Circular No. 21/2003/TT-BLDTBXH guiding the implementation of certain provisions of Government Decree No. 44/2003/NĐ-CP dated May 9, 2003 on labor contracts

I. FORM, CONTENT AND TYPES OF LABOR CONTRACTS

a) Indefinite-term labor contracts, fixed-term labor contracts from twelve to thirty-six months, and fixed-term labor contracts from three to less than twelve months must be concluded in writing according to Model No. 1 attached hereto. The employer prepares the labor contract according to the prescribed model on A4 size paper and stamps across the pages to be used within the unit.

In cases where one party to the labor contract is a foreigner, the content of the contract must be in Vietnamese, followed by a section in the agreed foreign language. The Vietnamese version has legal validity.

The labor contract may be written with ink of any color (except red) or typed.

b) Fixed-term labor contracts of less than three months or labor contracts for household assistance may be concluded orally, but must ensure the content stipulated in Clause 1 of Article 29 of the Labor Code.

c) Labor contracts in agricultural, forestry, fisheries, and salt industry enterprises may reduce some contents to suit the conditions of the enterprise.

d) In addition to the labor contract, both parties may conclude a property responsibility contract.

a) The employer and employee base the duration of the work to apply one of the types of labor contracts stipulated in Clauses 1, 2, and 3 of Article 4 of Decree No. 44/2003/NĐ-CP;

For retired persons, both parties may conclude multiple seasonal or specific task labor contracts with a term of less than twelve months.

b) Fixed-term labor contracts signed before January 1, 2003, which were still valid at that time, shall be considered as the first labor contract to apply the provisions of Clause 4 of Article 4 of Decree No. 44/2003/NĐ-CP.

II. CONCLUSION, MODIFICATION OF THE CONTENT OF LABOR CONTRACTS

- For state-owned enterprises, enterprises under the Enterprise Law, and foreign-invested enterprises operating in Vietnam, it is the General Director or Director of the enterprise;

- For cooperatives, it is the Cooperative Manager, and for cooperative unions, it is the Union Director;

- For international or foreign organizations operating in Vietnam, it is the head of the organization (Branch Manager, Office Director, Representative Head...).

- For individuals and households, it is the person directly using labor.

In cases where those authorized do not directly conclude labor contracts, they may delegate authority in writing, except in cases where personnel management delegation is already provided. For individual employers, delegation is not allowed.

2. Labor contracts signed with retirees receiving monthly social insurance and workers with a term of less than three months, in addition to salary based on job grade, the employee will also be paid the following amounts by the employer:

- Social Insurance = 15%;

- Health Insurance = 2%;

- Annual Leave = 4%;

- Travel expenses during leave agreed upon by both parties not lower than 9%.

The percentages above are calculated based on the salary stipulated in the labor contract.

- The party proposing the modification states the required changes and notifies the other party in writing.

- The party receiving the request must proactively meet with the proposing party to negotiate the required changes, at the latest within three days from the date of receipt of the request;

- If both parties agree on the modification of the labor contract content, then proceed to sign an annex to the labor contract according to Model No. 2 issued together with this Circular.

- If both parties cannot agree on the modification of the labor contract content, then continue to implement the concluded labor contract or agree to terminate it according to the provisions of Clause 3 of Article 36 of the Labor Code.

III. TERMINATION OF LABOR CONTRACTS, SEVERANCE PAY, AND COMPENSATION FOR TRAINING COSTS

a) In cases of termination of labor contracts under Article 36 of the Labor Code, both parties do not need to give notice.

b) In cases of unilateral termination of labor contracts stipulated in Articles 37 or 38 of the Labor Code, the party with the right to unilaterally terminate must notify the other party in writing. The number of notice days for employees is stipulated in Clause 2 and Clause 3 of Article 37; for employers in Clause 3 of Article 38 of the Labor Code. The notice period is working days. In cases where an employee is dismissed due to disciplinary action, there is no need to give notice.

a) Cases eligible for severance pay:

- Employees terminate labor contracts under Article 36; Article 37; Points a, c, d of Clause 1 of Article 38; Clause 1 of Article 41; Point c of Clause 1 of Article 85 of the Labor Code.

- Workers employed in state-owned enterprises before the implementation of labor contracts shall be entitled to severance pay upon termination of employment as if they had signed a labor contract.

