Vietnam is seeking to develop a more skilled workforce to support economic growth. However, the country currently has high levels of informal employment and lacks skilled labor. The document discusses several issues and makes recommendations to reform human resources training, probation periods, overtime limits, labor subleasing, and work permits for foreign employees. Addressing these challenges could help Vietnam develop its workforce and make the labor market more attractive to foreign investment.

1. Vietnam – Human Resources and Training - 2015
Overview
As Vietnam wants to move towards higher value-added, technical and capital-intensive
industries and service sectors, it needs to adapt its workforce to be equipped for this changing
environment. At the moment and despite recent regulations, recent estimates indicate that the
impact of 'informal employment' affects up to 37 million people in Vietnam, or around 82%
of the Vietnamese labour force, with payments below minimum wages and no social and
health insurance provided. Within ASEAN, Vietnam ranks in the lower half of human
resources development. Therefore, improving and upgrading the skills of its workforce
remains one of Vietnam's key tasks to meet the needs of a rapidly changing labour market. At
the same time, moving people from the informal to the formal sector should be high on the
agenda to improve both social welfare and economic attractiveness.
The Organisation for Economic Co-operation and Development (OECD) also highlights that
reforming training and education to better meet demand for skilled labour is one of Vietnam's
key challenges for the medium-term. With the lack of a skilled workforce, companies are
struggling with the cap on overtime limits and also the continued restrictions on employment
of foreign nationals in Vietnam, which affects the transfer of knowledge and experience, and
ultimately Vietnam's development.
Probation Period & Overtime
Relevant Ministries: Ministry of Labour, Invalids and Social Affairs (MOLISA), Ministry of
Planning and Investment (MPI), Ministry of Education and Training (MOET)
1. PROBATION PERIOD Issue description
The new Labour Code became effective on May 2013 after over eighty consultations with
relevant Government agencies. In the new Labour Code, we find that probation periods are
too short and not flexible enough. The standard duration of probation periods should be, in
our view, extended from the current thirty working days to sixty working days (still
renewable once) for certain jobs that require specific skills and additional training by the
employer. For certain management and highly qualified jobs, companies may need
approximately a three to four months’ probation period (90-120 days renewable capped to six
months for management positions).
Potential gains/concerns for Vietnam
Provided with sufficient time to assess a new employee, a company will be more likely to
offer indefinite labour term contracts, thus contributing to stabilise employment.
2. OVERTIME Issue description

2. Likewise, the maximum working time is restricted to ten hours per day or forty-eight hours
per week. The employer has the right to determine the working hours on an hourly, daily or
weekly basis, provided that the employees are notified in advance. In case the company
chooses the weekly basis, the normal working hours shall not exceed ten hours per day, and
not exceed forty- eight hours per week.
The biggest concern for Foreign Direct Investment (FDI) companies is the capped limit on
overtime hours. Decree 45/2013/ND-CP dated 10 May 2013 detailing a number of articles of
the Labour Code on working hours, rest hours and labour safety and labour hygiene has not
helped With a lack of qualified workers available in the market and increasing living costs,
overtime is needed by both the employer and employee. Total overtime hours are permitted
up to two hundred hours per annum, whereas the limit of three hundred hours is only
applicable to restricted industries. Overtime per day is not allowed to exceed 50% of the
normal working hours per day. In case of application of working regulations on a weekly
basis, the total normal working hours and the overtime hours shall not exceed twelve hours in
a day, and less than thirty hours in a month.
Potential gains/concerns for Vietnam
In our view flexibility regarding overtime hours is a necessity for companies to retain their
competitiveness. Therefore, it is important that companies and employees are given the
flexibility to exceed the current limit. With regards to regional competitiveness, other
countries in the ASEAN area and other regions have significantly higher overtime limits (see
chart where bold figures is the legal limit), with Vietnam having the lowest (annual) legal
limits in the region. Companies are starting to look elsewhere in the region where the labour
laws are less restrictive, and this will affect the investment and technology brought into
Vietnam and the development of a trained workforce.
Recommendations
1. Probation period
Develop an agreement between the employer and the employee on probation period, capped
by a new length limit. If the nature, the seniority or the technical nature of the job requires a
longer probation period, this should be agreed upon by the employee/employer within the
legal limit.
2. Overtime
• Remove the phrase' or forty-eight' hours per week in article 104 of the new Labour
Code;
• Allow overtime of up to 800 hours per year (instead of 300 currently) for
manufacturing and production with the maximum of 1,200 hours. Based on an
unofficial survey conducted by We Human Resources & Training Sector Committee,
manufacturing enterprises commonly expects between 450 and 800 hours of overtime
hours;

