Vietnam’s new labour code has wide-ranging impact on local business
Article 2 minute read

Vietnam’s new labour code has wide-ranging impact on local business

17 November 2014

TMF Group announces the release of a report on the impact of Vietnam’s New Labour Code (the new Code) on companies operating within the country. The report, undertaken with KCS, found that 53% of respondents said that the new Code had moderately or heavily impacted their business in Vietnam. And over 40% of respondents said their costs had increased by 25% or more as a result of the new Code.

TMF Group KCS’ report is based on the results of a survey of 115 people (managers to executives) at foreign owned and indigenous companies operating in Vietnam.

The new Code was passed by the National Assembly on 18 June 2012 and came into effect on 1 May 2013. The new legislation, designed to strengthen the position of employees, heralded major developments in the areas of: working hours, labour contracts, labour outsourcing, the hiring of foreign employees and internal labour rules.  However, it reduces employers’ flexibility and increases costs.  For example, 24% of respondents said they had to hire additional staff as a result of the new overtime restrictions.  The new Code also makes acquiring work permits more difficult and requires them to be renewed every two years instead of every three.

The key findings of the survey show that the new Code has had a significant impact on companies operating in Vietnam in terms of increasing the administrative burden and costs of compliance.     Perhaps unsurprisingly, 60% of respondents indicated that their companies had appointed external parties to assist with the implementation of the new Code and around 75% are likely to seek external support going forward.

Suresh Kumar, Managing Director of TMF Group Vietnam, said: “TMF Group KCS’ report shows that Vietnam’s New Labour Code has increased the administrative burden and costs of compliance for companies operating in the country, while doing little to improve conditions for workers.  A lot more work needs to be done in this field to clarify elements of the new Code, to improve employment conditions and to prevent Vietnam’s competitiveness and productivity being undermined.”   

Read the report.

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