When you hire in Vietnam, the very first thing you need to design correctly is the probation period and the contract term. If you extend a probation the way you might in Japan, or keep renewing a fixed-term contract again and again, you can easily run into labor disputes or an “unintended conversion to an indefinite-term contract” later on. A design mistake at the point of entry is notoriously hard to undo after the fact—and that is exactly what makes hiring in Vietnam tricky in practice.
In this article, based on the Labor Code 2019 (Law 45/2019/QH14, effective January 1, 2021), we organize the rules on probation periods, the “conversion rule” from fixed-term to indefinite-term contracts, the special provisions for foreign workers, and the penalties for non-compliance—all from the practical viewpoint of a Japanese-affiliated company. In particular, we will pin down accurately the frequently misunderstood point that an indefinite-term contract is not the same as lifetime employment.
1. There Are Only “Two Types” of Labor Contract in Vietnam
As a starting premise, under the Labor Code 2019 (Article 20) there are only two types of labor contract you can enter into. The “seasonal contract (under 12 months)” that existed under the old Labor Code (Law 10/2012) was abolished by the Labor Code 2019. Correctly understanding the difference between these two types is the starting point for all contract management.
| Type of Contract | Term | Key Features |
|---|---|---|
| Indefinite-term contract (indefinite-term) | No fixed term | A contract with no specified end date. Beware of cases where a contract becomes indefinite “unintentionally” through the conversion rule described below. |
| Fixed-term contract (fixed-term) | Up to 36 months from the effective date | A contract with an explicitly stated term. It may only be concluded consecutively a maximum of two times (Article 20(2)). |
The key points are that the fixed-term contract is capped at “36 months,” and that there are only two choices: “indefinite or fixed-term.” A practice of repeatedly concluding short contracts on the assumption of the old seasonal contract simply does not hold up under current law. On top of this two-type framework sit the “probation period” and the “conversion rule” we look at next.
2. The Rules on Probation — Caps, Wages, and Frequency
Probation is governed by Articles 24 to 27 of the Labor Code 2019. The first thing a Japanese-affiliated company should grasp is that the maximum number of days differs by job type (Article 25).
| Applicable Job Type | Maximum Probation Period |
|---|---|
| Enterprise managers (executive / director) | Up to 180 days |
| Positions requiring a college degree or higher | Up to 60 days |
| Intermediate vocational qualifications / technicians / skilled workers | Up to 30 days |
| Others (general / unskilled labor) | Up to 6 working days |
There is also a statutory rule on wages. Wages during the probation period must be at least 85% of the wage payable upon official employment (Article 26). Setting a rate such as “half pay because it’s a trial” is unlawful.
There are two ways to arrange probation (Article 24): (1) concluding a separate probation contract, or (2) including a probation clause within the labor contract. Note that probation cannot be applied to a contract of less than one month. And most importantly, there is a limit on frequency: probation may be applied only once per position. Extending it, or running probation multiple times, is unlawful.
Termination during probation is flexible. During probation, either the company or the worker may terminate the contract without prior notice and without compensation (Article 27). Conversely, if the probation result is satisfactory, the company is obligated to conclude a labor contract. A response of “the result was satisfactory, but we won’t sign the main contract” is not permitted.
3. The Easily Overlooked “Probation and Social Insurance”
What Japanese-affiliated companies tend to overlook when designing probation is the treatment of social insurance (compulsory enrollment). Here, the conclusion changes depending on the arrangement (methods (1) and (2) above).
Social insurance costs change depending on the probation “method”
Under Decree 158/2025/ND-CP (effective July 1, 2025), the treatment has been clarified as follows.
- (1) A separate probation contract only → the probation period is outside the scope of social insurance
- (2) A probation clause embedded in a labor contract of one month or more → the probation period is also within the scope of social insurance
In other words, even for the same “probation,” whether social insurance costs arise depends on how you structure it. Probation should be designed not only in terms of the number of days and the wage, but starting from “which method to use to conclude it.”
