Points to note for employers when the term of a labor contract expires
2024/06/17
- Ho Thi Y NhiI
Introduction
An employment contract is an important document that lists the agreement between employer and employee regarding salary, working hours, rights, obligations, etc., and also includes the duration of the employment contract. In Vietnam, employers often enter into fixed-term employment contracts with employees at the initial stage of hiring them. Therefore, in this article, we will explain what employers need to pay attention to when an employment contract expires, so that they can comply with Vietnamese law.
1. Expiration of a labor contract
Under Vietnam’s current labor law, there are two types of labor contracts: indefinite-term labor contracts and fixed-term labor contracts. The main difference between these is the length of the contract. With an indefinite-term employment contract, the parties agree only on the start date, but not on the duration or expiration date of the contract. In contrast, with a fixed-term employment contract, both parties agree on the term and expiration date of the contract, for a period not exceeding 36 months from the time the contract comes into effect.1 Therefore, the timing at which the term of an employment contract expires can be interpreted as the point at which the employment contract reaches its effective end point.
2. Points to note for employers when the term of a labor contract expires
Fixed-term employment contracts are generally interpreted as automatically terminating when the employment contract expires. The employer can choose to continue the employment relationship by entering into a new employment contract or to terminate it completely. In either case, to ensure compliance with the legal provisions, employers should pay attention to the following.
2.1. When a new employment contract is concluded and the employment relationship is continued
a. Conditions for concluding a new employment contract
This will only happen if the employer wishes to conclude a new employment contract and if the employee also wishes to do so. In addition, the parties may extend the fixed-term employment contract once and may conclude a maximum of two extensions2, but the new contract period may not exceed 36 months3. However, in special cases, such as for elderly or foreign workers, fixed-term contracts may be concluded more than twice. In addition, members in leading positions in the worker representative organization at a workplace may enter into fixed-term employment contracts of more than 36 months, which is the same period as their term of office.
b. Deadline for the conclusion of a new employment contract
The parties must enter into a new employment contract within 30 days of the expiration date of the old contract.5 Until a new employment contract is concluded, the rights, interests and obligations of both parties will be governed by the old contract. If, after the aforementioned period has elapsed, the parties do not enter into a new employment contract, the old fixed-term contract will automatically be converted into an indefinite-term employment contract. However, as mentioned above, when an indefinite-term employment contract is concluded, the expiration date is not agreed upon, so in practice it is very difficult to terminate such an employment contract and it takes longer than terminating a fixed-term employment contract. For example, while the notice period for unilateral termination for workers with indefinite-term labor contracts is at least 45 days, the notice period for unilateral termination of fixed-term labor contracts of 12 to 36 months is only 30 days.
Additionally, some workers intentionally extend the period until a new employment contract is negotiated and concluded beyond the 30 days mentioned above in order to turn a fixed-term employment contract into an indefinite-term employment contract. Therefore, employers are advised to negotiate and complete a new employment contract before the expiration date of the fixed-term employment contract in order to avoid the risk of finding themselves in the above-mentioned situation and to be able to proactively decide on the type and duration of the new employment contract.
2.2. If a new employment contract is not concluded and the employment relationship is not continued
When the employment contract expires, the employer has the right to completely terminate the employment contract as described above. However, when terminating an employment contract, employers must take note of the following points.
– When an employment contract is terminated, the employee must be notified in writing6. Although current laws do not specify a deadline for the notice, employers are required to send the notice to employees no later than the termination date of the employment contract to prevent employees from continuing to work after the termination of their employment contract and being forced to enter into a new employment contract that they do not want.
– Employers are responsible for paying in full all amounts related to workers’ entitlements, including salary, severance pay (if the worker qualifies for it) and amounts equivalent to unused annual leave (if any)7. In addition, after completing the procedures for verifying the period for which social insurance, medical insurance and unemployment insurance contributions have been paid, the employer is responsible for returning the originals of other documents to the employee if held by the employer, and for providing copies of each document related to the employee’s working process upon the employee’s request.8
There are the following exceptions to the termination of a labor contract.
– Members in leading positions in the worker representative organization at a workplace cannot terminate their already concluded employment contracts if their term of office is still in force, even if the employment contract expires; their term of office must be extended until the expiration of that term.9
– If a female worker is pregnant or raising a child under 12 months and her employment contract expires, she will be given priority in entering into a new employment contract.10 However, current law does not provide for the interpretation of “preferential”. Although the law does not appear to require employers to enter into new employment contracts, because such workers require special assistance and protection from their employers, employers should consider entering into new employment contracts.
In conclusion
The expiration of an employment contract and the associated responses are typical cases in labor relations. Therefore, employers should fully understand the provisions and be aware of their responsibilities and obligations in order to make the most of the rights granted by the law, whether they continue to enter into new employment contracts or not.
1 Article 20, paragraph 1 of the Labor Law of 2019
2 Article 20, paragraph 2, item c of the Labor Law of 2019
3 Article 20, paragraph 1, item b of the Labor Law of 2019
4 Article 20, paragraph 2, item c of the Labor Law of 2019
5 Article 20, paragraph 2, item a of the Labor Law of 2019
6 Article 45, paragraph 1 of the Labor Law of 2019
7 Article 48, paragraph 1 of the Labor Law of 2019
8 Article 48, paragraph 3 of the Labor Law of 2019
9 Article 34, paragraph 1 and Article 177, paragraph 4 of the 2019 Labor Law
10 Article 137, paragraph 3 of the Labor Law of 2019
M000111-182
(Created on June 16, 2024)
