Implementing new Labour Code will expedite Viet Nam’s path to high income country

Numerous improvements in the new Labour Code can bring benefits for workers and employers but only when all are aware of their new rights and actively use them.

Press release | 30 December 2020
© ILO/Nguyen Viet Thanh
HANOI (ILO News) – The ILO welcomes new rights of workers and employers in Viet Nam from 1 January 2021 as the revised Labour Code adopted in 2019 takes effect.

“The new Code will put Viet Nam on accelerated track for decent work for all working women and men,” said ILO Viet Nam Director, Chang-Hee Lee.

“The new Labour Code makes numerous improvements which can bring benefits for workers and employers. But they will become a reality only when all are aware of their new rights and actively use them,” the ILO Director emphasized.

Key improvements

The first important change is the expanded coverage of the Labour Code to those who work but without written employment contracts. Certain legal protections under the new Code can be applied to about 55 million people, instead of the current coverage of about 20 million workers with employment relations.

Secondly, the Code has strengthened protections against gender discrimination and sexual harassment at work. Employers are now required to “ensure equal pay for work of equal value without discrimination based on sex” and provide maternity protection. Meanwhile, sexual harassment has been legally defined for the first time, and employers have an obligation to develop internal regulations and implement solutions to prevent sexual harassment at their workplaces.

The retirement age will be gradually increased to 62 years for men (by 3 additional months per year) and 60 years for women (by adding 4 more months annually). It reduces gender gaps from 5 to 2 years, while making pension system more financially sustainable and responding to demographic challenge of rapid aging.

Thirdly, in line with modern labour laws of advanced countries, the Code has created enabling legal provisions for workers and employers to decide wages and working conditions through dialogue and negotiation, with the role of the State limited to defining legal minimum standards such as minimum wages and overtime caps. For example, employers no longer have to register their salary scales and tables, but are required to consult with workers’ representative organizations. This fully embodies the guiding principles set out by the Party Resolution No 27 on wage policies adopted in 2018.

Fourthly, the Code allows workers to establish and join a workers’ representative organization of their own choosing, which may or may not be affiliated with the Viet Nam General Confederation of Labour (VGCL). Workers’ organizations, which are not affiliated with VGCL, can be organized at the enterprise level, and will have the same industrial relations rights and obligations equal to grassroots trade unions under VGCL.

The Code also ensures the protection of employers’ organizations and workers’ organizations against any acts of interference by each other, and that workers enjoy adequate protection against anti-union discrimination. Employers now have clearer obligations to avoid acts of anti-union discrimination and interference in functions and activities of workers’ representative organizations before and after the registration. Managerial employees cannot participate in the same workers’ organizations as rank-and-file workers. This will gradually end the prevailing situation where senior or middle managers dominate workers’ representative organizations at the enterprise level.

The changes will create a solid foundation for the Government, workers’ and employers’ representative organizations to get on a more sustainable path towards shared prosperity, avoiding middle income trap."

Chang-Hee Lee, ILO Viet Nam Director
Under the new law, the mechanism for resolving labour disputes has been streamlined. If mediation fails to resolve a dispute, workers now can choose whether to go to lawful strike or arbitration. Previously, more steps were required before workers could lawfully strike.
This change has brought Viet Nam’s labour laws and industrial relations closer to ILO’s Convention 98 on Right to Organise and Collective Bargaining, which the country joined in 2019, and improvement towards Convention 87 on Freedom of Association and Protection of the Right to Organise, which the Government intends to ratify in 2023. The full respect and application of ILO Convention 87 and 98 is a key requirement for Viet Nam under the EU-Viet Nam Free Trade Agreement and the Comprehensive and Progressive Agreement for Trans-Pacific Partnership.

“More importantly, the changes will create a solid foundation for the Government, workers’ and employers’ representative organizations to get on a more sustainable path towards shared prosperity, avoiding middle income trap. It will accelerate social and economic upgrading of Viet Nam,” the ILO Viet Nam Director said.

New challenges and opportunities ahead

The Government has issued Implementation Decree 135 on retirement age, and new Decree 145 on employment conditions and industrial relations, giving effect to their related provisions. However, the Government has yet to issue a decree on registration of workers’ representative organizations and another decree on collective bargaining. Without them, workers and employers cannot enjoy benefits of new rights created by the 2019 Labour Code.

“The Government should adopt the decrees on registration of workers’ representative organizations and collective bargaining as early as possible, to enable workers and employers to exercise their rights,” said ILO’s chief of the Freedom of Association Branch, Karen Curtis. “All legal tools must be available to ensure that workers who take initiatives to exercise the newly created rights under the new Code are fully protected, including from any forms of retaliation.”

According to the ILO Viet Nam Director, labour inspection alone, though having the most important roles to play for its effective enforcement, cannot guarantee the full compliance of the Labour Code.

“Ultimately, it is responsibilities of all, not only the Government, workers’ and employers’ representative organizations, but also media, non-governmental organizations and courts to make all members of society to enjoy the full benefits of the new Labour Code,” he explained.

He went on to say, “I also hope that the effective implementation of the Code will facilitate the formalization of workers in the informal economy, which currently represents a majority of workers in Viet Nam. Driven by technological innovation, there are also rapidly growing number of platform workers, such as ride-hailing drivers, whose legal status is not clear. The Government, court and social partners should work together to find modern solutions to modern labour market challenges”.

*The ILO supported Viet Nam's revision of the Labour Code mainly through the New Industrial Relations Framework project. Funding for the New Industrial Relations Framework project is provided by the United States Department of Labor under cooperative agreement number IL-29690-16-75-K-11. One hundred percentage of the total costs of the project or program is financed with Federal funds, for a total of 5.1 million dollars.