Provisions regarding in-company labor unions under Vietnamese law


  • Ho Thi Y NhiI

Company-based labor unions are organizations that represent workers and are commonly found in medium-sized and large companies, particularly in manufacturing. However, it appears that few employers fully understand the significance of such organizations, the procedures for establishing them, their organizational structure, and their operations. In fact, some employers consider such organizations to be harmful to their companies and are hesitant to establish company unions or even intentionally obstruct the establishment of such unions. This article explains the current legal provisions and points to note regarding company unions to help employers understand these organizations.

1. What is a company labor union?
An in-house labor union is a representative organization of workers within a company, and is an organization established based on the voluntary will of workers. It is an organization whose purpose is to protect the rights and interests of workers in labor-management relations through collective bargaining or other forms of negotiation based on labor laws and regulations.1

2. Conditions for establishing an in-company labor union
In-house unions are established in enterprises with five or more employees and are required to voluntarily apply to join the Vietnam Trade Union.2

Vietnamese workers may establish trade unions in accordance with the Law on Trade Unions and have the right to join and participate in trade union activities.3 Furthermore, companies must not interfere with or manipulate the establishment or activities of labor unions.4 Therefore, if Vietnamese workers request the establishment of an in-company trade union, the enterprise must make arrangements for its establishment, create favorable conditions and be careful not to impede such establishment efforts.
Trade unions are established on the principle of voluntariness.5 Therefore, workers are free to choose to join a trade union.

3. Procedures for establishing an in-company labor union
The procedure for establishing an in-company labor union basically involves the following steps.

The deadline for the higher-level labor union to process the application is within 15 business days from the date of receipt of the application for establishment of the in-company labor union.
The above procedure may change depending on the judgment of the local authorities (senior labor unions). Therefore, when actually establishing a company, we recommend that you check the procedure with the senior labor union and receive accurate instructions.

4. Restrictions on labor union finances
4.1. Sources of union income
A labor union’s sources of income consist of the following four sources, of which union expenses and union dues are the main sources.

(i) Union expenses: Regardless of whether a company has an in-house labor union or not, the company is required to pay union expenses in an amount equivalent to 2% of the base wage used to calculate employees’ social insurance premiums.
(ii) Union dues: Unlike union expenses, these are expenses levied only on union members at companies that have in-house labor unions. Each month, members are required to pay union dues equivalent to 1% of their salary. However, the maximum allowance is 10% of basic salary.
(iii) Contributions or subsidies from the national budget
(iv) Other sources of income

4.2. Use of Union Resources
– In companies that have in-house labor unions, the in-house labor unions are permitted to use 60 percent of total union dues and 75 percent of total union expenses7 for expenditures on the protection, training, publicity, mobilization, and administrative management of members and workers.8

– In companies that do not have an in-house labor union, the higher-level labor union will use union expenses for protecting workers, public relations activities, training union members, establishing in-house labor unions, and concluding collective labor agreements. Senior trade unions will issue guidance documents outlining specific details regarding the content and proportion of expenditure.
For example, the General Confederation of Labour in District 1, Ho Chi Minh City is currently implementing Guidance Document 12/HD-LDLD. The document stipulates that the content and proportion of expenditures will be considered and determined based on actual circumstances, and the expenditure cap will not exceed VND2,000,000 per person per transaction.

As can be seen from these figures, companies that have in-house labor unions have the right to use a higher proportion of labor union financial resources than companies that do not have in-house labor unions, and can make more aggressive expenditures. Therefore, workers at companies that have in-house labor unions can enjoy comprehensive employee benefits, which leads to increased worker satisfaction.

5. Notes regarding workers who are members of the executive committee of an in-house labor union
As for members of the executive committee of the company trade union, there are special rules regarding working conditions, as they are responsible for specific tasks of the company trade union. Therefore, to comply with the law, companies should pay attention to the following:

(1)Even if the labor contract of a worker who is a member of an in-house labor union expires during the term of office, the labor contract will not be terminated.9 In this case, the employment contract must be extended10 and the new employment contract must last at least until the end of the worker’s term of membership in the trade union.

(2) A company is not permitted to make independent decisions regarding the termination of the labor contract, transfer to a different job, or dismissal of a worker who is a member of the executive committee of the in-house labor union; it is required to reach a written agreement with the executive committee of the in-house labor union. If no agreement can be reached, the parties must report to the provincial-level labor agency under the People’s Committee, and the enterprise will have the right to make a new decision 30 days after the date of the report. If an enterprise is dissatisfied with its decision, the employee and the enterprise union executive committee have the right to demand a settlement through a labor dispute in accordance with the procedures and processes prescribed by law.11

(3) Members of the enterprise trade union, including the chairman, vice chairman, executive committee member, team leader and deputy leader, will be paid union dues by the trade union and then a responsibility allowance will be paid by the trade union (the enterprise is not responsible for paying such allowance). Therefore, the allowance is not subject to social insurance, health insurance and unemployment insurance calculations under Decision No. 5692/QD-TLD, and is not subject to personal income tax calculations under Section 10 of the list attached to Official Letter No. 1381/TCT-TNCN and Article 2 of Circular No. 111/2013/TT-BTC.

(4) Workers can carry out trade union activities during working hours (up to 24 hours per month depending on their position, but working hours can be increased by agreement) and attend meetings and training sessions and still receive their salary paid by the company. This means that workers will spend less time working for a company.

(5) The head of an in-house labor union cannot simultaneously hold a leadership or managerial position within the company.12

Company-based labor unions play an important role in protecting workers’ legitimate rights and creating motivation. At the same time, however, there is the potential for conflicts of interest to arise between union members and companies. Therefore, all companies, whether they have in-house labor unions or not, need to pay attention to the above. Please make sure you fully understand the legal provisions and comply with them thoroughly.

1: Article 3, paragraph 3 of the 2019 Labor Law
2: Article 13 of the Vietnam Trade Union Charter and Clause 11.1 of Guiding Document 03/HD-TLD
3: Article 170, paragraph 1 of the 2019 Labor Act and Article 5 of the 2012 Labor Union Act
4. Article 175, paragraph 2 of the 2019 Labor Law
5: Article 6 of the Trade Union Act 2012
6. Higher-level trade unions include district, town, provincial and city general labor confederations, local industrial sector trade union organizations, industrial park, export processing zone, economic zone, high-tech zone trade unions, general company trade unions and other directly higher-level trade unions (according to Article 7 of the Vietnam Trade Union Charter).
7: This percentage is subject to change annually based on the decision of the Chairman of the Vietnam General Confederation of Labour (VGCL).
8: Decision 4290/QD-TLD Article 5, paragraphs 1 and 3
9. Article 34, paragraph 1 of the 2019 Labor Law
10: Article 22, paragraph 2 of the 2019 Labor Law
11: Article 177, paragraph 3 of the Labor Law of 2019
12: Guidance Document 03/HD-TLD Section 5.3

(Created on May 12, 2023)

*This article was translated by Yarakuzen.

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