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FOREWORD
Labor law is always a special concern of enterprises, and at the same time an aspect where many companies frequently encounter errors. Given that the legal provisions are somewhat more favorable to employees, enterprises which are considered to have an advantage in understanding labor relations regulations need to pay attention to their obligations.
In May 2023, HM&P introduced the legal guidelines titled “Labor Law Compliance and Common Errors Made by Enterprises” to assist enterprises in identifying errors they have made, are currently making, or may encounter during their operations. We are honored and proud that this publication has been well-received and positively appreciated by the enterprise community across various fields.
Continuing the content presented in the previous publication, in this edition, we would like to share more about labor legal issues that enterprises frequently encounter. Through this publication, we provide warnings and solutions to help enterprises minimize errors.
Similar to the previous edition, this publication is compiled based on the practical professional experience of HM&P's legal team. It is also the result of collecting and compiling errors which are officially documented in relevant authorities’ reports and inspection conclusions.
We hope that this publication will continue to be well-received by readers and serve as a valuable resource for their operation. Despite our diligent efforts, this document may have limitations and may not cover all the challenges or errors that enterprises often encounter. HM&P is grateful for the understanding and feedback from enterprises and colleagues.
If you have any questions regarding this publication or the services provided by HM&P, please contact us using the information below:
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Nguyen Van Phuc |
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HM&P LAW FIRM |
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Managing Partner |
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🏠 Floor 7th , ITAXA Building, 126 Nguyen Thi Minh Khai, Vo Thi Sau Ward, District 3, Ho Chi Minh City, Vietnam |
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🕿 +84 932 768 630 |
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🕿 +84 28 7308 0839 |
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http://hmplaw.vn |
ERRORS IN THE DRAFTING AND IMPLEMENTATION OF PROBATIONARY CONTRACTS AND EMPLOYMENT CONTRACTS
1. The company requires the employee to go through several probationary periods for one position
- The matter
The probationary period is a critical time for a company to evaluate an employee's competence and suitability before establishing a formal employment relationship. During the probationary period, the company may pay the employee at a rate lower than the official salary (provided it is still at least 85% of the official salary for the position). Many companies that want to reduce the wage budget have required employees to serve multiple probationary periods for a position.
- The violation
Article 25 of the 2019 Labor Code stipulates that the probationary period shall be agreed upon by both parties based on the nature and complexity of the job, but the probationary period shall be allowed only once for a job. At the same time, this article also specifies the probationary period for each position and job title.
According to this regulation, companies are only allowed to require employees to go through the probationary period once for each job. In practice, there are cases where the probationary period has ended but the enterprise does not sign an employment contract with the employee, and then requires the employee to sign another probationary contract on the grounds that the employee is not qualified to pass the probationary period. This is considered a violation of the provisions of the Labor Code of 2019.
For this violation, pursuant to Point a Clause 2 Article 10, Clause 1 Article 6 Decree 12/2022/ND-CP, enterprises may be fined from 4,000,000 VND to 10,000,000 VND.
- The solution/compliance
As a result of the different regulations applicable to probationary and regular employees, such as salary, social insurance, taxes, etc., legal regulations have limited the number of probationary periods and the duration of such periods for a job. Therefore, companies must ensure strict compliance with these regulations to avoid administrative penalties and other risks, as mentioned in our legal guide “Labor Law Compliance and Common Mistakes Made by Enterprises” (Part 1).
During its operation, a company may encounter situations where an employee does not successfully pass the probationary period. Subsequently, the employee reapplies for the position that was previously subject to the probationary period, which is not an uncommon scenario in practice. From our point of view, the employment relationship between the company and the employee ends when the probationary period ends. It may still be appropriate for the employee to reapply for a position that was previously subject to a probationary period, and for the company to agree to continue to place the employee on probation. However, the company must provide a reasonable explanation if requested to do so by the relevant authority. The company may rely on the evaluation criteria used during the previous probationary period and take into account changes in the employee's qualifications at the time of reapplication, for example, the employee may have supplemented his or her qualifications with a new degree or demonstrated a better fit with the job requirements. This can serve as justification for the employee's improved ability to meet the conditions and requirements of the job.
2. The company extends the duration of the fixed-term employment contract through an appendix
- The matter
Many companies are in the habit of extending employment contracts with workers by means of appendixes to the contract, or even using appendixes to extend the duration of fixed-term employment contracts, thus exceeding the legal limits set by the regulations.
- The violation
While the 2012 Labor Code and its implementing documents[1] allowed companies to use the contract appendix to modify the term of the employment contract, with the proviso that such modification could be made only once and could not change the nature of the contract originally entered into, the 2019 Labor Code no longer allows this practice. In particular, Clause 2 Article 22 of the 2019 Labor Code provides that the contract appendix may detail, modify or supplement certain provisions of the labor contract, but may not change the duration of the contract.
