The Draft Decree amending and supplementing several Articles of Decree No.05/2015/ND-CP dated January 12, 2015

July 11, 2018 Labor & Employment

The Draft amends several provisions related to the contents of labor contracts such as the time calculations for severance allowances and salary as well as expanding the employer’s labor discipline rights. Specifically:

As for the contents of labor contracts stipulated in Article 4, Decree No.05/2015/ND-CP, the Draft proposes referencing the internal policies of the employer (e.g. labor regulations, collective labor agreement, employer’s regulations) instead of inserting mandatory details into the labor contract concerning:

Regime for promotion of rank, level raises, and salary raises (conditions, time, location, salary rate after the level raise, salary);

Working time (working time in one day or one week; starting time and ending time of the working day or working week; number of working days in one week);

Break time (duration, starting time, ending time of the break during working hours; period of weekly leave, annual leave, holiday, new year leave, personal leave, unpaid leave); and

Protective equipment for employees working in jobs with dangerous or harmful conditions (quantity, type and useful life of personal protective equipment).

This proposal facilitates open negotiations during the creation of the labor contract between the employer and the employee. It also solves the “rigidity” of current regulations under which the employer and the employee are required to include mandatory provisions required by law in the labor contract. These mandatory provisions are usually very long, detailed and specific, and contain some very technical contents (e.g protective equipment). Further, these required provisions often already exist in the labor handbook, collective labor agreement or the employer’s policy. This proposal in the Draft also promotes flexibility when parties amend or supplement the contract and frees the parties from having to renegotiate and then write the mandatory terms into the labor contract.

As for determining the time in which the employee has actually worked for the enterprise when calculating severance allowances as stipulated in Article 14, Decree No.05/2015/ND-CP, the Draft proposes that the following periods of time shall NOT be considered as periods in which the employee has actually worked for the employer:

Probationary period;

Period of apprenticeship and training in order to work for the employer;

Period in which the employer sent the employee to training without full-time salary; and

Period of leave with benefit of entitlement under the provisions of the Law on Social Insurance (the period in which the employee takes paid leave for maternity or sickness above 14 working days shall not affect their monthly salary but shall entitle the employee to social insurance).

The reason for abolishing these periods of working time for calculating severance allowance is that:

During the periods of probation, traineeship, apprenticeship and period of paid leave under provisions of the Social Insurance Regulation (the period in which the employee takes leave for maternity or sickness above 14 working days without paid salary but with social insurance allowance), the employee shall not be subject to the unemployment insurance contribution.

Although employees taking leave for maternity, as mentioned above, are not subject to the unemployment insurance allowance, social insurance is to be paid during this period.  Previously, for the period preceding the time when the 2013 Labor Law took effect, maternity leave was considered a time in which unemployment insurance was paid under the 2006 Law on Social Insurance.  Therefore, abolishing the unemployment payment obligation during this period is compatible with principles of calculating severance allowance under the 2013 Labor Law (i.e. not including the time in which unemployment insurance was paid).

These periods of leave are usually short (01 – 06 months), and upon calculation of the severance allowance they are rounded to halves of a year, which is difficult for employers. This also pushes the enterprises’ expenses higher when severance allowance is paid to employees, whereas for most of the actual working period, the employees were already compensated with unemployment insurance by the employer.

As for the settlement of interests between employers and employees upon termination of the labor contract:

The Draft clarifies the benefits payable, whereby, in addition to severance allowance, the parties must settle the details regarding salary, social insurance premium, compensation and other amounts related to the interests of each party.

The Draft retains the time period of settlement to be 07 working days from the date of termination of the labor contract and can potentially be extended up to 30 days in special cases. The draft also adds merger, consolidation, division, separation of enterprises, co-operatives, transfer of ownership and property use rights under Article 45 of the Labor Code as constituting special cases in which the time for settlement may be extended.

Regarding the salary used as the basis for calculating payment to employees for work suspension, annual leave, public holiday, paid leave, salary advances and deductions, and compensation as stipulated in Article 26, Decree No.05/2015/ND-CP:

The Draft adjusts the salary used as the basis for calculating payment to employees during annual leave days in Article 111; the increments of annual leave days according to an employee’s seniority in Article 112; public holidays in Article 115 and the paid leave in Clause 1 Article 116 of the Labor Code, specifically applying the salary stated in the labor contract at the time the employer calculates and remits payment to the employee, instead of the salary stated in the labor contract for the preceding month as in the current regulations.

The Draft includes additional provisions on the salary used as the basis for calculating sums of payment in 02 cases:

The salary used as the basis for calculating compensation due to a violation of the regulations concerning the time of prior notice when the employer or the employee unlawfully unilaterally terminate the labor contract (as stipulated in Article 42.5 and Article 43.2 of the 2012 Labor Code) is the salary indicated in the labor contract at the time the employer or the employee unlawfully unilaterally terminate the labor contract.

The salary used as the basis for the employer to calculate the payment of compensation, allowances and salaries to employees who leave work due to labor accidents or occupational diseases (as stipulated in Article 38.10 of the 2015 Law on Occupational Safety and Hygiene) is the salary indicated in the labor contract at the time the employee leaves their work due to labor accident or occupational disease.

For disciplinary dismissal of an employee who has been absent from work without permission for a total of 05 incremental working days within 01 month (30 days) or 20 incremental days within 01 year (365 days) without any plausible reason as stipulated in Article 30 and 31, Decree No.05/2015/ND-CP, the Draft allows the employer to shorten the procedure for labor discipline as follows:

A disciplinary hearing is allowed to be conducted after 01 written notice where one of the participants is absent, instead of 03 of written notices as in other cases.

The procedures for disciplinary dismissal may now be conducted without having to wait until the end of the month or the year.

This proposal is based on the fact that most employees spontaneously quit their job and never return to work and, therefore, never participate in the disciplinary hearing.  As such, the existing procedure for disciplinary hearings lengthens the time of the process, affecting the enterprise’s production and business.

On the other hand, an employee spontaneously quitting their job is similar to cases where an employee unilaterally terminates the labor contract unlawfully.  However, these two cases require different solutions.  In fact, most enterprises will opt for the scenario where the employee unilaterally terminates the labor contract, so that they do not have to proceed to a disciplinary hearing for dismissal.

Regarding an employer’s authority to issue a disciplinary decision concerning an employee, the Draft expands the right to issue disciplinary decisions for all types of discipline to the person authorized to sign labor contracts, instead of confining this to the person or committee in the company that conducts disciplinary complaints as in the current regulations. This proposal aims to streamline disciplinary proceedings in enterprises, especially enterprises with many employees or with many business facilities located in different localities. In addition, this amendment is intended add flexibility and shorten the period for labor discipline which will facilitate the production and business operations of an enterprise.

  –   Written by LE & TRAN | Vietnam’s Premier Business Litigation Firm

This insight is quoted from the Vietnam Labor Law Review (April – May 2018), you can download and read the full file of Vietnam Labor Law Review (April – May 2018) here.