The Evolution of Vietnam’s Regulations on Foreign Workforce
January 31, 2015
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By: Thanh Ton and Nicolas Bitar
At the end of 2014, the number of registered foreign employees in Vietnam had increased to over 100,000 from around 55,000 in 2012. In November 2013, the Vietnamese government implemented a new regulation (Decree 102) on the management and recruitment of foreign talent.
The regulation implements the new provisions of the Labour Code (effective May 2013). The purpose of the regulation was threefold: to better regulate and protect the local labour market; to tighten the requirements of the work permit regime; and to align the Vietnamese Labour Code with the government’s commitments under the World Trade Organization (WTO) Service Agreement.
What are the changes?
The key changes brought about by the new regulation are most notably:
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Reduction of the maximum duration of a work permit from 3 to 2 years.
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Introduction of an additional level of governmental approval before a work permit application can be lodged.
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Removal of extensions to work permits. Under the new regulation, foreign employees must apply for re-issuance instead. In addition, the requirements for re-issuance have increased, including a new medical check-up and local police clearance.
The changes were not well received by the foreign business community in Vietnam, which perceived the new regulation as not only tightening control of foreign workers but also adding red tape to the already lengthy and inefficient process.
Despite this perception, in practice, the implementation of the new regulation, particularly with the re-issuance of work permits and work permit exemption applications, varies amongst the different provinces and local competent authorities, leaving much to their administrative discretion.
In a twist contradictory to the tightening measures, the new regulation actually expanded the work permit exemption categories to include the eleven sectors in the WTO Service Agreement. At the time of implementation, however, there were no clear guidelines or clarification on the requirements of the exempted categories and companies were told to wait for the implementing Circular.
The Implementing Circular on Work Permit Exemption Categories
After a year of waiting, on 5 November 2014, the Ministry of Industry and Trade finally issued Circular 41 announcing the work permit exemptions for intra-company transferees within the eleven service industries listed under Vietnam’s WTO commitments. The industries include financial services, education, transportation and business services, to name a few.
While this Circular took effect on 22 December 2014, its implementation criteria have yet to be clarified by the local authorities. There are still uncertainties with respect to its interpretation and applications on the eligibility requirements.
At the time of writing, companies were advised by Departments of Labour across the country that their concerns will be clarified in the upcoming months after internal discussions and guidance from the Ministry of Industry and Trade.
It should be noted that this circular was adopted under very short deadlines, compared to previous regulations in the field, and comes into effect a few weeks before the implementation of a new law on immigration (which has come into effect to align with the full reformation of foreign labor laws in Vietnam). As it is currently implemented, the new immigration law effectively removes the possibility to enter Vietnam with a visa on arrival for business related trips. As such, it indirectly strengthens the importance of embassies and consulates and greatly restricts the possibility of the employee to be in-country before his work permit is issued.
What can we expect?
With the new reforms of the labor regulations recently announced and due in early 2015, it is still difficult to determine which direction the work permit regulations will take in the course of the year. However, as an example, with the new Work Permit Exemption regulation announced, one can hope that the authorities are taking feedback from the business community seriously and attempting to provide further clarity to streamline the processes.
Under the above backdrop, we anticipate the new work permit exemption regulations will have a positive impact on the management of foreign talent in certain industries. It seems that the work permit exemption process may well be shifting from an employee- and activities-based adjudication to an employer- and industry-based assessment. That being said, the full extent of the exemption regulation will only be seen once further clarification is received from the implementing authorities. The silver lining to this lack of clarity of course is local flexibility. This means that the local authorities may allow room for administrative discretion and practical, more business-friendly solutions.
