When working in Vietnam, it’s important for both employers and employees—especially expatriates—to grasp the different types of employment contracts available. The Labor Code in Vietnam clearly defines these contracts, each with its unique terms and conditions that can affect job security, benefits, and the termination process.
Whether you’re entering into a fixed-term contract or an indefinite-term contract, having a solid understanding of the legal framework surrounding these arrangements can help you avoid misunderstandings and disputes.
This guide will walk you through the key features of each type of contract, providing an overview that ensures you comply with Vietnamese labor laws.
Different Types of Employment Contracts in Vietnam
A labor or employment contract is defined as an agreement between an employee and an employer that outlines the paid job, working conditions, rights, and obligations of both parties. This contract is governed by the Labor Code of Vietnam (Law No. 45/2019/QH14), which came into effect on January 1, 2021.
According to Article 13 of the 2019 Labor Code:
“A labor contract is an agreement between an employee and an employer on a paid job, salary, working conditions, rights and obligations of each party in the labor relationship.”
This law also stipulates that the labor contract must be in writing, except for cases where the contract is for temporary work lasting less than one month, in which case an oral agreement may suffice. Additionally, a labor contract can be either indefinite or fixed-term, depending on the duration and nature of the employment relationship.
All types of employment contracts in Vietnam, regardless of their form, must include essential provisions such as:
- Basic information of the employer and employee
- Job description and workplace
- Contract duration
- Salary, benefits, and payment terms
- Promotion and salary increase policies
- Working hours and break times
- Personal protective equipment
- Social, health, and unemployment insurance
- Training and skill development
These provisions are designed to establish clear and fair working conditions, giving both parties a solid foundation to handle any disputes that might come up.
Requirement for Expatriates
Expatriates wishing to sign a labor contract in Vietnam must meet several legal requirements to ensure their employment is lawful. These requirements are primarily governed by the Labor Code of Vietnam (Law No. 45/2019/QH14) and additional regulations concerning foreign workers:
- A work permit must be secured before signing a labor contract. According to Decree No. 152/2020/ND-CP, as amended by Decree 70/2023/ND-CP, a work permit is mandatory unless the expatriate qualifies for an exemption. Exemptions may apply to certain experts, high-level managers, or technicians who work fewer than 30 days per trip and do not exceed 180 days annually.
- A health certificate issued by an authorized medical authority in Vietnam or abroad is required to confirm that the expatriate is fit for work.
- The expatriate must possess the required qualifications or experience for the position. This typically involves presenting diplomas, degrees, or professional certificates, especially for roles such as managers, executives, or specialists.
- A proper visa, usually a DN or LD visa, or a temporary residence card must be obtained to legally reside in Vietnam for the duration of the employment contract.
- The labor contract must align with the job title, position, and employer specified in the work permit. Any discrepancies can invalidate the work permit and may result in penalties.
- Certain categories of expatriates, such as those working in Vietnam under international treaties, intra-corporate transferees, or foreign lawyers, may be exempt from work permit requirements but must still comply with reporting and registration obligations under Decree 152/2020/ND-CP (as amended by Decree 70/2023/ND-CP).
Once these requirements are fulfilled, expatriates are eligible to sign a labor contract, which can be either a fixed-term or indefinite-term contract, depending on the specifics of the employment.
Types of Employment Contracts in Vietnam
Here’s a quick look at the most common types of employment contracts in Vietnam.
Indefinite-term Contracts
As the name suggests, an indefinite-term employment contract does not have a fixed end date. The parties—employer and employee—do not specify the time of termination. This contract offers the greatest level of job security, making it attractive for long-term workers.
Key features of indefinite-term contracts include:
- No fixed end date.
- Ideal for long-term employment.
- Offers the highest level of job security.
- Requires at least 45 days’ notice for termination from the employer unless there is a breach of contract.
- Automatically applies after the completion of two fixed-term contracts if both parties continue working together.
The termination of this contract must follow specific procedures, including a mandatory notice period. The employer is required to provide at least 45 days’ notice before termination unless there is a violation of the agreement or a disciplinary issue.
Fixed-term Contracts
A fixed-term contract is more limited in duration and offers less job security compared to an indefinite-term contract. These contracts have a specified end date, which means the employment relationship is clearly defined for a set period. In Vietnam, fixed-term contracts usually span between 12 to 36 months for local employees and up to 24 months for expatriates.
Key features of fixed-term contracts include:
- Duration of 12 to 36 months.
- Requires renewal upon expiration, otherwise, it can transition into an indefinite-term contract.
- Only two consecutive fixed-term contracts are allowed, the third must be indefinite.
- Common for project-based or short-term assignments.
By law, an employee can only have two consecutive fixed-term contracts. If the employment relationship continues after the second contract ends, the third contract automatically becomes indefinite .
Expatriates are also limited to two-year contracts, as their employment is contingent upon visa and work permit status. Any renewal beyond this period requires close attention to work permit expiry dates.
Probationary Contracts
A probationary contract serves as a trial period where both the employer and employee assess if the working relationship should become permanent. The duration of this contract varies depending on the job’s complexity, and either party can end the agreement without major consequences during this phase. This type of contract is one of several types of employment contracts, each offering different terms and flexibility based on the nature of the role.
Key features of probation contracts include:
- The duration varies based on job complexity:
- Up to 180 days for executives.
- 60 days for skilled positions requiring a college degree.
- 30 days for vocational or technical roles.
