Vietnam Manufacturing: Employment Law Essentials for Foreign Operators

The Labour Code 2019 governs employment relationships, working time, wages, leave, termination, dispute resolution, and the trade-union framework. It applies in full to FIEs and to Vietnamese workers in FIEs; certain provisions apply differently to foreign workers in Vietnam. The implementing framework is dense — Decree 145/2020 on working time and leave, Decree 152/2020 on foreign workers, Decree 12/2022 on labour penalties, and a series of MOLISA circulars that fill the operational detail.

Three structural features of the 2019 Code matter most for manufacturing operations. First, the Code clarified and tightened the definition of an employment relationship — informal or undocumented arrangements that escaped scrutiny under the old law are now harder to defend. Second, the Code introduced the concept of internal labour rules with mandatory registration for any employer with 10 or more employees, meaning the rule book itself is now a regulated document. Third, the Code expanded employee protections in collective bargaining and dispute resolution, including the introduction of independent worker representative organisations alongside the traditional Vietnam General Confederation of Labour structure.

For FIE manufacturers, the practical implication is that compliance is now a documented, registered, and audit-ready exercise rather than a series of internal practices. Foreign customers — particularly large brands subject to their own ESG and supply-chain audit obligations — increasingly request copies of registered internal labour rules, collective labour agreements, and social-insurance contribution certificates as part of supplier qualification. Compliance has become commercial.

Decree 152/2020/ND-CP (with significant amendments via Decree 70/2023) governs the work-permit regime for foreign workers. The starting position is that every foreign worker in Vietnam needs a work permit, with narrow exceptions for movement of executives at director level for short periods, certain experts performing emergency repairs, and a small number of treaty-based exemptions.

The four standard categories foreign manufacturers rely on are: managers (department head or above with documented management experience), executive directors (typically the legal representative of the Vietnamese entity), experts (university degree plus three years of relevant experience, or twelve years of experience in lieu of formal education), and skilled technical workers (one year of relevant training plus three years of relevant experience).

The application process has three substantive steps that must be taken in sequence. First, the FIE submits a labour-need report to the provincial People's Committee at least 15 days before the expected hire, demonstrating that the position cannot be filled by a Vietnamese worker. Second, on approval, the FIE submits the work-permit application to the provincial Department of Labour, Invalids and Social Affairs (DOLISA), with the supporting documentation (degree certificates, criminal record check, health certificate, photographs, and corporate documents). Third, on issuance of the permit, the foreign worker applies for the appropriate visa or temporary residence card.

The most-common operational pitfall is timing. The labour-need report alone takes 30-45 days in most provinces; the full chain to a working employee on the ground is realistically 60-90 days. Manufacturers planning a senior expat hire should start the work-permit process before the offer letter, not after. The second-most-common pitfall is documentation: foreign degrees and experience certificates must be apostilled (or consularly legalised for non-Hague countries) and translated into Vietnamese by a sworn translator. The chain takes 2-4 weeks and cannot be compressed.

Vietnamese law recognises three principal contract types: indefinite-term, fixed-term (now capped at 36 months under the 2019 Code), and seasonal/specific-task contracts (under 12 months). Indefinite-term contracts are mandatory once an employee has been employed on two consecutive fixed-term contracts and the employer wishes to continue the relationship — a manufacturer cannot indefinitely roll fixed-term contracts to avoid indefinite-term commitment.

Probation periods are tightly regulated. The 2019 Code caps probation at 180 days for executive positions, 60 days for positions requiring intermediate vocational training or above, 30 days for positions requiring basic vocational training, and 6 working days for other positions. During probation, either side may terminate without cause and without severance. After probation, the full Labour Code protections apply.

Manufacturing roles tend to fall into the 6-day or 30-day probation categories, which is short by international standards. Operational induction and basic training programmes need to be designed around the actual probation window. Many of the wrongful-dismissal claims I have litigated involve manufacturers who attempted to extend probation informally or who terminated during a 'probation' that had actually lapsed under the statutory cap.

Internal labour rules must be registered with DOLISA for any employer with 10 or more employees. The rules cover working time, rest, breaks, order at the workplace, occupational safety, asset protection, conduct of disciplinary proceedings, and prevention of harassment. A manufacturer cannot impose a sanction or discipline that is not foreshadowed in registered internal labour rules — the rules are the substantive ceiling on disciplinary authority.

Vietnamese employees are entitled to compulsory social insurance, health insurance, and unemployment insurance, with contributions split between employer and employee. The current rates (2025-2026) are approximately: social insurance 17.5% employer / 8% employee; health insurance 3% employer / 1.5% employee; unemployment insurance 1% employer / 1% employee — together approximately 21.5% employer contribution and 10.5% employee deduction on the contribution base salary.

Three operational issues recur in manufacturing. First, the contribution base is capped at 20 times the regional minimum wage, which limits exposure for higher-paid workers but is a binding constraint for senior hires. Second, the contribution rate and base must be reported and remitted monthly; arrears trigger administrative penalties and personal liability for directors. I have advised on multiple cases where social-insurance arrears emerged in M&A diligence and required substantial settlement payments before closing.

Third, the social-insurance scheme is now mandatory for foreign workers in Vietnam under most conditions. Foreign workers with valid work permits are covered for retirement and survivor benefits, with contributions starting from 2022. Employers should confirm that their payroll systems handle foreign-worker social insurance correctly — many older payroll systems do not.

