Foreign direct investment (FDI) flows into Vietnam have been on the rise in recent years, as greater numbers of foreign companies decide to establish businesses in the country.
Operating in Vietnam, not only is it important to consider the laws and regulations on wages, but also the policies vital to the growth and operations of your company including overtime payment applicable to the workforce.All of these regulations are stated by the Vietnamese government in the Labor Law of 2012 (Law No. 10/2012/QH13), Decree No. 05/2015/ND-CP, and Circular No. 23/2015/TT-BLDTBXH.
The first thing an employer must do is to ensure a thorough understanding of when overtime is applied.Understanding the limits will allow your to properly optimise you workforce and operations.
Following 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 must be applied.
In addition to working beyond a set number 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 6:00a.m.
In the event that a company triggers overtime, employers are 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 percentages are applied on top of regular rates when work hours exceed regular hours.
Employees who work extra hours are to be paid for their extra hours based on their current hourly wages, as follows:
- At least 150 percent for extra hours worked on regular working days;
- At least 200 percent for extra hours worked during the weekend; or
- At least 300 percent for extra hours worked during holidays and paid leave days.
In cases where an employee works extra hours at night, they should be paid extra in accordance to the applicable regulations. Employees who are given time off in compensation for working extra hours will need to be paid the difference between their wages during normal working hours and overtime work. For employees who work night shifts should be paid at least 30 percent higher than normal rates.
Please take a look at table below for more details for overtime:
Normal working hours wage
|Working overtime on weekdays at day time||A x 150%|
|Working overtime on weekdays at night time (It will be applied once you off at day time and be requested to work OT at night from 22:00 pm to 06:00 am next day)||[(A x 150%) (A x 30%) ( A x 20%)] = A x 200%|
|Working overtime on weekdays at night time (It will be applied once you already work at day time and be requested to work overtime until over 22:00 pm. For example: You work OT from 07:00 pm to 23:00 pm)||[(A x 150%) (A x 30%) ( A x 150% x 20%)] = A x 210%|
|Working overtime on weekend at day time||A x 200%|
|Working overtime on weekend at night time||[(A x 200%) (A x 30%) (A x 200% x 20%)] = A x 270%|
|Working overtime on Tet or other public holiday at day time||A x 300%|
|Working overtime on Tet or other public holiday at night time||(A x 300%) (A x 30%) (A x 300% x 20%) = A x 390%|
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 on Overtime Work
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.
The Vietnam Labour Law also establishes strict regulations for employees who are minors 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.
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
Salaries paid to Vietnamese staff working for foreign companies must be denominated in Vietnamese dong. Foreign employers may base salary rates in either Vietnamese dong or U.S. dollars, but salaries that are based in U.S. dollars must be converted into Vietnamese dong.
In general, an employee’s typical monthly salary package includes their gross salary and mandatory insurance contributions. Personal income taxes will be levied on the balance after the mandatory insurance contributions have been taken.
Get up to speed with overtime regulations
There are many different Vietnamese regulations aimed to protect employees in Vietnam. Not only should you familarise yourself with what constitutes as overtime work, but you should also be careful to note when overtime work is forbidden for certain workers, as is the case with women in later stages of pregnancy.
Careful not to skim on calculations
There are many classifications of overtime work, each with a different overtime rate. On top of that, companies need to keep careful note of the time of these engagements so to not have their employees exceed the maximum hours of overtime work that is permitted.
Have a good practice of keeping clear records
Easier said than done, but it’s always good to keep a clear record of all engagements especially in payroll. An easy way to go about this may be to outsource your payroll to professional partners who can act as a line of defense, minimizing potential errors.
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