- Workers whose labor contracts are terminated due to the cessation of operations of enterprises, agencies, or organizations as stipulated in point d, Clause 1, Article 38 of the Labor Code include cases where the enterprise, agency, or organization is dissolved by competent authorities, declared bankrupt by courts, their operating licenses have expired, or their business registration certificates have been revoked due to violations of laws.

b) Cases not entitled to severance pay:

- Workers dismissed according to points a and b, Clause 1, Article 85 of the Labor Code.

- Workers who unilaterally terminate their labor contracts in violation of the reasons for termination or notice period prescribed in Article 37 of the Labor Code.

- Workers who cease work to enjoy monthly retirement benefits as provided for in Clause 1 and Clause 2, Article 145 of the Labor Code.

- Workers who terminate their labor contracts under Clause 1, Article 17 and Article 31 of the Labor Code and have already received unemployment benefits.

The formula for calculating severance pay at each enterprise:

- Total time worked at the enterprise is the number of years the worker has worked at the enterprise, rounded off according to the principle specified in Clause 5, Article 14 of Decree No. 44/2003/NĐ-CP.

- Base salary for calculating severance pay is the average monthly salary of the six months immediately preceding the termination of the labor contract, including rank-based salary, position-based salary, and regional and position-based allowances (if applicable), as stipulated in Article 15 of Decree No. 114/2002/NĐ-CP dated December 31, 2002.

a) In cases where workers perform multiple labor contracts with one enterprise and have not been paid severance pay upon the conclusion of each contract, the enterprise shall aggregate the working periods under these labor contracts and use the average monthly salary of the six months immediately preceding the termination of the final labor contract to calculate severance pay for the worker. If one of the labor contracts was unilaterally terminated illegally by the worker, the working period under that illegal contract will not be eligible for severance pay, while the other contracts remain eligible for severance pay.

Example 1: Ms. Vu Thi Tam terminated her labor contract with Thang Long Company after completing three labor contracts: The first contract lasted 14 months with an average monthly salary of 500,000 VND for the last six months of the contract; the second contract lasted 18 months with an average monthly salary of 600,000 VND for the last six months of the contract; and the third contract lasted 24 months with an average monthly salary of 800,000 VND for the last six months of the contract. Ms. Tam's severance pay is calculated as follows:

- Total time worked is: 14 months + 18 months + 24 months = 56 months (rounded up to 5 years);

- Severance pay is: 800,000 VND x 5.0 x 1/2 = 2,000,000 VND.

If Ms. Tam illegally terminated her third labor contract, she would not be entitled to severance pay for that contract. Thang Long Company would only aggregate the working periods under the first and second contracts to calculate her severance pay as follows:

- Total time worked is: 14 months + 18 months = 32 months (rounded up to 3 years);

- Severance pay is: 600,000 VND x 3 x 1/2 = 900,000 VND.

Thang Long Company will pay Ms. Tam the severance pay amount within seven days from the date of termination of her third labor contract.

b) In cases where workers work for state-owned enterprises but have both tenure-based and contractual working periods, both periods shall be aggregated to calculate severance pay.

Example 2: Mr. Nguyen Van Toan, a mechanical worker (scale A1 group II), worked at company B from April 1991 to February 1994 on a tenure basis and then worked under a labor contract from March 1994. He terminated his labor contract in June 2003. Mr. Toan's total working period is 147 months (rounded up to 12.5 years) with an average monthly salary of 823,600 VND for the last six months (coefficient 2.84). His severance pay is calculated as follows:

823,600 VND x 12.5 x 1/2 = 5,147,500 VND.

c) In cases where workers work for multiple state-owned enterprises due to job transfers before January 1, 1995, severance pay shall be calculated separately for each enterprise. Salaries prior to April 1, 1993, shall be converted according to Decree No. 25/CP, 26/CP as of April 1, 1993.

Example 3: Ms. Le Thi Be, a construction worker (scale A6 group II), has worked at three units of state-owned enterprises: At Company Y on a tenure basis from October 1988 to December 1990 (22 months rounded up to 2 years) with an average monthly salary of 142,000 VND for the last six months (coefficient 1.55) converted according to Decree No. 26/CP as of April 1, 1993; at Company Z on a tenure basis from January 1991 to May 1994 (41 months rounded up to 3.5 years) with an average monthly salary of 186,000 VND for the last six months (coefficient 1.55); and at Company X under a labor contract from June 1994 until terminating the labor contract on May 31, 2003, with an average monthly salary of 823,600 VND for the last six months (coefficient 2.84). Her working period at Company X is 108 months (rounded up to 9 years). Ms. Be's severance pay is calculated as follows:

- At Company Y: 142,000 VND x 2.0 x 1/2 = 142,000 VND

- At Company Z: 186,000 VND x 3.5 x 1/2 = 325,500 VND

- At Company X: 823,600 VND x 9 x 1/2 = 3,706,200 VND

Total: 4,173,700 VND.

