An employment contract is one of the most important documents for clearly defining the rights and obligations of employees and the company. At Vietnam offices, differences in practices and laws between Japan and Vietnam often mean that deficiencies in contracts can lead to labor disputes or conflicts at the time of resignation.
In this article, we整理 the five key points that Japanese companies with Vietnam offices should pay particular attention to in their employment contracts, and introduce practical viewpoints for checking them.
1. Contract Type, Term, and Probation Period
The first thing to check is whether the type of contract, term, and probation period comply with the rules set out in Vietnam’s Labor Code.
1-1. Contract Types
- Indefinite Term Contract
- Fixed-Term Contract (e.g., 12–36 months)
- Short-term contract / project-based contract, etc.
If a fixed-term contract is renewed too many times, there is a risk that it will be deemed an indefinite term contract by law. For this reason, it is important to define internal rules regarding how many times contracts may be renewed and under what conditions.
1-2. Probation Period
- Whether maximum probation periods by job category are respected
- Whether the salary level during the probation period (e.g., at least 85% of the base salary) is clearly stated
- Whether the conditions for transitioning from probation to a formal employment contract are specified
Key point:
If the probation period is vaguely described and loosely managed, it becomes easy for disputes to arise over questions such as “From when am I officially hired?” or “Which salary level should apply?”
2. Job Description, Work Location, and Transfers
The next important area is clearly defining what kind of work the employee will perform and where they will work.
2-1. Job Description
- Describe not only the job title but also the main duties in bullet points
- Clarify whether the employee is a manager or a general staff member, and outline their scope of authority
- Where necessary, link the contract to a separate job description (JD)
2-2. Work Location and Transfers
- Clearly state the primary work location (e.g., head office, factory, branch office)
- If the company may require transfers or secondments to other locations for business reasons, include that possibility in the contract
- Link rules on long-term changes in work location, such as business trips or overseas assignments, to separate regulations (e.g., allowances, housing costs)
If the job description or work location is vaguely defined, there is a higher risk that changes in assignment or duties will be claimed as a “breach of contract.”
3. Salary, Allowances, Overtime Pay, and Payment Currency
Among the clauses in an employment contract, those related to salary, allowances, and overtime pay are especially prone to disputes. Always check that they are consistent with both Vietnam’s Labor Code and your internal regulations.
3-1. Base Salary and Payment Currency
- Clearly state the base salary amount and the payment currency (VND, USD, etc.)
- If an exchange rate is used, define the reference date and calculation method
- Specify when salary reviews or increases will be considered (e.g., annual evaluation)
3-2. Various Allowances
- Categorize allowances such as position allowance, duty allowance, meal allowance, transportation allowance, housing allowance, etc.
- Clearly state payment conditions (e.g., prorated according to days worked, fixed monthly amount)
- Align the treatment of allowances that are included or excluded from the social insurance salary base with internal regulations
3-3. Overtime Pay and Premium Rates
- Premium rates for work beyond normal working hours (on weekdays, weekends, and public holidays)
- Procedures and approval flow for overtime (e.g., prior approval by a supervisor)
- How overtime is treated for managers (conditions and explanations if they are not eligible for overtime pay)
Important:
If the treatment of “overtime pay is included in the salary” or “fixed overtime pay” is left ambiguous, this may lead to claims for unpaid overtime or disputes. Be sure to confirm that there are no inconsistencies with your work rules and salary regulations.
4. Rules on Working Hours, Days Off, and Leave
Rules on working hours, breaks, days off, and paid leave directly affect employees’ working conditions, so they must be carefully explained in the employment contract.
4-1. Working Hours and Breaks
- Standard daily working hours (e.g., 8 hours per day) and standard working days per week
- Start and end times of work and how break times are taken
- If shift work or a rotating schedule is used, clearly state this in the contract
4-2. Days Off and Leave
- Treatment of weekly days off (e.g., Saturday and Sunday, Sunday plus one weekday, etc.)
- Rules on Vietnamese public holidays and Tet holidays
- Number of days of annual leave, the timing of accrual, and how carryovers or unused leave are settled
By clarifying rules on working on holidays and compensatory days off, you can reduce operational issues during busy periods and disputes over overtime calculations.
5. Social Insurance, Benefits, and Conditions for Termination
Finally, in order to cover the entire employee lifecycle from hiring to resignation, it is essential to include clauses related to social insurance, benefits, and termination of the contract (resignation and dismissal).
5-1. Social Insurance, Health Insurance, etc.
- Whether the employee will be covered by social insurance, health insurance, and unemployment insurance, and the sharing of contributions between employer and employee
- Availability of private insurance, health checkups, and other benefits such as meal subsidies or company buses
- Start date of coverage (including how coverage is handled during the probation period)
5-2. Contract Termination, Resignation, and Dismissal
- Notice period required when the employee resigns (e.g., 30 days)
- Grounds on which the company may terminate the contract or dismiss an employee (poor performance, disciplinary issues, etc.)
- Items to be settled upon resignation (unpaid salary, unused annual leave, bonuses, return of company property, etc.)
- Whether non-compete obligations and confidentiality obligations (NDA) apply
Key point:
If clauses on contract termination or disciplinary dismissal are inconsistent with the law, there is a risk that a dismissal will later be judged invalid. Regular legal reviews are essential to ensure the wording complies with Vietnam’s Labor Code.
Checkpoints for Your Own Employment Contracts
Lastly, here is a checklist of items to review when re-examining the employment contracts used at your Vietnam office.
- Contract type, term, and probation period are clearly stated in compliance with applicable laws
- Job description, work location, and the possibility of transfers are explained concretely
- Rules on salary, allowances, overtime pay, and payment currency are consistent with work rules
- The treatment of working hours, days off, and leave is aligned with Vietnam’s Labor Code
- Conditions for social insurance, benefits, resignation, and dismissal are organized and can be clearly explained to employees
If any of these items are unclear or ambiguous, it may be time to review your contracts and internal regulations.
Summary: Contracts as “Blueprints for Reducing Trouble”
An employment contract is not just a formal document signed at the time of hiring. It serves as a “blueprint for reducing trouble” that protects the rights and obligations of both employees and the company.
At Vietnam offices, in addition to differences in legal systems compared to Japan, there are also gaps in language and culture. Standardizing the content of employment contracts and ensuring consistency with work rules, salary regulations, and social insurance operations is the first step toward stable HR and labor management.
For Companies Looking to Centrally Manage Employment Contract Information in a System
EST is an HR, labor, attendance, and payroll management system designed for Vietnam offices.
It allows you to centrally manage each employee’s contract information, salary conditions, and social insurance coverage on a single platform, and automatically track update histories and contract expiry dates.
- Centralized management of employment contract information, salary conditions, and allowances
- Alert functions for contract terms and renewal dates to prevent oversights
- Integration with attendance, payroll, and social insurance to reduce both operational workload and risk
If you are facing challenges with payroll or HR and labor management at your Vietnam office, please feel free to contact us.