3. • Regulate the level of overtime, to be reported on a monthly basis by the company to
the Labour Department to ensure the worker's good health;
• Allow overtime of up to twelve hundred hours per annum (instead of 300), and to be
agreed via the collective labour agreement.
Labour Subleasing
Relevant Ministry: Ministry of Labour, Invalids and Social Affairs (MOLISA)
Issue description
The new Labour Code allows for the practice of labour subleasing for the first time; this
measure helps to accommodate for the fluctuating demands in the labour market and despite
it being already popular in Vietnam's industrial areas, until recently it was illegal.
This is a new form of work in Vietnam and it facilitates the assignment of an employee,
recruited by the labour sub lessor to work for, and be subject to the management of, the
labour sub lessee. Simultaneously, the labour relationship between the employee and the sub
lessor remains intact and no employment relationship is created between the former and the
sub lessee, but there is co-employment liability with regard to health and safety, salary
structure and internal labour regulations: we believe this can and will lead to confusion for all
partiesP
9
We welcome the introduction of this form of work. However we are also of the view that
there are a number of shortcomings that remain to be addressed, not only in the form of the
sub leasing but also the licence application process required.
We believe that the new regulations not yet allow private employment agencies to offer the
full range of workforce solutions. As the law currently stands, labour subleasing is permitted
for 17 types of jobs only and the contract term may not exceed twelve months. We feel that
the rules should not regulate the type of services offered; organisations often make use of
outsourcing and aged business services in Vietnam, and labour outsourcing is no longer
allowed. Additionally, the types of subleased occupations covered by the regulations, do not
reflect the exact nature of the work currently performed by private employment agency
workers and required by user enterprises. Lack of flexibility in this area is likely to cause
major operational and compliance issues for market participants, and does not address the
requirements of user enterprises in the market.
Potential gains/concerns for Vietnam
Over the last ten years, there has been an increasing need to provide more flexible workforce
solutions to enterprises globally, and private employment agencies have played an important
part in this process. As Vietnam is moving from an agricultural to a manufacturing based
economy, this need for a flexible workforce is more prevalent. There continues to be a lack
of skilled workforce and high unemployment in the 18-25 years age range. Private
employment agencies create a stepping stone into permanent employment via the services of

4. temporary staffing, not only employing but also giving the job training which is required in
Vietnam.
Furthermore, private employment agencies have been able to assist public employment
services that struggle with the changing needs of enterprises and employees alike. Various
organisations, including the International Labour Organisation (ILO) under Convention No
181, recognised that private employment agencies can contribute to the functioning of the
labour market as a whole. By allowing these agents to offer a full range of services, including
temporary work, contingency staffing, out-sourcing and managed business services, Vietnam
would be better equipped to fill the gaps of a changing labour market. The lack of human
resources and a skilled workforce is recognised as one of the biggest challenges to Vietnam's
economy.
Private employment agencies employ 9.5 million people worldwide, with over 700,000 jobs
created through the use of temporary workforce. We estimate that regarding the
abovementioned types of services, if the worldwide statistics were applied to Vietnam, this
would result in the creation of jobs for 70% of the 18-24 year olds entering the workforce
every year. Research conducted by the Vietnam Employment Agencies Federation [VEAF]
in 2013 show that the top ten agencies employ over 13,500 people and generates revenue in
excess of 42 million Euros per annum. The VEAF believes the industry is worth over 100
million Euros revenue in 2014.
Opening up Vietnam to allow for a temporary staffing model under the guidance of MOLISA
and working with the VEAF would ensure full protection of employees’ rights and statutory
insurances and would allow self-governance in the industry. There is an inverse relationship
between the temporary work penetration rate and the level of informal employment in a
country. Moreover, these measures would allow the young workforce to gain invaluable
experience and build up their skills set. This would contribute to increasing the number of
skilled workers in Vietnam, and potentially provide a resource pool for future investment
projects providing for long term employment. As a result, international corporations would
be more inclined to establish operations in the country, leading to further benefits for
Vietnam such as knowledge transfer and sharing of best practices.
Recommendations
• Recognise the VEAF as the industry governing body in Vietnam;
• Allow a range of flexible workforce solutions in addition to subleasing (e.g.
contingency staffing, outsourcing, and managed business services as suggested by the
International Confederation of Private Employment Agencies (CIETT);
• Remove the imposed maximum term of the labour sublease agreement which require
enterprises to change workers every twelve months. This entails a significant training
burden particularly as 65% of Vietnam's workforce is still deemed unskilled as per the
Vietnam Industrial Report 2011.

