Advanced labour code dismaying foreign employers

Feb 24th at 08:24

24-02-2021 08:24:02+07:00

The fresh Labour Code is burdening foreign employers in Vietnam with new insurance payments for part-time employees.

Advanced labour code dismaying foreign employers, illustration photo

As soon as the new law came into force in early January, a great number of employers, especially foreign-invested enterprises (FIEs), displayed their dissatisfaction with Article 32.3 which stipulated that part-time employees shall be entitled to receive rights and obligations equal to those of full-time employees, including in equal opportunities, safety, and hygienic working environments.

“In other words, employers have to fulfil insurance fees for part-time employees,” said Mai Duc Thien, deputy director-general of the Department of Legal Affairs at the Ministry of Labour, Invalids, and Social Affairs (MoLISA).

Speaking at a workshop about the Labour Code last month, hundreds of FIEs voiced that the total cost they pay for labourers has now increased greatly as a result of the changes. Those include the on-year growing minimum wage, subsidies, and health and social insurance, among others.

“Thus, paying insurance for part-time labourers will increase the cost burden for FIEs in Vietnam,” said Tran Nguyen Trung, director at Japanese-backed recruitment consultants I-GLOCAI.

Early this month, Hoang Xuan Hiep, a member of the Vietnam Textile and Apparel Association and owner of a garment facility employing dozens of part-time workers, said that the cost for businesses will be higher if paying insurance for labourers who work fewer hours than full-time labourers.

“Increasing costs are seen as inappropriate at this time as many businesses like us are struggling to cope with COVID-19,” said Hiep.

Vietnamese labour costs have been a concern for many businesses, especially FIEs, despite the nation’s perceived advantage of low-cost labour. Speaking at a webinar about the law last month, Thiet Nguyen, director of Management Consulting at PwC, said that the minimum wage in Vietnam has constantly increased over the years. “In the 2006-2015 period, the sum grew as much as four times. Annually, the wage on average increases by 6-10 per cent.”

Nguyen added that one of the things businesses need to be aware of is the high insurance contribution. “Employers currently pay 21.5 per cent of labourers’ social insurance, much higher than other regional countries such as Malaysia’s 13 per cent, the Philippines’ 10 per cent, Indonesia at 8 per cent, and Thailand at 5 per cent,” he said.

Working part-time roles is very popular in Vietnam. Over the years, a large number of FIEs such as Lotte, McDonald’s, KFC, and Shopee have constantly recruited part-time employees, reflecting the high demand for such positions. Data published by job listing site vn.indeed.com showed that the monthly number of available part-time positions on their site was at around 30,000. According to the MoLISA, as of mid-2020, part-time workers occupy 8.5 per cent of the total labour force in Vietnam.

The main beneficiaries of such part-time jobs are students and those who have yet to find full-time roles. Most of them may also be unfamiliar with their rights in regards to insurance or labour contracts.

“They hire me for serving drinks for about four hours per day with the wage of VND30,000 ($1.30) per hour,” said Nguyen Thi My, a 21-year-old student at Hanoi University who is working at a café. “That is basically all the information I have about my current job.”

Sam Luong, a former student at the Foreign Trade University, also shared, “I worked as a teacher at an English language centre for nearly two years. During that time, I never signed any labour contract or received any rights similar to full-time jobs.”

Luong said that most people she knows who are working part-time assume that the jobs are temporary, so they do not care too much about rights or benefits. “And most employers, of course, always do their best to cut costs. If part-time workers like us were entitled to more insurance benefits, our job-related risks would be reduced significantly,” she added.

Commenting on the change in the new law, Colin Blackwell, chairman of the HR Committee at the Vietnam Business Forum, said that improving local labourers’ rights and benefits on par with international standards is necessary. However, in some cases, those might lower the ability of employers because the businesses are already struggling to ensure appropriate human resources in Vietnam.

“The biggest problem with finding quality staff in Vietnam are educational certificates. Companies currently have to spend too much time trying to retrain people,” Blackwell said.

The amended Labour Code, which was approved last year, officially came into force in January 2021. Its adjustments are a step towards complying with international labour standards particularly as the country more deeply joins the global economy as noted by the International Labour Organization.

In comparison with the previous versions, the latest code has some improvements, especially terms stipulating the role of labourers in the modern economy where remote work and freelancers have become popular. Pointedly, an employment contract in the form of electronic data conformable with electronic transaction laws shall have the same value as that of a physical contract, following the law’s Article 14.

The Labour Code also has some adjustments in working hours of employees. While the working hour limit remains the same at 48 hours per week, the new law states that normal working hours cannot exceed eight hours a day or 48 hours per week.

Notwithstanding, if the employer and employee agree on an overtime deal, the overtime cannot surpass 12 hours a day, 40 hours a month, and 200 hours a year. For industries such as textile and clothing, footwear, and electronics in which seasonal orders during certain times of the year require an extensive workload, an overtime cap of 300 hours has been specified.

Additionally, employees will be able to immediately terminate a contract for mistreatment, pregnancy, or if the employer fails to pay salary on time.

VIR