hours plus overtime working hours shall not exceed 12 hours in 01 day, and 40 hours in 01 month.

The total overtime working hours do not exceed 200 hours in 01 year and 200 hours in 01 year in the specific fields, works, jobs as manufacture, processing of textile, garment, footwear, electric, electronic products, processing of agricultural, forestry, aquaculture products, salt production; generation and supply of electricity, telecommunications, refinery operation; water supply and drainage and some special cases regulated.

On June 23, 2015, the Ministry of Labor, War Invalids and Social Affairs issued Circular No. 23/2015/TT-BLĐTBXH on guidelines for some Articles on salaries of Decree No. 05/2015/NĐ-CP.  

Overtime pay equals (=) actual pay per hour or per product of a normal working day multiplied by (x) at least 150% or 200% or 300% multiplied by (x) number of additional hours or additional products.

The rates of 150%, 200%, and 300% are specified in Article 98 of the Labor Code 2019. In particular, an employee who works overtime will be paid an amount based on the piece rate or actual salary as follows:

• On normal days: at least 150%;
• On weekly days off: at least 200%;
• During public holidays, paid leave, at least 300%, not including the daily salary during the public holidays or paid leave for employees receiving daily salaries.

Benefits

In addition to the minimum wage, employees in Vietnam are entitled to a number of benefits, including:

• Social, Health & Unemployment Insurance (SHUI)

• Health insurance: The rate of health insurance is 4.5% of the employee's monthly salary. The employer is responsible for paying 3% of the employee's salary, and the employee is responsible for paying 1.5% of their salary.
• Unemployment insurance: The rate of unemployment insurance is 2% of the worker's monthly salary. The employer is responsible for paying 1% of the worker's salary, and the worker is responsible for paying 1% of their salary.
• Compulsory Social insurance: The employer is responsible for paying 17.5% of the employee's salary, and the employee is responsible for paying 8% of their salary.

The total contribution rate of SHUI is 32% of the employee's monthly salary. The employer is responsible for paying 21.5% of the employee's salary, and the employee is responsible for paying 10.5% of their salary.

Please note that these rates are subject to change. The most recent rates were announced in July 2023.

• Paid sick leave: Employeesare entitled to 30-60 days of paid sick leave per year  which depends on each situation. This leave can be used for any type of illness, including both short-term and long-term illnesses.
• Paid maternity leave: Female employees are entitled to 6 months of paid maternity leave. This leave can be taken before or after the birth of the child.
• Paid paternity leave: Male employees are entitled to a maximum of 14 days of paid maternity leave depending on each situation.. This leave can be taken to care for the newborn child.

Performance Evaluation and Management

Performance evaluation and management are essential components of HR system setup. An effective system provides tools for setting performance goals, conducting regular assessments, and facilitating constructive feedback.

HR systems enable managers to create performance appraisal processes tailored to their organization's needs. They offer templates for defining key performance indicators (KPIs) and competencies relevant to each role. This data-driven approach ensures that performance evaluations are objective and aligned with the company's goals.

Performance management features within HR systems allow managers to track employee progress, provide feedback, and set development goals. This continuous feedback loop fosters employee growth and identifies high-potential individuals who can contribute significantly to the organization's success.

Training and Development

Investing in employee training and development is crucial for building a skilled and adaptable workforce. HR systems support these initiatives by streamlining the planning, tracking, and evaluation of training programs.

HR systems can help businesses identify skills gaps within their workforce, enabling them to tailor training programs to address specific needs. This ensures that training efforts are targeted and result in a more competent workforce.

Additionally, HR systems can automate training registration, track attendance, and manage training records. They also facilitate e-learning and online course management, allowing employees to access training materials conveniently. A well-structured training and development strategy, supported by HR systems, enhances employee engagement and reduces turnover.

Labor Relations and Compliance

Maintaining positive employee relations and ensuring compliance with labor laws are essential for long-term success in Vietnam's competitive labor market. HR systems provide tools to foster effective communication, manage employee grievances, and ensure legal compliance.

Effective communication is crucial for resolving workplace issues and promoting a healthy work environment. HR systems often include features such as employee self-service portals, where employees can access information, submit leave requests, and communicate with HR departments. This transparency and accessibility improve employee satisfaction and engagement.

Additionally, HR systems facilitate grievance management by allowing employees to report issues and track their resolution. These systems maintain a record of grievances and resolutions, which can be invaluable for preventing similar issues in the future and demonstrating compliance with labor regulations.

Moreover, HR systems help companies adhere to labor regulations through automated compliance checks and alerts. They can generate reports to ensure that employment contracts/agreements, working hours, and other labor-related matters comply with Vietnamese law. This reduces the risk of legal issues and penalties, safeguarding a company's reputation and financial stability.

Final Thoughts

In the rapidly evolving business landscape of Vietnam, establishing a robust human resource system is not just a necessity; it's a competitive advantage. Overcoming challenges in compliance, talent acquisition, cultural adaptation, and more is essential for success.

Viettonkin specializes in helping businesses set up comprehensive HR systems in Vietnam. With our expertise and experience, we empower organizations to navigate the complexities, ensuring seamless operations and compliance with local regulations.

Are you ready to elevate your company's HR in Vietnam? Contact Viettonkin today, and let's embark on a journey of efficiency, compliance, and growth together.