5. • Private employment agencies should be allowed to decide the market value of salaries
and services to be charged, which is not currently allowed. The services fee should be
based on the complexity and nature of the service being offered to clients. To be able
to deliver these services and facilitate market competitiveness, private employment
agencies should ensure all workers are protected under the Labour Code;
• Private employment agencies should have clear internal policies and grading on
levels, promotions, roles etc. within their internal collective labour agreements, which
should be made available to all employees. As part of these agreements the service
provider should, in our opinion, hold the employment responsibility;
• The employment relationship should be between the employee and the private employment
agency. The latter should not charge the employee any fees for introduction of employment.
Private employment agencies should charge fees based on services and output/ production;
• MOLISA should opt for internationally recognised principles governing private
employment agencies, for example as laid down in Convention 181 and the internationally
recognised CIETT Code of Conduct, which has over 70,000 members;
• Enforce penalties against the operation of rogue agencies (which do not adhere to
regulations and fail to meet their obligations or safeguard workers' rights).
2.3.4 Work permit
Relevant Ministries: Ministry of Labour, Invalids and Social Affairs (MOLISA), Ministry
of Industry and Trade (MOIT), Ministry of Planning and Investment (MPI), Ministry of
Public Security (MPS)
Issue description
We believe, that localisation of roles is an important part of the development from an emerging
market to a developed nation. However, the provision in the new Labour Code regarding work
permits, along with related Decree 102 , Circular 03 and Resolution 47 , do not take into account
the existing market conditions, neither with regard to the educational system and the severe
shortage of a skilled workforce, nor with the practical aspects of the process.
Here are current shortcomings in the management of foreign employees working in Vietnam:
1. Short term mission
The new Labour Code and Decree 102 provide that all foreigners working in Vietnam - whatever
the duration of their mission - must hold a work permit issued by the government of Vietnam,
except for work permit exemption cases. In fact, enterprises often assign employees or invite
foreign business partners to Vietnam for a short period of time, from a few days to a few weeks, to
carry out specific activities, such as:

6. • Attendance of seminars, conferences and internal meetings or meeting with clients;
• Internal training, corporate internal audits;
• Exploration of the market, negotiating with partners;
• Provision, purchasing of goods / equipment;
• Maintenance and repair of equipment, supervision and management of equipment
assembly; and
• Recruitment and/or interview.
We do not find it reasonable for foreign nationals entering Vietnam for the purposes set out above
to apply for work permits since the preparation of a Vietnamese work permit may take up to four
months in itself and is a disproportionate administrative requirement when a foreigner is only
working for a couple of weeks or even days.
Furthermore, regarding foreign nationals entering Vietnam for less than three months to resolve
technical problems that Vietnamese and foreign experts currently in Vietnam cannot handle, the
enterprise must submit an application for a work permit exemption at least seven working days
prior to the commencement date. In fact, when such problems arise, enterprises usually face an
emergency and must send the foreign expert to resolve it within a few working days to avoid
serious effects. It is then simply impossible to forecast seven days in advance their need of an
urgent mission and apply for a work permit exemption before the starting date of the mission.
In practice, such business travellers take certain risks by entering the country without a work permit.
2. Work permit exemptions
Under Decree 102, some foreigners working in Vietnam should be exempt from a work permit if
their business sector falls under one of the eleven service sectors defined in the WTO commitments.
However, this has still not been clarified nor applied in practice despite several meetings,
discussions and follow-ups organised by We with Ministry of Labour, Invalids and Social Affairs
(MOLISA) and the Ministry of Industry and Trade (MOIT) since September 2013.
Moreover, exemptions should be defined by law and lead to the automatic granting of a visa or
residence card, upon registration with the Department of Labour, Invalids and Social Affairs
(DOLISA). However, the current procedure to apply for a work permit exemption is an application
file leading to a minimised but similar procedure amounting to a visa request.
3. Criminal records
Foreign nationals who had resided, currently reside or who have even just visited Vietnam are
required to provide a Vietnamese police record in addition to a foreign police record when filing a

