Many companies that invest in Vietnam are frequently confronted with questions about the recruitment of foreign employees. In this context the application for work permits is a major issue and can cause lots of administrative efforts. In the following you can see a summary of the most important steps within the procedure of applying a work permit.

1. Important provisions

The base for all employment-contracts is the standard form provided from MOLISA which can and should be adjusted to the special interests of each company.

The existing labour laws consist of the Labour Code and a number of decrees and circulars. Numerous guiding regulations on one hand help to clarify issues that are unclear under the Labour Code. On the other hand, however, they also cause difficulties in application given the labour laws affect a wide range of the society.

The Labor Code dated 23 June 1994, and amended in 2002, 2006 and 2007 (“Labor Code”) is one of the most important laws with respect to labour matters. Furthermore, the following provisions have to be noted:

• Decree 34/2008/ND-CP dated 25 March 2008 on recruitment and management of foreigners working in Vietnam dated 25 March 2008 (“Decree 34”)
• Decree 113/2004/ND-CP dated 16 April 2004 guiding administrative sanctions for violations of the labor law (“Decree 113”)
• Circular 08/2008/TT-BLDTBXH dated 10 June 2008 guiding the implementation of a number of provisions of Decree 34 (“Circular 08”)

The latest changes to Vietnamese law have been introduced by Decree 34 & Circular 08. Thereby the requirement that the ratio of foreign employees to Vietnamese employees be less than 3% of work force (and any more than 3% required the approval of the Chairman of the Provincial People’s Committee) has been removed. The work permit exemption for foreign Chief Representatives, Heads of Branch in Vietnam was also removed and as well as the work permit exemption for foreigners coming to Vietnam to carry out contracts signed between a foreign company and a Vietnamese party.

To such extent, an effort to codify the numerous current regulations in a uniform code to avoid the existence of fragmented and sometimes overlap decrees and circulars is highly appreciated. It is strongly recommended that to ensure the supremacy of the Labour Code, the issue of guiding circulars should be minimized.

2. Requirement of work permit

Subject to certain exemptions all foreigners working in Vietnam must have a work permit. As a consequence for the failure of a work permit, the employer can be cursed with administrative sanction / fines from VND 5m to VND 10m. In respect with serious violation even with the withdrawal of certificate of investment / BRC. If the employee works for more than 6 months without a work permit he can be expelled from Vietnam (Art. 14 (3) Decree 34) / Decree 13 (3 months).

On the other hand, a foreigner is exempt from the requirement to hold a work permit, when the foreigner is working in Vietnam for 3 months or less, is a member of a multi-member LLC, is an Owner of a single-member LLC or a member of the Management Board of a JSC. A work permit is further not necessary, when the foreigner comes to Vietnam to offer services. However, in this case, a 7-day in advance notice must be submitted to the provincial DOLISA prior to working in Vietnam

3. Requirements for the issuance of a work permit

First of all, the issuance of a work permit requires a minimum of 18 years of age. Besides, the employees must be physically fit for the work requirement. The work permit for managers / executive directors or experts require more documents, such as following:

• Separate requirements for those practicing in health-care and medical sector, education and vocational training
• Need to submit degree certificates (normally university degree or higher) and other documents evidencing high technical and professional qualification
• For those experts without such degrees or certificates (e.g., craftsman) must have confirmation of at least 05 working years

Furthermore, the employee should not have a criminal record for a national security offence, criminal prosecution or any criminal sentence under Vietnamese or foreign law.

The work permit application dossier has to be submitted 20 days prior to the expected first date of work at the authorities (Art. 6 (5) (a) Decree 34). The labor contract shouldn’t be signed before the issuance of the work permit (Art. 4 (4) (d) Decree 34). The Employer and Vietnamese party have to bear the administrative burden (issuance, renewal application). That means that the application process depends on the employer/Vietnamese party, but, nevertheless, the employee suffers from the employer/Vietnamese party’s delay or failure to apply for work permit (e.g. no reasons for expulsion).

The employer should also take into account that a copy of labor contract must be sent to provincial DOLISA within 5 days of signing. Besides, the employer has following reporting obligations of employer:

• Annual report on employment of foreign employees to DOLISA
• Foreign employees work at a different province or city for ≥ 10 days: written notification must be sent to provincial DOLISA

4. Exemption of a work permit

In some more cases a work permit is also not necessary. In a intra-corporate transfer some employees don’t need a work permit. These are managers / executive directors or experts of a foreign enterprise having an established commercial presence entity in Vietnam who temporarily transfer internally to the commercial entity in Vietnam and have worked for the foreign enterprise for at least 12 months prior to working in Vietnam. “Service provider pursuant to a contract” don’t need a work permit, either. Service provider pursuant to a contract are employees of a foreign company without commercial presence in Vietnam who are recruited by a foreign company for at least 02 years and work in Vietnam to implement a contract between the employer and a Vietnamese company

5. Pros and cons of not signing a labor contract

The advantage of not signing a labor contract is that there is no employment relationship, so that the relationship can be terminated easily. In this case a Dispute settlement is more favorable to the enterprise. The disadvantages are the more administrative burdens on the Vietnamese party’s side, e.g., tax withholding application, paperwork for work permit application.

Finally, we would therefore recommend that thorough understanding of labor laws and work permit regulations as well as their amendments is more than necessary and be aware of different practice of different DOLISA and labor authorities.

If you would like to get more information about the discussed topic, please do not hesitate to contact me.