Cost Impact: New Labour Code, New Union Law, and Draft Employment Law

In 2012, the National Assembly passed two important laws regarding labor matters including Labor Code No. 10/2012/QH13 dated 18 June 2012 taking effect effective date from 1 May 2013 (the “New Labor Code”) and Law No. 12/2012/QH13 on Trade Union dated 20 June 2012 taking effect from 1 January 2013 (the “New Union Law”). These laws will replace the current Labor Code passed on 23 June 1994, amended and supplemented in 2002, 2006 and 2007 (the “ Current Labor Code”) and current Law No. 40-LCT/HDNN8 on Trade Union dated 30 June 1990 (the “Current Union Law”). Also, the new draft of Employment Law is under discussion and expected to take effective from 1 January 2015 (the “Draft Employment Law”).

Providing many new regulations, these new laws will explicitly impact to labor relationship and employers’ business. In the scope of this document, we will focus on the impact of new laws to company (employer) costs. Specifically, the revisions can make company direct / indirect costs (as defined below) increased.:

• “Direct cost” revisions mean legal requirements that would directly impose higher taxes, fees and labor costs on the enterprises, e.g., increase of probationary salary, minimal salary rates, insurance contribution rates, change of leave regimes, increase of salary for overtime, new regulation of union fund, etc.

• “Indirect cost” revisions mean legal requirements that would cost company more administrative and management time, e.g., imposition of union levy (2%) to all enterprises even if such enterprises have no grassroots union, shortening the term of work permit, etc.

In the situation of economic downturn, the considerable increase of labor costs will surely lead to consideration of retrenchment of employees or increase of product/ service prices. Labor cost is also one of the factors of investment environment, and country competitiveness. The sudden changes would affect decisions of new investors to choose Vietnam or other neighbor countries as their investment destination. We do hope that Government of Vietnam will consider these issues carefully for the coming implementation guidance of the Code and / or its future amendments and revisions.

Read more …

Revised Labour Code, Law 10/2012/QH13, Jun 18, 2012 (English) pdf version
Revised Labour Code, Law 10/2012/QH13, Jun 18, 2012 (Vietnamese) pdf version
Consolidated Comments on the Amended Labour Code (English)
Consolidated Comments on the Amended Labour Code (Vietnamese)
Comments (Baker&McKenzie) on the Amended Labour Code (English)
Comments (Baker&McKenzie) on the Amended Labour Code (Vietnamese)
All of the above documents in one zip folder

Additional Background Reading

National Employers Conference 2011 – Labour Code Revision, Oct 24, 2011
VN General Confederation of Labour (VGCL) wants higher minimum wage, same overtime, Nov 16, 2011