4. [The Core] The “Conversion Rule” from Fixed-Term to Indefinite-Term
The most important point in this article is this fixed-term → indefinite-term conversion rule (Article 20(2)). Without an accurate understanding here, you could end up converting your entire workforce to indefinite-term contracts without even realizing it.
There are two main rules.
- A fixed-term contract may be concluded consecutively no more than two times (the first contract plus one renewal). If employment continues after the second fixed-term contract expires, the third must be an indefinite-term contract.
- If a worker continues to work after a fixed-term contract has expired and no new contract is concluded within 30 days of the expiration date, the contract is automatically converted into an indefinite-term contract.
Illustrated as a flow, it looks like this.
| Step | Contract | Practical Note |
|---|---|---|
| 1st | Fixed-term (up to 36 months) | If employment continues after expiry, conclude the next contract within 30 days. |
| 2nd | Fixed-term (up to 36 months) | This is the limit for consecutive fixed-term contracts. If employment continues after expiry, the next must be indefinite. |
| 3rd | Must be indefinite | Re-contracting on a fixed-term basis is not allowed (for general workers). |
Two deadlines to keep in mind in practice
- The “two consecutive” count: Fixed-term is allowed up to twice. Concluding a third on a fixed-term basis is unlawful (exceptions are covered in Section 6 below).
- The “30 days after expiry” deadline: If you keep the worker on after a fixed-term contract expires and fail to conclude a new contract within 30 days, it is automatically converted to indefinite. A delay in the renewal procedure translates directly into conversion risk.
5. “Indefinite-Term Contract” Is Not “Lifetime Employment” [Correcting a Misconception]
Here, let us set straight the point that Japanese-affiliated companies most easily misunderstand. “Once you convert from fixed-term to indefinite, you have to keep the person employed for life”—this is a misconception.
What an indefinite-term labor contract means is simply that there is “no fixed term”—it does not mean “the worker cannot be dismissed.” Even with an indefinite-term contract, if a statutory ground applies (economic reasons, incapacity, breach of discipline, restructuring due to downsizing, and so on) and the statutory procedure is followed, the contract can be terminated.
Therefore, there is no need to be overly afraid that “conversion to indefinite means you can no longer fire anyone.” That said, the flip side is that a legitimate ground and a proper procedure are essential for dismissal—and this is true regardless of whether the contract is fixed-term or indefinite. Because picturing it through the Japanese notion of “lifetime employment” leads you to misread the reality, it is more accurate to think of an indefinite-term contract as “a contract with no fixed term, to which the ordinary dismissal rules apply.” For details on the grounds and procedures for terminating an indefinite-term contract, see our Dismissal and Disciplinary Action Guide.
6. Special Provisions for Foreign Workers
For expatriates and locally hired foreign nationals, there are special provisions that differ significantly from the rules so far (Article 151(2)). Confusing these will lead to errors in contract management.
- Only fixed-term contracts may be concluded. You cannot conclude an indefinite-term labor contract with a foreign worker.
- The contract term is capped by the validity period of the work permit. Since a work permit is valid for a maximum of 24 months, the contract is tied to it (the work permit period takes precedence over the general 36-month rule of Article 20).
- The indefinite-conversion rule does not apply. Article 20(2) explicitly excludes foreign workers (Article 151(2)), so fixed-term contracts may be renewed any number of times in line with work permit renewals.
In short, for foreign nationals you do not need to worry about the “two fixed-terms then conversion to indefinite” rule. Instead, the focus of management is on aligning the validity period of the work permit with the contract term. Because the very premise of the contract collapses once the permit expires, the practical key is to manage the work permit renewal schedule and the contract renewal as a set.
7. Common Mistakes and Penalties
Based on the rules above, let us organize the mistakes Japanese-affiliated companies actually tend to make.
- Concluding a third fixed-term contract (for general workers; a fixed-term contract exceeding two consecutive times is unlawful).
- Leaving it more than 30 days after expiry and unintentionally converting to indefinite.