With respect to the limitation of the term of fixed-term labor contracts, the provisions of the 2012 Labor Code, its related implementing documents, and the 2019 Labor Code are similar in substance. While Decree 05/2015/ND-CP stipulates that the enterprise can only change the term of a labor contract once by using the appendix to the contract, Point c Clause 2 Article 20 of the 2019 Labor Code also stipulates that the signing (re-signing) of a fixed-term employment contract can only be done once. The difference in the 2019 Labor Code comes from the provision that the enterprise is no longer allowed to intervene in the term of the employment contract through the contract appendix.
Therefore, at present, if an enterprise interferes with the term of a labor contract through entering into a contract appendix, regardless of extending or reducing the term of a fixed-term labor contract, this is a violation of the enterprise.
Decree 12/2022/ND-CP[2] regulates the penalties for such violations as follows:
• From 2,000,000 VND to 4,000,000 VND for violations involving 1 to 10 employees.
• From 4,000,000 VND to 10,000,000 VND for violations involving 11 to 50 employees.
• From 10,000,000 VND to 20,000,000 VND for violations involving 51 to 100 employees.
• From 20,000,000 VND to 30,000,000 VND for violations involving 101 to 300 employees.
• From 30,000,000 VND to 40,000,000 VND for violations involving 301 employees or more.
- The solution/compliance
In order to avoid possible administrative penalties for violations, the company must review the contract appendixes and replace any contract appendix that contains content that adjusts the contract term with a new employment contract.
The company should note that it is allowed to sign a new fixed-term employment contract only once for the employee who previously signed a fixed-term employment contract. After that, if the employee continues to work, he/she must sign an open-ended labor contract, except for the contract with certain special employees, such as those hired as directors in State-owned enterprises, senior workers, and foreign workers working in Vietnam, as specified in Clause 1 Article 149, Clause 2 Article 151 of the Labor Code of 2019 and the members of the leadership of the grassroots employees representative organization who are in their term but the labor contract has expired, as specified in Clause 4 Article 177 of the 2019 Labor Code.
3. The company uses the employee to work overtime without the employee’s consent
- The matter
Regardless of whether overtime pay is provided, many companies currently tend to require employees to work overtime without their consent, especially in specialized positions depending on the time of the year.
- The violation
According to Point a Clause 2 Article 107 of the 2019 Labor Code, an enterprise is entitled to require employees to work overtime with their consent. In addition, Article 59 of Decree 145/2020/ND-CP provides detailed regulations that, except for the cases specified in Article 108 of the 2019 Labor Code, employees must agree to work overtime in terms of time, place and tasks. Therefore, if an enterprise fails to obtain an employee's consent before requiring overtime work or forces an employee to work overtime, the enterprise will be subject to an administrative fine ranging from 40,000,000 VND to 50,000,000 VND, based on Point b Clause 3 Article 18 and Clause 1 Article 6 of Decree 12/2022/ND-CP.
- The solution/compliance
The law does not require a company to make a written record of an employee's consent to work overtime; however, it also does not specify a particular form for expressing an employee's consent to work overtime. In practice, employees who voluntarily remain at the workplace and continue to work beyond regular working hours may be considered a form of expressing consent to work overtime. This approach can also be seen as compliance with the provisions of Article 59 of Decree 145/2020/ND-CP, which outlines the employee's consent on three aspects: time, place and tasks for overtime work.
However, it is essential for companies to record the employee's consent to overtime work in writing to avoid potential complaints and disputes in the future. For the convenience of the work process, a company can first agree on the content in the employment contract regarding the cases in which the employee expresses consent to work overtime.
In unexpected situations that require employees to work overtime, especially for extended periods of time, night shifts, weekends, and holidays, the company should record the employee's consent to work overtime in writing. The enterprise may use or refer to Form No. 01/PLIV in Appendix IV issued with Decree 145/2020/ND-CP to develop the form and content of the document requesting the employee's consent.
4. The company does not specify a particular form of salary payment for employees
- The matter
The form of salary payment is one of the obligatory contents of the employment contract, and it is also specifically regulated by law. However, many companies still make mistakes when stipulating this provision in the employment contract.
- The violation
Clause 2 Article 96 of the 2019 Labor Code stipulates that salary must be paid in cash or transferred to the employee's personal account opened at a bank. In accordance with this provision, many companies simply state “Form of salary payment: Bank transfer or cash” in the employment contract. This is one of the most common mistakes made by many companies, as this statement in the employment contract does not guarantee full compliance with the law. As mentioned above, the Labor Code stipulates that if the salary is paid by bank transfer, it must be transferred to the employee's personal account opened at a bank. Therefore, the company's failure to specify a certain form of salary payment may be considered a violation of the law. For this violation, the enterprise may be subject to administrative fines ranging from 4,000,000 VND to 50,000,000[3] VND, depending on the number of employees affected.
- The solution/Compliance
This is not an overly complex issue for companies. To avoid the risk of penalties, the company should review the executed employment contracts to supplement the content regarding the employee's salary receiving account, especially in cases where the salary is paid by bank transfer. Companies can explicitly specify the employee's salary receiving account in the salary payment form clause or refer to the employee's account as described in the employee information section.
[3] Clause 1 Article 9 and Clause 1 Article 6 Decree 12/2022/ND-CP.
