7 Costly Mistakes Without Employment Lawyers in Vietnam

Table of Contents

Introduction

Expanding a business into Vietnam presents incredible opportunities, but one legal misstep can turn your business into a compliance challenges.

Many foreign companies underestimate the complexity of Vietnam’s labor laws, leading to unnecessary legal disputes, financial losses, and damaged reputations.

Without expert guidance from experienced employment lawyers in Vietnam, employers risk violating regulations they didn’t even know existed.

This guide outlines the seven most common employment-related mistakes foreign businesses make in Vietnam and, more importantly, how to avoid them with the help of legal professionals, the employment lawyers in Vietnam.

Mistake 1: Misclassifying Employees and Independent Contractors

Many foreign businesses misclassify employees as independent contractors to reduce costs. However, Vietnam’s labor law imposes strict definitions on employment relationships. Misclassification can lead to severe consequences, including back payments for social insurance, labor violations, and fines imposed by Vietnamese authorities. Businesses that fail to properly classify employees could also face reputational damage and strained relationships with local labor departments.

Proper classification is not just about saving costs, it determines an employer’s legal obligations, such as tax contributions, social security, and severance payments. When a worker is misclassified as an independent contractor, the employer may avoid these costs temporarily, but once discovered, the financial and legal repercussions can be severe. Courts in Vietnam tend to favor employee rights, making it critical for foreign companies to correctly define the nature of their workforce from the outset.

Seeking legal guidance from employment lawyers in Vietnam ensures that businesses accurately classify their workers, avoiding penalties and potential lawsuits. The employment lawyers in Vietnam can assess job roles, contractual terms, and regulatory requirements, providing businesses with clear strategies to remain compliant.

Mistake 2: Failing to Draft Legally-Compliant Employment Contracts

Employment contracts must comply with Vietnam’s Labour Code, covering key terms like probation, salary, benefits, and termination clauses. Many foreign businesses assume that a standard international employment contract will suffice in Vietnam, but local labor laws have specific provisions that must be included. For example, certain benefits, such as severance pay and work-related allowances, may be mandatory even if not explicitly mentioned in a contract.

Without a properly drafted contract, disputes over wages, working conditions, and termination terms can arise. Vietnamese labor authorities require employment agreements to be clear, detailed, and compliant with national labor standards. Missing or ambiguous clauses can lead to legal ambiguity, which usually benefits employees in dispute resolutions. Many foreign employers are caught off guard when their contracts are deemed unenforceable due to non-compliance with local regulations.

By working with employment lawyers in Vietnam, companies can ensure that their employment contracts are legally binding and structured to protect employer interests while remaining compliant. Legal professionals help draft contracts that meet regulatory standards, reducing the likelihood of disputes and litigation.

Mistake 3: Overlooking Work Permit and Visa Requirements

Foreign employees in Vietnam must obtain work permits and visas, yet many companies either ignore or mishandle these requirements. Vietnam has strict regulations for hiring foreign workers, including limitations on the types of jobs they can perform. Employers who fail to properly apply for work permits can face hefty fines, while employees risk deportation and legal sanctions.

Many foreign businesses mistakenly assume that short-term assignments do not require work permits. However, Vietnam’s labor law dictates that any foreigner working in Vietnam for more than 30 days per trip (or more than 90 days per year cumulatively) must have a valid work permit. Even executives and managers of foreign-owned companies need to secure proper authorization, which requires a detailed application process with supporting documentation.

Navigating Vietnam’s work permit regulations can be complex, but employment lawyers in Vietnam provide invaluable assistance in obtaining the necessary approvals. They help businesses understand eligibility requirements, compile proper documentation, and ensure timely submissions to avoid disruptions in hiring foreign staff.