- 6 days for basic jobs.
- Offers lower salary rates during the probation period, typically negotiable.
- Probationary employees can transition to either a fixed-term or indefinite-term contract after successful completion.
During the probation period, the expat may not enjoy the full set of benefits available to permanent employees, such as health insurance or full wages.
Non-Traditional Contracts
Non-traditional contracts, such as service agreements or cooperation contracts, are not governed by the same labor laws as standard employment contracts. They are common in sectors like education, especially for foreign language teachers, consultants, and freelance professionals. These contracts typically focus on delivering specific services rather than full-time employment.
For expatriates, particularly those in sectors like education or consulting, non-traditional contracts offer more flexibility and freedom compared to standard employment.
Common Issues and Legal Disputes of Labor Contracts
Different types of employment contracts in Vietnam can sometimes lead to legal disputes, especially for foreign workers who may not be familiar with local laws. Below are some common issues that cause disagreements or legal actions between employers and employees.
Breach of Contractual Terms
One of the most common causes of disputes involves allegations of breach of contract between employers and employees. This occurs when either party fails to meet their obligations as outlined in the labor contract.
A breach might happen if an employer does not provide the promised benefits, such as health insurance or paid leave. On the other hand, employees can breach the contract by violating confidentiality clauses or failing to meet performance expectations.
The Labor Code strictly requires both sides to follow the terms specified in the contract. This includes duties, working hours, compensation, and other conditions regardless of the types of employment contracts. Temporary, part-time, and full-time contracts all carry binding legal responsibilities for both the employer and the employee.
Failure to comply with these terms can result in escalating disputes, sometimes leading to legal consequences.
Unlawful Termination
Unlawful termination claims arise when employees feel they’ve been dismissed unfairly, violating the terms of their employment contract or labor laws.
Vietnamese law requires employers to provide valid reasons and proper notice, typically 30 to 45 days, depending on the types of employment contracts. Disputes often occur when employers terminate employees without proper documentation or due to discriminatory actions.
Non-compete and Confidentiality Clauses
Many employment contracts include non-compete and confidentiality clauses, which can be contentious if not carefully drafted. A non-compete clause typically prevents employees from working for competitors for a certain period after leaving a company.
However, the enforceability of such clauses in Vietnam depends on the reasonableness of the restrictions, such as the time frame and geographic scope. Misunderstanding these clauses often leads to disputes, especially when an employee transitions to a competitor.
Unpaid Wages or Benefits
Disagreements over unpaid wages or benefits are another common source of disputes. Employers may fail to pay agreed salaries, bonuses, or allowances, either intentionally or due to financial issues. Vietnamese labor law is clear that wages must be paid in full and on time. Any delays or omissions can lead to legal claims from employees seeking compensation, including interest on delayed payments.
Social Insurance Contributions
Foreign employees working in Vietnam must generally participate in the country’s social insurance system, which covers health, maternity, and retirement benefits. Disputes often arise when an employer fails to make the required contributions, leaving the employee without adequate coverage.
The law mandates that both employer and employee contribute to the fund, with the employer bearing the larger portion of the cost. Failure to comply can result in fines and retroactive payments .
Disputes Over Probation Periods
Probation periods in Vietnam are regulated by strict laws, especially concerning different types of employment contracts. Legally, probation can last up to 60 days for technical roles, during which either party may terminate the contract without notice.
Some employers, however, may attempt to unfairly extend probation periods or dismiss employees just before it ends. This is often done to avoid offering permanent employment contracts, leading to potential disputes. These actions violate the rules governing types of employment contracts, causing legal issues for both employees and employers.
Work Permit and Visa Issues
For foreign workers in Vietnam, work permits and visas are legal necessities. Disputes can arise if employers fail to assist in obtaining or renewing these documents.
Employers must facilitate the work permit application process and failure to do so may leave foreign employees vulnerable to deportation or legal action from authorities. Disputes can also happen if an employee is terminated due to expired permits, potentially leading to wrongful termination claims. This risk can vary based on the types of employment contracts in place.
Contractual Dispute Resolution in Vietnam
In Vietnam, contractual disputes are typically resolved through:
- Negotiation
- Mediation
- Arbitration
- Court proceedings
Disputes arising from labor contracts often begin with informal negotiation between the employer and employee. If negotiations fail, mediation by a third party—usually a representative from the company’s trade union or a labor conciliator—may be required. Mediation is seen as a preferred, non-confrontational method. However, if the conflict remains unresolved, arbitration or legal action may be pursued.
Vietnamese courts often serve as the final option for contract disputes, but the legal process can be slow. Foreigners may find the system particularly challenging due to language barriers and different legal procedures. Misunderstanding the terms of labor contracts or regulations can result in unintended violations. Contract disputes may drag on if not addressed properly from the beginning.
This is where local legal expertise becomes invaluable. A firm with extensive knowledge of Vietnamese labor law can help resolve these disputes efficiently and within the bounds of local regulations .
Why Russin & Vecchi?
With over 30 years of experience in Asia, Russin & Vecchi is well-equipped to handle labor disputes for foreign employees in Vietnam. Our deep understanding of both local and international legal frameworks ensures that clients receive expert advice.
The firm’s seasoned attorneys specialize in employment law, guiding clients through the complexities of Vietnamese labor regulations.
Whether it’s navigating contract disputes, obtaining work permits, or ensuring compliance with local laws, Russin & Vecchi delivers practical, reliable solutions
