When companies turn to Vietnam to establish their manufacturing operations, it is important to not only consider the laws on regular wages, but also the policies on overtime that will be applicable to the workforce and type of operation.
One of the great benefits of Vietnam is that wages are low in comparison to the rest of the region, especially China. Overtime and night work policies in the socialist republic are essentially the same as those currently employed in China. The Vietnamese government enumerates all of these regulations in the Labor Law of 2012 (Law No. 10/2012/QH13), Decree No. 05/2015/ND-CP, and Circular No. 23/2015/TT-BLDTBXH. Understanding how these laws and guidance shape costs is of utmost importance for investors seeking to maximize Vietnam’s potential as a low-cost destination for manufacturing.
Triggering Overtime
The first thing an employer must do is to ensure a thorough understanding of when overtime is applied. Understanding this threshold will allow for the optimization of production targets to customers’ cost and time constraints.
Pursuant to the regulations mentioned above, regular working hours cannot exceed eight hours a day, 48 hours a week. For employees working in heavy-duty or hazardous conditions, the maximum regular working time is six hours a day. If a worker exceeds these limits, overtime compensation will be applied.
In addition to working beyond a set threshold of hours, overtime compensation may be triggered and influenced by the time and date that employees are engaged. Key triggers of overtime beyond hours worked include weekends, public holidays, and night hours—defined as between 10:00 p.m. and 6:00 a.m.
Overtime Compensation
In the event that a company triggers overtime, it will be obligated to compensate employees beyond the wages outlined in their contracts. This is applicable to all employees regardless of the wages that are offered. The following are the percentages in excess of standard that are to be applied in the event that certain work-related thresholds are crossed.
Note: There are limitations on the number of overtime hours an employee is allowed to work. Overtime hours cannot exceed 30 hours per month and 200 per year. In special cases regulated by the government, the yearly maximum can be increased to 300 hours per year.
Exceptions
Women who are in their seventh month or later of pregnancy and women with babies under 12 months old are forbidden from working overtime, working at night, or taking long-distance business trips. Furthermore, pregnant women who are performing heavy-duty work must either be transferred to lighter work or have their daily work time decreased by an hour, while maintaining the same total pay.
Employees
The Vietnam Labour Law also establishes strict regulations for minor employees under the age of 18. They are prohibited from working in dangerous conditions or with potential exposure to toxic substances. The Ministry of Labour, Invalids and Social Affairs also establishes a limit on which industries minors can work in and what kind of work minors can do.
Minor employees between the ages of 15 and 18 can work a maximum of eight hours a day and 40 hours a week. They are only permitted to do overtime and night work in certain industries, as specified by the Ministry. For workers under the age of 15, regulations establish maximum hours at four hours a day and 20 hours a week, with no overtime or night work permitted.
Vietnam vs. China
The Labour Law of the People’s Republic of China established similar regulations for its employees. Employees working overtime must be paid at a rate of at least 150%; for work done during a rest day/weekend, 200%; and for work during a holiday, 300%. China has stricter rules regarding the amount of overtime work than Vietnam. Chinese workers are limited to only an hour of overtime work per day and three hours in special circumstances. The monthly limit is 36 hours.
Women and minors (under age 18) cannot do physical labor that is above Grade IV in labor intensity and Grade III intensity for pregnant women or women with a baby under one year old. Women at least seven months pregnant are forbidden from working overtime or night shifts. Special approval is required for recruiting workers under the age of 16.
Original article posted by Vietnam Briefing. Since its establishment in 1992, Dezan Shira & Associates has been guiding American investors through Asia’s complex regulatory environment and assisting them with all aspects of legal, accounting, tax, internal control, HR, payroll, and audit matters. As a full-service consultancy with operational offices across China, Hong Kong, India, and emerging ASEAN, including liaison offices in Boston and Waltham specifically established to support our American clients, we are your reliable partner for business expansion in Asia and beyond. For inquiries, email us at [email protected]. For further information about our firm and how we can support American investors in Asia, visit our North American Desk.