When can you sign indefinite term contract in Vietnam?

by Quang Minh

LSX legal firm recently received a question from a customer: “I have applied for a job and passed the job interviews. I wonder if I could make an agreement to go into the contract with an indefinite term. How does the law govern the act of entering into an indefinite-term labor contract?” In this article, we would like to help you answer the question: “When can you sign indefinite term contract in Vietnam?”

  • Labor Code 2019

Classification of labor contracts according to regulations

Two types of labor contracts under the Labor Code:

  • Indefinite-term employment contract: a contract in which the two parties neither fix the term nor the time of termination of the contract.
  • Fixed-term employment contract: a contract in which the two parties fix the term of the contract for a duration of up to 36 months from the date of its conclusion.

Besides, Clause 2, Article 20 of the Labor Code provides that if an employee keeps working when a fixed-term employment contract expires:

  • Within 30 days from the expiration date of the employment contract, both parties shall conclude a new employment contract. Before such a new employment contract is concluded, the parties’ rights, obligations, and interests specified in the old employment contract shall remain effective;
  • If a new employment contract is not concluded after the 30-day period, the existing employment contract shall become an employment contract of an indefinite term;
  • The parties may enter into 01 more fixed-term employment contract. If the employee keeps working upon expiration of this second fixed-term employment contract, the third employment contract shall be of an indefinite term, except for employment contracts with directors of state-invested enterprises and the cases specified in Clause 1 Article 149, Clause 2 Article 151, and Clause 4 Article 177 of the Labor Code.

When can you sign indefinite term contract in Vietnam?

Under Article 13 of the Labor Code 2019, an employment contract means an agreement between an employee and an employer on a paid job, salary, working conditions, rights, and obligations of each party in labor relations.
Accordingly, the Labor code respects the rights of the parties in choosing the type of contract to enter into. Therefore, the parties have the right to freely agree on entering into an indefinite-term labor contract if they wish.

In what form is an indefinite labor contract signed?

Based on Article 14 of the Labor Code 2019, parties may enter into an employment contract in one of the following three forms:

  • In writing.
  • Data of electronic means.
  • In oral.

An employment contract entered by electronic means in the form of a data message meets the requirements of the law on electronic transactions is valid as a written labor contract.

Verbal labor contracts are only applicable to labor contracts of less than 01 month; except for the case of entering into a contract with domestic workers; people under 15 years old; group of employees through an authorized person to do the job for less than 12 months.

So, when signing an indefinite-term labor contract, the parties may only use the written form or the electronic data and must not use the oral form to enter into this type of contract.

Advantages for employees when entering into indefinite term contract?

Regardless of the type of labor contract, employees always enjoy benefits in terms of working conditions, working hours, rest time, salary and welfare regimes of the company, etc. 

However, compared to a fixed-term labor contract, an indefinite labor contract has the following advantages:

  • Indefinite term for the duration of the contract.

When signing a definite-term contract, the parties will perform the contract according to the agreed term but not exceeding 03 years. At the end of this period, the labor contract will terminate.

Then, if the parties want to continue the labor relationship, they must sign a new contract. A definite-term labor contract can only be signed a maximum of 2 times. If the employee continues to work after that, he or she must sign an indefinite term contract.

  • Fully participate in social insurance, health insurance, and unemployment insurance.

Pursuant to the Law on Social Insurance 2014, employees working under labor contracts from full 1 month or more will be subject to participation in compulsory Social insurance.

Cases of termination of labor contracts with indefinite term

Article 34 Labor Code 2019 on cases of contract termination for an indefinite term:

  1. Both parties agree to terminate the employment contract.
  2. The employee is sentenced to imprisonment without being eligible for suspension or release as prescribed in Clause 5 Article 328 of the Criminal Procedure Code, capital punishment, or is prohibited from performing the work stated in the employment contract by an effective verdict or judgment of the court.
  3. The foreign employee working in Vietnam is expelled by an effective verdict or judgment of the court or a decision of a competent authority.
  4. The employee dies; declared by the court as a legally incapacitated person, missing or dead.
  5. The employer that is a natural person dies; is declared by the court as a legally incapacitated person, missing or dead. The employer that is not a natural person ceases to operate, or a business registration authority affiliated to the People’s Committee of the province (hereinafter referred to as “provincial business registration authority”) issues a notice that the employer does not have a legal representative or a person authorized to exercise the legal representative’s rights and obligations.
  6. The employee dismissed for disciplinary reasons.
  7. The employee unilaterally terminates the employment contract in accordance with Article 35 of this Code.
  8. The employer unilaterally terminates the employment contract in accordance with Article 36 of this Code.
  9. The employer allows the employee to resign in accordance with Article 42 and Article 43 of this Code.
  10. The work permit of a foreign employee expires according to Article 156 of this Labor Code.

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Contact LSX

Finally, hope this article is useful for you to answer the question about “When can you sign indefinite term contract in Vietnam”. If you need any further information, please contact  LSX Law firm+84846175333 or Email: hoangson@lsx.vn

Employees’ rights when signing an indefinite term contract?

– Employees can unilaterally terminate the contract without reason to find another suitable job.
– There is no compensation or loss of any fee when unilaterally terminating the contract without reason.
– Receive severance allowance despite of leaving work for any reason.

Time limit to settle payments when terminating indefinite-term contract?

Within 14 working days following the termination of an employment contract, both parties shall settle all payments in respect of the rights and interests of each party. In the following cases, such period may extend, but shall not exceed 30 days:
– Shutdown of business operation of the employer that is not a natural person;
– Changes in the organizational structure, technology, or changes due to economic reasons;
– Full division, partial division, consolidation, merger of the enterprise; sale, lease, conversion of the enterprise; transfer of the right to ownership or right to the enjoyment of assets of the enterprise or cooperative;
– Natural disasters, fire, hostility, or major epidemics.

Contents of an indefinite term contract?

The employer’s name, address; full name, and position of the person who concludes the contract on the employer’s side;
Full name, date of birth, gender, residence, identity card number, or passport number of the person who concludes the contract on the employee’s side;
The job and workplace;
Duration of the employment contract;
Job (or position)-based salary, the form of salary payment, the due date for payment of salary, allowances, and other additional payments;
Regimes for promotion and pay rise;
Working hours, rest periods;
Personal protective equipment for the employee;
Social insurance, health insurance, and unemployment insurance;
Basic training and advanced training, occupational skill development.

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