Points to note when hiring foreign workers under a labor contract


  • Ho Thi Y NhiI

Hiring foreign workers has become essential for many Vietnamese companies, especially foreign-affiliated companies such as Japanese companies. In addition to utilizing foreign workers sent by their parent companies, many companies also recruit foreign workers directly in Vietnam. In this case, the foreign worker is referred to as a “foreign worker working in Vietnam in the form of a labor contract.” However, not many employers fully understand the regulations and precautions involved in employing foreign workers in this manner. This article explains the points to be aware of when hiring foreign workers under a labor contract, to help employers understand and comply with the provisions of Vietnamese laws and regulations.

1. Definition of foreign workers working under a labor contract
Under Vietnamese law, foreign workers can work in Vietnam in a variety of forms, including intra-company transfers (foreign workers with more than one year of work experience who are dispatched by their parent company to their Vietnamese subsidiary), performance of labor contracts, and performance of economic contracts (foreign workers working in accordance with the economic contract agreement between a foreign partner company and a Vietnamese company).1

In particular, foreign workers working in Vietnam under the performance of a labor contract are understood to refer to foreign nationals who are employed by an employer in Vietnam, have entered into a labor contract, and are paid a salary under the employer’s control.

2. Conditions for employment of foreign workers in Vietnam
When hiring foreign workers, whether they are internal transfers or local hires, in principle, the conditions set out in Article 152 of the 2019 Labor Law must be met. Specifically, the following applies.

Condition 1: An employer may hire foreign workers only if it is unable to secure Vietnamese workers to meet the employer’s production and business needs.

Therefore, before hiring foreign workers, employers are required to notify the vacancies of Vietnamese workers for the positions for which foreign workers are expected to be hired on the electronic information portal of the Department of Employment or the local employment service centre.2 If there are no Vietnamese workers who meet the recruitment criteria, employers can proceed with the recruitment process for foreign workers.

Condition 2: Before recruiting foreign workers to work in Vietnam, employers must explain their labour needs to the competent authority and obtain written approval. Specifically, employers will explain to the competent authority (Ministry of Labor, War Invalids and Social Affairs) the need to hire foreign workers instead of Vietnamese workers. This is also a key step in the work permit application process for foreign workers to work in Vietnam.

In short, employers cannot employ foreign workers freely, but only when there is a genuine need and approval from the competent Vietnamese authorities. The regulations on the recruitment conditions of foreign workers partly reflect the Vietnamese state’s spirit of “giving employment priority to Vietnamese workers”. Therefore, employers need to clearly understand the regulations regarding the terms and conditions of hiring foreign workers in order to develop their human resource utilization plans.

3. Overview of the process for employing foreign workers under a labor contract
3.1. Application for work permit
The application process for a work permit for foreign workers working under a labor contract basically consists of three steps.

Step 1: Notification on recruiting Vietnamese workers for positions expected to hire foreign workers
Step 2: Finalize your foreign worker plan
Step 3: Apply for a work permit

Compared with the application procedures for work permits for foreign workers working under the performance of economic contracts or internal transfers, the application procedures for work permits for foreign workers working under the performance of labor contracts require simpler document preparation in Step 3, so the process takes less time to complete.

3.2. Obligation to conclude labor contracts with foreign workers
3.2.1 Obligation to conclude and submit a labor contract
Unlike other employment forms, in the case of foreign workers working under a labor contract, after the issuance of a work permit, the employer and the foreign worker are required to enter into a written labor contract before the intended date of work. Once concluded, the employer must submit the original or a notarized copy of the employment contract to the work permit issuing authority.3

3.2.2 Contents of the employment contract
The contents of the employment contract include the main contents stipulated in Article 3 of Circular No. 10/2020/TT-BLDTBXH. Employers should also be aware that the term of a foreign worker’s employment contract must not exceed the validity period of the work permit, which is a maximum of two years.4 In addition, an employer may enter into multiple fixed-term employment contracts with foreign workers, provided that the period of the employment contract is within the period of the issued work permit. This differs from the case of Vietnamese workers, who can only enter into fixed-term employment contracts a maximum of two times. In addition, labor contracts with foreign workers must record information about their work permits, and their wages must be paid in Vietnamese dong or foreign currency.

3.3. Social insurance and health insurance
Under Vietnamese law, foreign workers are eligible to join social insurance if they meet the following four conditions.5

i. Having a labor contract for one year or more.
ii. Have a work permit.
iii. You are not working in a form of internal transfer.
iv. Not having reached the retirement age according to Vietnamese law.

In addition, foreign workers who have a labor contract with an employer for one month or more are exempt from the health insurance contribution obligation.6

Therefore, after a foreign worker obtains a work permit and signs a labor contract with an employer, it is necessary to check whether the foreign worker is eligible for social insurance and health insurance and to report and enroll the foreign worker in social insurance and health insurance at a Vietnamese social insurance agency.

In conclusion
Vietnam’s labour laws stipulate specific conditions and processes for recruiting and using foreign workers in the performance of labour contracts. Therefore, if employers have the need to employ foreign workers and need to formulate appropriate plans to rapidly respond to human resource utilization in their business activities, they need to clearly understand and comply with the provisions.

1 Clause 1, Article 2 of Decree No. 152/2020/ND-CP
2 Clause 2, Article 1 of Decree No. 70/2023/ND-CP
3 Clause 3, Article 11 of Decree No. 152/2020/ND-CP
4 Labor Law Article 151, Paragraph 2
5 Clauses 1 and 2, Article 2 of Decree No. 143/2018/ND-CP
6 Article 1, Paragraph 6 of the Act amending and supplementing certain provisions of the Health Insurance Act

(Created on May 18, 2024)

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