- Setting the probation wage below 85%, exceeding the maximum number of days, or running probation multiple times or extending it.
- Embedding probation in the labor contract but overlooking social insurance enrollment during the probation period.
These violations are subject to administrative penalties. The penalties are set out in Decree 12/2022/ND-CP (effective January 17, 2022), under which the fine for an organization (a company) is double that for an individual. Because Japanese-affiliated companies generally fall under “organization,” the amounts in the tables below apply.
Violations Related to Probation (Article 10)
| Violation | Individual (VND) | Organization (VND) |
|---|---|---|
| Applying probation to a worker on a contract of less than one month / failing to notify the result | 500,000–1,000,000 | 1,000,000–2,000,000 |
| Probation more than once / exceeding the period / wage below 85% / failing to conclude the main contract despite a satisfactory result | 2,000,000–5,000,000 | 4,000,000–10,000,000 |
As remedial measures, payment of the wage shortfall and conclusion of a labor contract may be ordered.
Violations of Contract Type (Article 9)
Where an inappropriate contract type is concluded—such as concluding a fixed-term contract where an indefinite-term one should have been used—the fine scales across five tiers depending on the number of workers affected. Note that if you employ several people under the wrong type, the fine amount jumps sharply.
| Number of Workers Affected | Individual (VND) | Organization (VND) |
|---|---|---|
| 1–10 workers | 2,000,000–5,000,000 | 4,000,000–10,000,000 |
| 11–50 workers | 5,000,000–10,000,000 | 10,000,000–20,000,000 |
| 51–100 workers | 10,000,000–15,000,000 | 20,000,000–30,000,000 |
| 101–300 workers | 15,000,000–20,000,000 | 30,000,000–40,000,000 |
| 301+ workers | 20,000,000–25,000,000 | 40,000,000–50,000,000 |
For an organization, the fine reaches a maximum of 50 million VND. Because an error in contract type grows not “per case” but “per number of workers affected,” it is essential not to leave any operational gap unaddressed.
8. Conclusion — With Contract Management, “Timing” Is Everything
Managing probation and contract terms comes down, in the end, to “managing timing.” If you track expiration dates, renewal deadlines, and probation end dates by hand or in Excel, overlooking the “30-day rule” or missing a renewal is bound to happen. Here are the key points from this article.
- There are only two types of contract (indefinite / fixed-term, up to 36 months). The seasonal contract has been abolished.
- Probation: cap by job type, wage of at least 85%, only once per position. Extension or multiple rounds are unlawful.
- Fixed-term is allowed up to twice consecutively → the third must be indefinite. It automatically becomes indefinite 30 days after expiry.
- Indefinite ≠ lifetime employment. Termination is possible if a statutory ground and the proper procedure are met.
- Foreign workers: fixed-term only, capped by the work permit period. The indefinite-conversion rule does not apply.
Prevent “careless oversights” in contract renewal with a system
As we have seen in this article, much of the risk in contract management arises from “overlooking deadlines.” The HR management system “EST,” built for Vietnamese labor-practice realities, supports drafting labor contracts, managing contract renewals, and automatic contract renewal. It centralizes contract expiration dates and renewal deadlines within the system, preventing trouble such as “unintended conversion to indefinite 30 days after expiry” or “missed renewal procedures” before it happens.
Furthermore, probation and social insurance settings can also be centrally managed together with contract information, supporting the drafting of contracts in line with the Labor Code. You can organize designs by method within the system—such as the social insurance treatment when embedding probation into a labor contract.
In addition, EST provides automatic adaptation to legal amendments, easing the burden on your staff of having to constantly keep up with changes to the provisions. Systematizing the management of the “entry point”—probation and the contract term—is the first step toward preventing labor disputes.
Related Articles
- Key Points When Concluding a Labor Contract in Vietnam
- Vietnam Dismissal and Disciplinary Action Guide
- Key Points of the 2025 Amended Social Insurance Law
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