Things to keep in mind when a company requires 200 to 300 hours of overtime work per year
2023/07/20
- Do Thi Diu
Introduction
It is not uncommon for companies to require employees to work overtime. On the other hand, in order to ensure a balance between employees’ working hours, rest periods, and health, the law sets upper limits on overtime work on a daily, monthly, and yearly basis. For example, Vietnam’s 2019 Labor Law stipulates that overtime work does not exceed 200 hours a year, but in some jobs, such as manufacturing, overtime work of up to 200 to 300 hours is permitted. This article focuses on points to keep in mind when companies require employees to work 200 to 300 hours of overtime a year.
1. Conditions for overtime work
According to Article 107 of the 2019 Labor Law, employers can require workers to work overtime under the following conditions:
(i) Obtain the consent of the workers.
(ii) Ensure that overtime hours do not exceed 50% of their normal working hours in a day; If the regulation of regular working hours per week is applied, the total of regular working hours and overtime working hours shall not exceed 12 hours per day and 40 hours per month.
(iii) The worker’s overtime work does not exceed 200 hours per year, unless overtime work of 200 to 300 hours per year is permitted.
Guaranteeing an upper limit on overtime work for a year is one of the conditions for employers to allow employees to work overtime.
2. The cases overtime work of up to 200 to 300 hours per year is permitted
Generally, overtime work should not exceed 200 hours a year, but Vietnamese law stipulates seven cases in which employers may require overtime work of up to 200 to 300 hours a year. Details are as follows.
(1) If the employer’s business is manufacturing or processing textiles, sewing, leather, shoes, electrical or electronic products for export, or processing agriculture, forestry, salt industry, or marine products.
(2) If the employer’s business is electricity generation and supply, telecommunications, oil refining, water supply and drainage.
(3) When the employer’s work requires a high level of specialization or skill, and the labor market is unable to supply enough workers.
(4) When resolving work that cannot be delayed due to fixed delivery dates for raw materials or products, etc. When resolving work that occurs due to inclement weather, natural disasters, fire, war damage, power shortages, raw material shortages, production line accidents, etc.
(5) If the job cannot be delayed due to objective factors that are urgent and directly related to the official activities of state organs (except for overtime work in special cases as provided for in Article 108 of the Labor Law of 2019).
(6) When providing public services, medical services, education and vocational training services.
(7) In the case of work directly related to production or management activities in a company where normal working hours do not exceed 44 hours per week.
In cases (1), (2), and (6) above, the employer will require overtime work based on the specific work registered with the municipal/provincial planning and investment bureau. Specifically, it refers to seasonal or essential work.
On the other hand, if the employee is not registered as one of the specified jobs listed above, the employer will often apply cases (4) or (7) and require the employee to work overtime within 200 to 300 hours per year.
3. Notification procedures for overtime work within 200 to 300 hours per year
If an employer requires overtime work to exceed 200 to 300 hours per year, it will not be considered illegal if the employer follows the notification procedure below. According to Article 107, Paragraph 4 of the 2019 Labor Law, if a worker is required to work overtime within 200 to 300 hours a year, the employer must notify the labor agency belonging to the provincial People’s Committee. Details are as follows.
Notification format:
Notification in writing using Form 02/PLIV in Appendix IV of Legislative Decree No. 145/2020/ND-CP. However, in practice, some labor organizations often require the following additional documents to prove that overtime work is performed within 200 to 300 hours per year.
-Overtime work plan: Employers can refer to Form No. 03 of Circular 15/2003/TT-BLDTBXH. This form has expired, but can be used as no other guidance documents have been published yet
-Agreement regarding overtime work with workers (Ordinance 145/2020/ND-CP No. Appendix IV Form 01/PLIV)
Submit to:
Department of Labor, Invalids and Social Affairs (for companies located outside industrial parks, export processing zones, and special economic zones) / Industrial Park Management Committees (for companies located outside industrial parks, export processing zones, and special economic zones) in the following regions/case;
-Regions where overtime work is implemented
-Location of the company’s head office (if the location where overtime work is performed is different from the company’s head office location)
Notification deadline:
Overtime work must be carried out within 15 days at the latest from the day on which overtime work begins. Since the upper limit is 40 hours of overtime work per month, employers are basically required to give notice after June of each year for overtime work that exceeds 200 hours per year.
4. Risks related to violations when requiring overtime work of up to 200 to 300 hours per year
Under the 2019 Labor Law, violations regarding overtime work risk the following penalties being imposed on employers:
(i) Employers who fail to take notification procedures for overtime work of up to 200 to 300 hours per year will be subject to a fine of 4~10 million Vietnamese dong (VND).
(ii) Cases in which overtime work exceeds the stipulated upper limit (not covered by the seven cases shown in “2. Cases in which overtime work of 200 hours or less per year is permitted” of this report or 300 hours) , the employer will be fined 10~150 million VND.
Under tax law, if a company illegally engages in overtime work exceeding 200 hours a year, the following risks arise:
(i) Regarding corporate tax, based on Article 6, Paragraph 2 of Circular 78/2014/TT-BTC, there is a risk that overtime wage payment costs exceeding 200 hours will be treated as non-deductible.
(ii) Regarding income tax, based on Article 3, Paragraph 1 of Circular 111/2013/TT-BTC and Official Letter 4641/TCT-DNNCN issued by the Directorate General of Taxation dated November 12, 2019, overtime exceeding the upper limit stipulated in the Labor Law 2019 Premium wages for labor run the risk of being subject to income tax.
Conclusion
In this article, we have explained the precautions to be taken when companies require employees to work 200 to 300 hours of overtime in a year. Companies need to once again pay attention to complying with labor laws and regulations to avoid unnecessary risks.
Reference laws and regulations
1. Labor Law 2019 (Law No.45/2019/QH14)
2. Decree 145/2020/ND-CP
3. Decree 12/2022/ND-CP
*This article was translated by Yarakuzen.
