Lawyer in Vietnam Oliver Massmann - Human Resources - Pragmatic Solutions ahead

1. Lawyer in Vietnam Oliver Massmann - Human Resources -
Pragmatic Solutions ahead
The foreign investor group is welcoming positive progress being made on foreigner work
permits and providing us the opportunity to contribute to the process of revising the regulations.
Thank you.
1. OVERTIME
We all support economic growth in Vietnam and understand that business practices being
competitive with other countries is important to achieving this - The better Vietnam compares to
especially its regional peers, the more attractive Vietnam is to foreign investment. Whilst
excellent progress has been made on many fronts, there is one measure where Vietnam is
significantly less competitive than almost any other country in the world. This is Vietnam's
overtime cap, which is significantly below that of other ASEAN countries.
By restricting business operations especially in export manufacturing, the current overtime cap
also limits GDP growth. Labor productivity measures for Vietnam are well below the ASEAN
average, but allowing more overtime flexibility would contribute towards improving this and
enhancing enterprise competitiveness for global integration.
Overtime flexibility is particularly important in the export manufacturing sector. If a factory in
Vietnam is bidding for an international export contract, it has to be able to quickly increase
production to meet an export order. If a similar factory in another ASEAN country is more
flexible to increase production quickly by having their workers work overtime, they can put in a
more competitive bid. This is why export manufacturing investors from Japan and Korea in
particular are very concerned about this issue. The good Vietnamese workforce attracts
manufacturing investors, but the overtime cap makes them in part reconsider.
Vietnam's existing annual overtime cap is 200 hours and 300 hours under special circumstances.
The overtime cap is far below that of regional competitors.
We appreciate that the Ministry of Labor, Invalids and Social Affairs is concerned about
increasing the overtime cap. We agree that this is a sensitive topic and that any changes should

2. continue to protect Vietnamese workers. Any change has to be well regulated and be something
that workers will also benefit from. We understand the Ministry's concern and would like to
provide ideas as to how increasing the overtime cap can actually be beneficial to workers as well
as to Vietnam's economy.
The Ministry of Labor, Invalids and Social Affairs had previously said that that the overall health
of the Vietnamese people is lower than in other countries and that increasing the overtime cap
will negatively affect workers' health and well-being. Reviewing the leading statistics on health,
among which those of the World Health Organization, the World Bank and the United Nations
Development Program, we have found that Vietnamese people actually tend to be very healthy.
In terms of life expectancy, Vietnam ranks 60" out of 196 countries. With an average life
expectancy of 76 years, Vietnam ranks higher than countries such as Thailand, the Philippines
and Malaysia. Moreover, whereas globally the average healthy life expectancy is only 62 years,
Vietnamese people are expected to live 66 years of their life in good health.
With regard to nutrition, Vietnamese people are also relatively well-off. The prevalence of
undernourishment is 8.3% in Vietnam, as opposed to 11.8% in the Asia and Pacific region and
12% globally. Similarly, the average Vietnamese person has a daily calorie intake of 2745,
which is more than sufficient to lead a healthy life. Obesity rates are some of the lowest in the
world. So, in reality, Vietnamese people are not any less healthy than people in other parts of the
world. In fact, their health may actually be above average. So, we question the assertion that
Vietnamese are less able to work longer hours to meet production needs, than other people in the
world.
With a literacy rate of 97% and a labor force participation rate of 80%, Vietnam's labor force is
one of its greatest competitive advantages with huge potential. One way of achieving this is by
increasing the overtime cap to global norms.
To assist in resolving this, we have a suggestion from the Japanese business groups in Vietnam.
Their suggestion is an alternative to increasing the overtime cap for all industries. It follows the
experience Japan has had in finding a good solution for themselves, which has worked extremely
effectively for many years. This alternative, included in the Japanese labor code as Article 36,
holds that people are allowed to work overtime when both the employer and the employee agree
and the relevant government agency has been notified. Basically, if everyone is happy with

3. working overtime - the employee, the employer and the union, then the government in Japan
should facilitate them.
To clarify more precisely the content of Japan's Article 36 is: "an employer shall conclude a
written agreement with the labor union ... or with an employee representative ..., where upon the
submission of the concluded written agreement to the administrative authority, overtime work
exceeding statutory work hours and/or work during statutory holidays, is made permissible." The
Japanese government has set a maximum number of hours permitted for overtime, "however,
limited to exceptional circumstances under which work hours must exceed [this number], the
parties under the labor-management relationship are permitted to provide in writing the fact that
work hours exceeding the maximum hours for overtime shall be allowed". In practice this allows
for more overtime without the need to change the labor law.
Article 36 has proven very successful in Japan and demonstrates that having a higher overtime
cap does not need to have a negative impact on workers. This law has been in place for over 50
years and has ensured proper working conditions for people this entire time, a period of immense
economic growth in Japan. Considering that an increase in the overtime cap can lead to greater
productivity, the introduction of a policy similar to that of the Japanese could thus significantly
benefit the Vietnamese economy, while still protecting workers. The Japanese business groups
are willing to assist the Vietnamese government with researching alternatives for new overtime
regulations and can help the Ministry of Labor in designing inspection systems for companies to
qualify for exemptions for additional overtime hours. Such a measure will increase worker
productivity and, as a result, will enhance Vietnam's competitiveness on both a regional and a
global scale.
Aside from drawing in foreign investment, increasing the overtime cap will also benefit workers.
Many Vietnamese people are motivated to work extra hours if they are compensated for this
work. It is our opinion that, if people want to work in order to earn extra income, they should be
allowed to do so, as long as proper safeguards and regulation remain in place. There is no harm
in having people work overtime if they are healthy and are willing to do so. Reducing the limits
on overtime hours will thus be good for individuals as well as for the Vietnamese economy as a
whole.
2. WORK PERMITS

4. In the past two years FOREIGN INVESTOR GROUP has raised several practical issues related
to decree 102/2013/ND-CP on the work permit regulation. To reduce administrative burden and
streamline procedures for qualified foreign nationals has been a necessity and we are grateful
that the MOLISA has collaborated with FOREIGN INVESTOR GROUP and the business
community in the right direction. A consultative meeting between the MOLISA, MPI
representatives and FOREIGN INVESTOR GROUP HR sub working group has taken place on
August 6th, 2015 in which a new version of draft decree amending decree 102 was introduced.
This new draft decree is positive and addresses main concerns from the business community, but
it has yet been approved. While MOLISA confirmed that the objective is an implementation of
the new decree before the end of 2015, we would like to highlight the urgent need to revise
current decree 102. Indeed, while we understand and share the view that the Vietnamese
workforce shall remain a priority, the implementation of decree 102 has generally increased
timeliness of work permit issuance for qualified foreign nationals. It's also accompanied with
inconsistent implementation and advices in provinces and unreasonable requirements such as a
Vietnamese police clearance certificate to foreign nationals who visited Vietnam once on short
Business trip visit before applying for work permit.
This has in the past resulted in lack of understanding from everyone, cost increases and
productivity issues for companies which are in need of qualified foreign nationals for their
operations in Vietnam. We are happy that significant progress has been made on this and look
forward to the final resolution of this topic.
***
Please do not hesitate to contact Oliver Massmann under omassmann@duanemorris.com; if you
have any questions or want to know more details on the above. Oliver Massmann is the General
Director of Duane Morris Vietnam LLC.