7. work permit application. Getting a Vietnamese police record is complicated, especially for foreign
nationals who have stayed fora short period of time or who have resided in Vietnam a long time
ago. In addition, foreign nationals who have been living in Vietnam for an extended time are
burdened with obtaining a police clearance from their home or from a third country.
4. Discrepancies with the new Immigration Law
The introduction of Law 4-7/2014/QH13 on entry, exit, transit, and residence of foreigners (new
Immigration Law)1231 which will be applicable from 1 January, is encouraging. The Immigration
Law defines 20 different types of visa. However, we noticed that only application files for a LD
(standing for 'Lao DDng’, which means work) visa require the submission of a work permit. Thus,
we wonder whether or not work permits will be mandatory for foreign nationals entering under
other types of visa[M , or whether this provision will conflict with other existing legislation on
immigration, creating new difficulties for applicants and the relevant authorities.
The new Immigration Law only takes into account the dependents of holders of certain visa
categories but not of all categories.
5. Freelancers
There are no specific guidelines on the granting of work permits for foreign freelancers (such as
web or computer graphics designers, computer programmers, etc.), working for many different
organisations, enterprises under service contracts (including short-term contract for a few months,
weeks, days, depending on the projects). The current law and regulations do not seem to take into
account these categories of foreign nationals working in Vietnam. More comprehensive regulation
would be recommended.
2. Uniformity of procedure
Finally, discrepancies still exist in the procedures and implementation of the law on work permits
between different provinces. This has raised several concerns related to administrative and
compliance issues and might potentially impact Vietnam’s competitiveness in attracting foreign
investors.
Potential gains/concerns for Vietnam
We have stated on many occasions that Foreign Direct Investment (FDI) companies mainly hire
local employees, while foreigners are usually employed in directorship and technical positions. FDI
companies have a positive impact on various aspects of economic development. These potential
gains include the transfer of technology and managerial skills from FDI companies to domestic
companies as well as the possibility to send Vietnamese employees abroad to receive training.
Providing clearer guidelines to companies and to provincial labour officers would prevent
discrepancies and avoid the discretionary application of regulations by different labour departments.
As a result, Vietnam would benefit from the consistent application of its laws, potentially resulting

8. in more efficiency and reductions of the administrative burden on public officers.
Recommendations
We would like to put forward the following recommendations:
• Foreign nationals assigned to Vietnam on a short term mission (less than three months)
should be exempted from work permit requirements, especially for the activities below:
- Deliver training to a Vietnam registered entity or contractor;
- Conduct any type of audit at a company's or contractor's site;
- Deliver or purchase goods / equipment;
- Supervise/manage an installation of equipment for a company/client;
- Maintain/repair specific equipment; and
- Hire people or terminate a labour contract.
• Emergency missions should be facilitated by granting an exemption or by requiring to
apply for a special type of visa in the specific cases foreseen by law. This type of visa
would grant more time for enterprises to register for work permit exemptions after the
foreign national has entered Vietnam.
• Exemptions for work permits should go through simple registration procedures (e.g. filing
of a work permit exemption form) instead of going through a 'mini permit process', as is
currently required.
• MOIT should issue guidelines or adopt a clear regulation on the work permit exemptions
regarding the eleven service sectors defined in the WTO commitments.
• Remove the requirement for a local police clearance certificate for foreigners who just
visited without having lived in Vietnam prior to applying for a work permit. We suggest to
only require a Vietnamese police record for foreign nationals residing in Vietnam for six
months or more, and remove the overseas police record requirement in such cases.
• Issue guidelines on work permit requirements for foreign freelancers in Vietnam.
• Currently work permit renewal applications are not accepted by the DOLISA before 15
days from the work permit expiry date. This is an issue for the renewal of immigration
documents (including visas and temporary residence cards). We recommend this timeframe
to be extended to 30 days.
Provide more comprehensive guidelines on the issuance of work permits and improve training of

