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Vietnam Reforms the Law of Foreign Employment in the Country - Vietnam Briefing News

By Francesca Grassi

Sept. 7 – On June 17 of this year, the Vietnamese government issued Decree n.46/2011/ND-CP (effective from August 1, 2011) amending and supplementing Decree n.34/2008/ND-CP dated March 25, 2008 on the employment and administration of foreigners working in Vietnam.

The new legislation aims at improving the ineffective implementation of foreign labor regulations with strong regard to the working permit requisite.

In fact, the newly called “expats” (foreigners) are entitled to work in Vietnam if they meet all profile requirements listed in Article 3 paragraphs 1, 2, 3 and 4. Namely, the individual is a minimum 18 years of age; in good health; holds a manager, director or expert position; and has no criminal record for national security offense.

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Secondly, the individual must succeed to carry out the epic administrative process to get a permit, which includes the obtainment of legal certificates of no criminal activities from all former countries of residence (Art.4.2.b).

However, Decree n.46/2011/ND-CP (hereinafter “the Decree”) makes few, but significant steps to accelerate the whole procedure thanks to major deadline revisions (now 10 days instead of 15 for granting permits, same for extension inquiries, and 3 instead of 15 for re-issuance cases).

Instead, the most questionable feature of the recent regulation is given by its faithfulness to the well-established governmental policy of discouraging in-flows of human capital and encouraging domestic labor workforce to break free national borders at the same time. In fact, Article 16.1 of the Labor Code recites “The employee has the right to work for any employer and at any place not forbidden by law (emphasis added).”

The growing number of foreign workers over the last three years (official statistics report 52,633 people in 2008 becoming 55,418 in 2009, and rising to 56,929 in 2010) has increased to between 70,000 and 74,000 foreigners and it has recently played a crucial role in the settlement of working expats’ “containment” provisions. On the whole, as Minister Nguyen Thi Kim Ngan put it, “Vietnam’s point of view is not receiving foreign unskilled workers.”

The core of the onerous task is threefold and includes new rules that have already unleashed disappointment and stirred stiffness in the foreign business environment. Under the spotlight are now measures applying to people unsupplied with work permit and employment recruitment.

New regulation imposes expulsion for working permit’s non-compliance
Under paragraph 3, Article 4 foreigners that are not geared with permits or haven’t even lodged application after 6 months from when the Decree has entered into force, are subject to irrevocable deportation proposed by the Ministry of Labor, Invalids and Social Affairs (hereinafter ‘MOLISA’) to the Minister of Public Security. Article 4.3 of the Decree illustrates that:

“Foreigners currently working in Vietnam except for objectives prescribed at the Article 9.1 of this Decree who have not yet obtained a work permit must carry out procedures to apply for issuance of a work permit in accordance with this Decree. If after six (6) months, from the effective date of this Decree, working in Vietnam a foreign employee still does not have a work permit or has not lodge the application file for issuance of a work permit in accordance with regulations, the Department of Labor, War Invalids and Social Affairs shall propose that the Minister of Public Security issue a decision on deportation from Vietnam in accordance with law.”

New foreign recruitment regulation threatens Bilateral Trade Agreement (BTA) implementation
According to the rule of paragraph 4, Article 4, employers have the duty to publish their recruitment plan on one local and one national newspaper at least 30 days prior the day they intend to hire a foreigner for that specific job position. Objections have triggered sharp criticism. The Foreign Invested Enterprises’ Association has filed an official complaint to the Prime Minister on August 3, 2011 on three grounds: breach of international agreements, useless time consumption and legal action attempts.

In fact, the advertisement process represents a clear attempt to prioritize domestic employment over foreign employment, however, such a discrimination based on nationality could disregard the arrangements Vietnam already committed to in BTAs with other countries. The exact case scenario is given by United States-Vietnam BTA signed December 10, 2001 as other sources report. The accords imply unequivocally that American companies have the right to employ managers, directors and technicians independently of their own nationality, but this provision is lacking of implementation under Vietnamese law. Another point has been made. Before receiving expats’ applications, the foreign company has to go all the way down the procedure thus in the first place it is mandatory to examine all domestic applications which could lead to:

  1. Costly delay for the company in the recruitment phase;
  2. Easy law suites to be filed by Vietnamese workers whether they are not preferred over foreigners at the very end of the process.

Internal transfer of foreigners in the enterprise still to miss WTO targets
Under Article 1.8 of the Decree the list of exceptions of foreigners with no permit have been enlarged. Newly-introduced sub-clause letter (j) includes also:

“A foreigner having internal transfer within an enterprise, in the service scope in the commitment service table of Vietnam with World Trade Organization with 11 services, including: business service; information service; construction service; distribution service; education service; environmental service; financial service; health service; tourism service; service of entertainment culture and transportation service.”

However, as the Newsletter of the European Chamber of Commerce in Vietnam has recently highlighted (Second Quarter 2011, Issue 20), the 11 services exempted are not enough to meet the WTO regulation of General Agreement on Trade and Services (GATS). In fact, Article XVI of GATS demands treatment no less favorable for all services and service providers that, as “natural persons of a Member,” perform “in the territory of any other Member” (Article I letter d GATS). Only provisions contained in the Schedule of Vietnam accession to the WTO are exempted. Therefore, the service supplied by the internal transfers of foreigners does not enjoy the same treatment as those supplied under the internal transfer of a Vietnamese citizen thus, breach of WTO obligations is likely to be soon claimed.

Dezan Shira & Associates is boutique professional services firm providing foreign direct investment business advisory, tax, accounting, payroll and due diligence services for multinational clients in Vietnam. To contact the firm, please email [email protected], visit www.dezshira.com, or download the firm’s brochure here.