Beyond the mandatory schemes, manufacturers commonly provide voluntary benefits that have become market-standard: meal subsidies (often a separate line item on the payroll, with tax advantages up to a cap), transport allowances, attendance bonuses, and 13th-month or Lunar New Year (Tet) bonuses. The Tet bonus is not strictly mandatory but is treated as such in market practice, and failure to pay regularly causes labour unrest.

Vietnam's trade-union framework is governed by the Trade Union Law 2012 and the relevant provisions of the Labour Code 2019. The historical position is that the Vietnam General Confederation of Labour (VGCL) is the only authorised national trade-union body, with grassroots units in each enterprise. The Labour Code 2019 introduced the concept of independent worker representative organisations alongside VGCL units, and implementing decrees in 2024-2025 have begun fleshing out the registration regime — though independent organisations remain rare in practice.

Manufacturers above a threshold size (effectively any meaningful FIE manufacturer) will have a VGCL grassroots unit. The employer must allow the unit to operate, deduct union dues from member wages on the unit's behalf, and contribute 2% of the wage fund to union activities. The contribution is a real cost line item and must be budgeted.

Collective labour agreements (CLAs) are negotiated between the trade-union unit and the employer and typically cover wages, working time, leave, social benefits, occupational safety, and dispute resolution. A CLA cannot reduce statutory protections but can — and almost always does — provide enhancements above statutory minimums. CLAs are registered with DOLISA and are publicly available. Foreign customers conducting supplier audits typically request CLAs as part of qualification.

Strike action is legal in Vietnam in defined circumstances after a defined procedure (registration, mediation, vote). In practice, most labour disputes resolve before strike, but wildcat strikes — strikes outside the legal procedure — do occur, particularly in lower-wage sectors and during Tet. The legal response to a wildcat strike is constrained: the employer cannot summarily discipline striking workers, and the regulatory expectation is mediation through DOLISA and the trade-union unit. Manufacturers with active labour-relations programmes — regular communication, transparent grievance handling, predictable bonus practices — have markedly fewer wildcat-strike incidents.

Termination is the area where Vietnamese employment law diverges most sharply from common-law expectations. There is no concept of at-will employment. Every termination — individual or collective — must rest on one of a defined list of statutory grounds: employer-side (restructuring, technological change, mergers, economic difficulty, force majeure), employee-side (defined misconduct, repeated underperformance, unauthorised absence), or mutual agreement.

For large-workforce reductions in manufacturing — closure of a production line, relocation between provinces, automation-driven redundancy — the relevant grounds are typically restructuring or technological change. The procedure is rigorous. The employer must prepare a labour-utilisation plan covering retraining, reassignment, and severance; consult with the trade-union unit; notify DOLISA at least 30 days in advance; and pay severance at one month per year of service for service from 2009 onwards (earlier service triggers a different calculation under the unemployment-insurance scheme).

I have advised on multiple large-scale workforce reductions, including factory closures with workforces in the hundreds and low thousands. The legal cost of doing it correctly — severance, notice, retraining contributions — is substantial. The legal cost of doing it incorrectly is greater: wrongful-dismissal claims compound across the affected workforce, regulatory penalties accrue, and the customer-audit consequences can affect the entire business.

Two operational principles I recommend. First, treat workforce reduction as a 90-day project, not a 30-day notice period. The consultation, planning, and procedural steps require time, and time pressure produces procedural defects. Second, document everything. The labour-utilisation plan, the consultation minutes, the DOLISA notification, the severance calculations, the offers made and accepted or refused — all of it becomes evidence if later challenged. Clean documentation is the single most-effective defence against wrongful-dismissal claims.

The Labour Code 2019 caps regular working time at 8 hours per day and 48 hours per week, with overtime capped at 40 hours per month and 200 hours per year (300 hours in specified sectors including textiles, footwear, electronics, and seafood processing — many manufacturing categories qualify for the higher cap). Exceeding overtime caps is a common audit finding in seasonal-demand industries and triggers administrative penalties plus potential customer-audit consequences.

Shift work is permitted but tightly regulated. Night shift (10pm-6am) requires a 30% wage premium; overtime night shift requires a 30% premium on top of the overtime rate. Female workers who are pregnant from the seventh month or with children under 12 months may not be assigned to night shift. Internal labour rules and the CLA must reflect these constraints precisely.

Occupational safety and hygiene is governed by the Law on Occupational Safety and Hygiene 2015 and its implementing decrees. The framework requires hazard identification, risk assessment, periodic medical examinations for workers in hazardous environments, supply of personal protective equipment, and reporting of workplace accidents within statutory timeframes. Manufacturers must register their occupational-safety programmes with DOLISA and renew on the prescribed cycle.

Workplace accident reporting is the area where I see the most operational error. Serious accidents must be reported to DOLISA, the social-insurance authority, and the labour inspectorate within 24 hours; less serious accidents within longer windows. Failure to report on time triggers penalties and complicates social-insurance claims by the affected worker. Manufacturers should have a written accident-response protocol that aligns with statutory reporting and is rehearsed by the operations team.

The checklist below covers the body of work every FIE manufacturer should have current and audit-ready. It is the work I review when conducting compliance audits for international clients ahead of customer or M&A diligence.