Mistake 4: Violating Employee Rights to Social Insurance and Benefits

Vietnam mandates social, health, and unemployment insurance for employees. Many foreign employers misunderstand contribution requirements, leading to fines and employee disputes. In Vietnam, all employees with labor contracts of at least one month are entitled to social insurance benefits, which include pensions, maternity leave, and sick leave payments. Failure to register employees for these mandatory contributions is considered a serious labor law violation.

Foreign businesses sometimes assume that offering private health insurance or international benefit packages exempts them from local insurance contributions. This misconception can result in legal consequences and significant financial penalties. Vietnamese labor inspectors routinely audit foreign companies to ensure compliance, and violations can lead to backdated payments and legal action from employees.

To avoid such complications, businesses should engage employment lawyers in Vietnam to ensure full compliance with Vietnam’s social insurance laws. The employment lawyers in Vietnam can provide tailored advice on structuring benefits packages while meeting all regulatory obligations.

Mistake 5: Mishandling Employee Terminations

Wrongful termination claims in Vietnam are among the most common legal disputes in Vietnam. Employers must follow strict procedures for layoffs, dismissals, and severance payments. Termination without just cause or failing to provide required notice periods can result in legal action, financial penalties, and reputational damage.

Vietnamese law protects employees from arbitrary dismissal, requiring valid reasons for termination and specific legal procedures. Employers must document misconduct or poor performance and provide written evidence supporting any dismissal decision. In cases of redundancy, employers are required to consult with labor unions and provide severance packages that meet legal standards.

Consulting employment lawyers in Vietnam before terminating an employee ensures that companies follow proper legal procedures, reducing the risk of wrongful termination lawsuits. The employment lawyers in Vietnamcould help employers draft termination letters, conduct exit interviews legally, and handle dispute resolution if conflicts arise.

Mistake 6: Ignoring Overtime and Working Hour Regulations

Vietnam strictly regulates work hours, overtime pay, and rest periods. Failure to comply leads to labor complaints and legal action. Under Vietnamese law, employees cannot work more than 48 hours per week, and any overtime must be compensated according to legally mandated rates, which increase for night shifts, weekends, and public holidays.

Many foreign companies struggle to implement fair overtime policies due to differences in international labor practices. Some employers mistakenly assume that including a fixed salary in a contract allows them to bypass overtime payments, but Vietnam’s labor laws mandate strict adherence to overtime calculations. Failure to compensate employees properly for extra hours can lead to disputes and penalties.

By working with employment lawyers in Vietnam, companies can develop legally sound overtime policies that protect both business interests and employee rights. The employment lawyers in Vietnam could help businesses design contracts and payroll systems that align with Vietnamese regulations, preventing compliance issues.

Mistake 7: Neglecting Employee Grievances and Workplace Disputes

Unresolved workplace conflicts can escalate into lawsuits or government interventions. Employee grievances related to discrimination, wage disputes, or harassment must be addressed swiftly and legally. Employers who fail to take complaints seriously risk damaging workplace morale and inviting legal action.

Vietnamese labor laws encourage mediation and arbitration to resolve disputes before they reach court. However, many foreign companies are unaware of the procedures for handling workplace complaints, leading to escalation and government involvement.

Engaging employment lawyers in Vietnam ensures that companies establish effective dispute resolution mechanisms. Legal experts help businesses implement fair grievance policies, mediate disputes, and provide representation in labor arbitration if necessary.

Conclusion

Expanding or operating a business in Vietnam is rewarding but requires careful legal compliance. With the guidance of skilled employment lawyers in Vietnam, foreign companies can avoid costly mistakes, maintain smooth employment relationships, and protect their business from legal pitfalls. Don’t let legal missteps jeopardize your success. Work and partner with experts to ensure compliance and peace of mind.

About ANT Lawyers, a Law Firm in Vietnam

We help clients overcome cultural barriers and achieve their strategic and financial outcomes, while ensuring the best interest rate protection, risk mitigation and regulatory compliance. ANT lawyers has lawyers in Ho Chi Minh city, Hanoi, and Danang, and will help customers in doing business in Vietnam.