The New Labor Code

Today’s PresentationIntroductionsLabor Code UpdateThree Year HR planningHow to engage?Q & A

Over 80 consultations with MOLISA, ILO andVCCI over the last 3 years….The Process …

Highlights …Extensive consultation with stakeholders and ILOClearer definitions in Labor CodeMOLISA active in approach and changes needed10 Draft decrees are being circulated for opinion by MOLISAMOLISA wants a framework law but companies to agree internal details Road Map of HR in Vietnam 2015 & 2020National Wage CouncilGovernment Statutory InsurancesHealth + SafetyRecommendations are being listened toWork Permits, Over time

The changes …

National Wage CouncilAdvices on region-based minimum wages 5 members MOLISA 5 members VGCL 5 members of organisations representing employers5% difference on 2 consecutive wage grades Lowest training needs to be 7% above regional min wage Wage scales to be consulted on with labor collectives

What is Sub leasing?AgencyServices /CommercialAgreementLabour / paymentcontractUser EnterpriseManagement ofDispatched workersDispatchedWorkersDefined as the situation when an employee employed by an enterprise licensed toprovide outsourcing services works for another employer and subject to the latter'smanagement while the labour relation with the outsourcing service provider is

Sub leasing/ Dispatched WorkersNew Form of Work introduced in VietnamCovers non Regular form of workMax 12 months Labour contractsDispatched workers can not work for the same User Enterprise formore than 12 monthsEqual not fair payUser Enterprises will need to share salary scale with AgencyRestricted to 17 + occupations

14+ occupations allowed for Sub leasingNo. Job1 Interpretation2 Secretaries and Administrative Assistants3 Receptionist4 Tour guide5 Sales support6 Project support7 Office computing8 Accountant9 Electricity and electronics10 Professional care and hygiene man11 Teaching12 Business13 Marketing14 Guard

Conditions for AgenciesOutsourcing will be bannedConditional services such a Employment PlacementGoverned by MOLISATri pirate relationship (Agency, worker, User Enterprise)Charter Capital of 2,000,000,000 VNDLicense for 36 months only and then renew2,000,000,000 VND Deposit requiredAwaiting circulars and decrees from MOLISA before can applyWill take up to min 6 – 9 months for any licenses to be issuedUser Enterprises should have a Managed ServiceAgreement to cover themselves in mean time

Working Hours / Overtime

48 hours per week maxNight Shift Working hours 10pm – 6amOver time needs to be paid after 10 hours Employers have the right to decide working hours on a daily / weekly basis Overtime must not exceed more than 50% of normal working hours Restricted to:12 hours in one day max30 hours per month / 200 hours in one year, 300 for garments, production etc Overtime Payment : On Weekdays 150% On Weekly days off 200% Holidays and Public Holiday 300% plus 100% Night Shift Allowance 150%

Labor Contracts

Still allowed to sign multiple labor contractsAll companies have to contribute government insurances if more than onecontract based on stated Labor contract salaryThree typesSeasonal – for a specific task up to 12 months - 3 working days noticeDefinite – up to 36 months - 30 working days month noticeIndefinite - 45 working days noticeSeasonal contracts becomes 24 month definite if employee keeps workingbut no contract signed re signedStill allowed only 2 signing then indefinite contractsAllow to put conditions in for business secrets and compensation for violationsAnnex are as valid as a Labor contract

Trade Unions

All enterprises required to have a trade union inc householdsEmployer2% of the total local employees payroll used to contribute to socialinsurance (20 times gen min wage)Employee1% of actual salary/ capped at 10 times general min wageForeigner Nationals are technically covered under this tradeunionsNeed to have a yearly labor conferenceWith quarterly meeting Possible Introduction of Employment Fund concept 1%contribution

Minimum Wage/ Probation

85% salary during probation periodProbation period remains the same6 days30 days60 daysMin Wage expected to be unified by 2015 from localand foreign companiesNational Wage council to be set up Expected it to be min 3,500,000 VND gross by 2015

Annual Leave / Compassionate Leave

6 months maternity effect 1 st May 2013Public Holidays Additional one day for Lunar New Year Holiday Plus additional one for Foreign Nationals at TetForeign Country Nationals Day1 day compassionate leave (unpaid) for death ofgrandparents, sister/ brother, brother/ sister getmarried

Implementation TimelinesNationalAssemblyApril 2013 To approvedraft in principleMOLISAJuly 2013 Communication on5 Decrees Some furtherconsultationEmployment Law?Sept 2013• Decrees issued5 DecreesJan 2014• AdditionalDecrees andcirculars issuedHealth andSafety LawSocial &Medical Law2014

HR ‘s 3 year plans – need to consider Government Insurances will be increasing 2014 / 2016 / 2018 Trade Unions fee and power Minimum wage will increase average once a yearCommon min wage will need to be adjusted accordingly Annual inflation in Vietnam Attrition of employees – why they leave Cost of replacing employees Talent Management

Thank you