Setting Up Shop in Vietnam

By Orzechowski, Robert; Berret, Beth | Workforce, May 1998 | Go to article overview

Setting Up Shop in Vietnam

Orzechowski, Robert, Berret, Beth, Workforce

Two scholars discuss the Labour Code in one of tomorrow's hottest markets.

The Pacific Rim has long been viewed as an area with significant opportunities for economic development. With the lifting of the U.S. embargo of Vietnam in 1994 and, more recently, the normalization of relations and Vietnam's acceptance into ASEAN [Association of South East Asian Nations], U.S.-based businesses can now explore more freely the same opportunities in Vietnam that most other developed nations have enjoyed for the past 10 years. The result: Vietnam is now viewed by many American companies as a hot market.

As U.S. companies begin to conduct business in Vietnam, they will employ Vietnamese citizens. If your company is considering this option, it's important for you to understand the basic provisions of the 1994 Labour Code of the Socialist Republic of Vietnam.

The Labour Code includes many of the provisions of the United States' Fair Labor Standards Act, Americans With Disabilities Act, Occupational Safety and Health Administration and Equal Employment Opportunity laws. The Labour Code institutionalizes the doi moi (renovation) policy established in 1986 by the Vietnamese Communist party to address the economic problems of inflation, shortage of goods and lack of foreign investments. The code also protects the rights of workers and employers. A manifest purpose of the Labour Code "is to make Vietnam a wealthy and strong country, and its society fair and civilized." Short descriptions of several pertinent sections of the code follow.

Discrimination. The code prohibits discrimination on the basis of gender, race and religion. The code specifically establishes preferential treatment for women and other workers traditionally considered protected groups. For example, employers must provide special facilities, paid rest periods, leave and child-care assistance for female employees. Incentives are provided for employing or otherwise preferentially treating such protected groups.

Recruiting. Vietnamese workers can be recruited through various sources. Employment agencies are either government owned (as the U.S. Bureau of Employment Security) or private enterprises. Employers use help-wanted advertising and search for university students through schools' placement offices.

Employers generally are allowed to select employees on the basis of merit and good business sense. As in the United States, there are laws prohibiting discrimination based on protected status. When employers can't locate suitable talent and must therefore hire foreign labor (expatriates or thirdcountry nationals), employers are expected to establish training programs for Vietnamese employees who would eventually assume such positions. This practice mainly applies to technical, specialized or managerial positions. Foreign workers must obtain a work permit issued by the Ministry of Labour and are entitled to all rights and benefits and subject to all provisions of the Labour Code. Final selection decisions are made by the plant or company manager, with the HR manager having significant input into the decision.

Employment contracts. Employers must plan to enter into contractual relationships with employees individually or as a collective labor group via agreement. Individual contracts may be signed as indefinite contracts, definite contracts (one to three years) or labor contracts (less than one year). The written contract is a combination of what might equate in the States to the job description and a policy manual designed to promote the safety and security of the Vietnamese worker.

In addition to the nature of work, duration of contract, salary, benefits and issues of safety, the contract specifies a probationary period. During this trial period, not to exceed 60 days in specialized/technical fields (30 days otherwise), employees are paid at least 70 percent of their normal job rate. (To advance from the training rate, employees usually have to pass written and performance tests. …

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