Company X will pay Ms. Be the entire severance pay amount and subsequently notify Companies Y and Z using Model No. 3 issued together with this Circular so that they can reimburse the amounts they paid on her behalf.

In the event that Company Y or Company Z has ceased operations, Company X will be refunded by the state budget in accordance with the guidance of the Ministry of Finance.

d) In cases where, following the merger, consolidation, division, or separation of enterprises, or the transfer of ownership, management rights, or usage rights of enterprise assets, employees terminate their labor contracts, the subsequent employer must bear the responsibility for paying severance benefits to the employees, including the time worked for the immediate previous employer. For state-owned enterprises implementing restructuring plans or ownership form conversion schemes (privatization, transfer, sale, lease, or business contracting of enterprises), the provisions of the State shall apply to these cases.

Example 4: Mr. Bui Van An worked at State-Owned Enterprise A from June 1990. By June 1998, this enterprise was privatized and became a joint-stock company operating under the Law on Enterprises. By June 2003, Mr. An terminated his labor contract. Mr. An's average monthly salary six months before privatization was 300,000 VND/month, and six months before terminating his labor contract was 800,000 VND/month. The calculation of Mr. An's severance benefits is as follows:

- Severance benefit at the state-owned enterprise: 300,000 VND x 8 x 1/2 = 1,200,000 VND.

- Severance benefit at the joint-stock company: 800,000 VND x 5 x 1/2 = 2,000,000 VND.

Total: 3,200,000 VND.

The joint-stock company must pay the full amount of the severance benefit to Mr. An. The source of payment for the severance benefit is implemented according to Article 27 of Decree No. 64/2002/NĐ-CP dated June 9, 2002, of the Government regarding the transformation of state-owned enterprises into joint-stock companies.

a) Employees trained within or outside the country using funds provided by the employer, including funds sponsored by foreign parties, must work for the employer for a period agreed upon by both parties after completing their studies.

b) If an employee voluntarily leaves the job or unilaterally terminates the labor contract, except in cases specified in Article 37 of the Labor Code, without completing their studies or failing to work for the employer for the agreed period after completion, they must compensate for the training costs, which include expenses for instructors, study materials, classrooms, machinery and equipment, practical materials, and other support costs for the trainee as calculated by the employer with the agreement of the employee.

The agreements mentioned in points a and b above must be in writing and signed by both the employer and the employee.

IV. IMPLEMENTATION PROVISIONS

1. This Circular takes effect fifteen days after its publication in the Official Gazette; it abolishes the following documents: Decision No. 66/LĐTBXH-QĐ dated February 12, 1993, of the Minister of Labor, War Invalids, and Social Affairs on the issuance and management of labor contracts; Decision No. 207/LĐTBXH-QĐ dated April 2, 1993, of the Minister of Labor, War Invalids, and Social Affairs on the model of labor contracts; Circular No. 21/LĐTBXH-TT dated October 12, 1996, of the Ministry of Labor, War Invalids, and Social Affairs guiding the implementation of certain provisions of Decree No. 198/CP dated December 31, 1994, of the Government on labor contracts; Circular No. 02/2001/TT-BLĐTBXH dated January 9, 2001, of the Ministry of Labor, War Invalids, and Social Affairs abolishing Point 4 Section III of Circular No. 21/LĐTBXH-TT dated October 12, 1996, of the Ministry of Labor, War Invalids, and Social Affairs.

2. This Circular's method of calculating severance benefits shall not be applied retroactively to calculate severance benefits for those who terminated their labor contracts before the effective date of this Circular.

3. Every six months and annually, units employing workers under labor contracts must report to the Department of Labor, War Invalids, and Social Affairs or the Management Board of Industrial Zones in the locality where the unit's headquarters is located about the signing, use, and termination of labor contracts in accordance with the law.

4. The Departments of Labor, War Invalids, and Social Affairs, and the Management Boards of Industrial Zones in provinces and centrally-administered cities have the responsibility to assist People's Committees in organizing guidance, urging, and inspecting the implementation of this Circular.

Any issues encountered during implementation should be promptly reported to the Ministry of Labor, War Invalids, and Social Affairs for research and resolution./.