9. labour officers to ensure uniformity of procedure or centralise the handling of work permit
applications in one administrative body with qualified officers.
• We recommend the Provincial People’s Committee to authorise local DOLISAs to approve
the hiring of foreign nationals, in order to fasten the process and to ensure that the processing time
of 15 days as defined in the Circular 03P
[251
P is respected. We suggest accepting the provision of an
annual labour forecast by a company director instead of a report on individual positions from time
to time.
Issue guidelines on the implementation of the new Immigration Law as soon as possible, but at least
before the entry into force of this new law with regard to the question whether or not a work permit
is needed. Furthermore, regulations guiding the application of the Immigration Law must be
consistent with the provisions of the Labour Code.
2.3.5 Trade Union
Relevant Ministries: Ministry of Education and Training (MOET), Ministry of Labour, Invalids and
Social Affairs (MOLISA), Ministry of Industry and Trade (MOIT)
1. UNION LEVY
Issue description
Article 26 of the Union Law P
1261
P provides that one of unions’ sources of finance is a 'union levy
contributed by organisation, bodies, [and] enterprise which is equal to 2% of [local] employee
payroll used for social insurance contribution’. In the past, according to Decision No. 133/2008/
QD-TTg dated 1 October 2008 P
1271
P (Decision 133) regarding the payment of union levies in foreign
invested companies and executive offices of foreign parties in business cooperation contracts, the
union levy only applied to companies that had a registered grassroots union. However, according
toDecision 270/QD-TLD dated 7 March 2014-P
[28]
P by the Vietnam General Confederation of Labour
(VGCL]P
[29]
P, this charge applies to all companies regardless whether a grassroots union exists in
such companies or not.
We are of the opinion that Article 26 of the Union Law does not provide a clear guidance on
whether or not a company without a union has to contribute a union levy. The VGCL is not
authorised by the National Assembly to issue guidance on the implementation of the Union Law
and therefore the above Decision has no binding power. We also feel that this regulation, as
interpreted under VGCL’s Decision, would not be consistent with the primary rule of trade union
law, which is voluntariness. We members believe that companies without a grassroots union should
not be subject to paying a union levy. In cases where employees voluntarily set up their own
associations, such organisation should, in our view, operate from the employees’ financial
contribution only and not the employers’. Many companies already offer excellent retain and
reward programmes similar to the use of a traditional trade union fund. If a company can provide
these benefits through its Human Resources (HR) programme it should be able to opt out of a union

10. if none of the employees want to participate in one.
Potential gains/concerns for Vietnam
In the context of the economic downturn, this regulation increases costs for all employers (while
companies are seeking to cut costs to weather the difficult conditions).
Recommendations
We would like to propose that in the short-term the Government issues guidance to exclude
companies without a union from the list of companies having to pay a union levy.
2. GRASSROOTS UNION
Issue description
Article 17 of the new Union Law provides that the upper level management of a union can
represent employees at enterprises which do not have corporate unions. This 'at request'
representative function is confirmed in article 13.1 of Decree No. 43/2013/ND-CP dated 10 May
2013It means that if employees request the assistance from the upper level union in settling issues
with employers, the upper level union can represent them in all labour related issues. However,
according to article 3.4 of the new Labour Code, the upper level of a grassroots union is considered
as the 'default' representative organisation of the labour collective where there is no corporate union.
We believe the aforementioned constitutes an inconsistency between the two laws that needs to be
resolved. We feel the principle of providing default representation is contrary to the voluntary
notion of trade unions. In light of the Civil Code of Vietnam, no one can represent a person if they
do not authorise such representation.
Potential gains/concerns for Vietnam
From a legal perspective, the provisions of the Labour Code seem to be contrary to the principles of
the Civil Code, and the Union Law. With regards to implementation, the upper level union lacks
human resources to undertake the representative functions. We feel it might not be practical for it to
assist all companies without a union. Also, from the company’s points of view, the upper level trade
union might not be familiar with the business and culture of the specific enterprise and thus would
not be in a position to provide appropriate advice to the employees or the organisation. In practice,
since the Union Law came into effect, a number of upper level unions have denied to give opinions
to companies without corporate unions, insisting that the companies set up unions instead.
Please contact Oliver Massmann under Uomassmann@duanemorris.comU if you have any
questions.