Due to the complicated situation of COVID-19 pandemic in Vietnam, a large number of enterprises have no choice but to cut down their business scale; many are shut down, suspended or have to narrow their production; millions of workers had to stop working take unpaid leave, etc.
Legally, the forms of employee reduction that enterprises may take into account during Covid – 19 pandemic are stipulated in the Labor Code and Decree 05/2015/ND-CP dated January 12th 2015 detailing and guiding the implementation of several contents of the Labor Code (“Decree 05/2015/ND-CP”), specifically as follows: (i) temporary leave (suspension of a Labor contract, work suspension, unpaid leave), (ii) termination of Labor contracts; otherwise, wage and bonus reduction plan may be considered.
Legal regulations on salary, bonus and insurance benefits may vary in each case, specifically as follows:
- Suspension of labor contract
Amid the current COVID-19 pandemic, employees and the owner of the enterprise may agree on a temporary suspension of contract performance as prescribed in Clause 5 Article 32 of Labor Code.
During suspension period, the employee is not obliged to work and is not responsible for fulfilling their tasks agreed upon in the Labor contract. Therefore, the suspension period is not included in the time the employee performs the Labor contract and the employee will not be entitled to salary, social insurance fee as well as the rights and benefits specified in the Labor contract, unless otherwise agreed by the two parties.
However, to ensure the standard live of workers, on April 9th, 2020, the Government issued Resolution No. 42/NQ-CP regarding assistance for people affected by COVID-19 pandemic (“Resolution 42”) and stipulates that a worker who has his/her employment contract suspended month because his/her employer does not have adequate fund to pay wages due to Covid-19 will receive VND 1,800,000 per month. The assistance duration varies according to the duration of employment contract suspension and the pandemic situation, beginning from April 1st, 2020 and not exceeding 03 months (according to Section 1, Part 2-Support content).
Upon the end of suspension period, according to Article 10 of Decree No. 05/2015/ND-CP, the employer must arrange works for the employee, whereby:
“1. Within 15 days after the date of expiration of the employment contract suspension, the employee must be present at the workplace and the employer must reinstate the employee . If the employee can not be present at the workplace in accordance with the regulated time, the employee shall agree with the employer at the time of their presence.
2. The employer shall be responsible for arranging the employee to perform the job defined in the employment contract; in case the employer fails to arrange the job defined in the employment contract, both parties shall be agreed on a new job and amend, supplement the existing employment contract or conclude a new one.”
- Taking unpaid leave
According to Clause 3, Article 116 of the 2012 Labor Code, in addition to the fully paid days off, the employee can negotiate with the employer to take unpaid leave during the COVID-19 pandemic which is still is calculated in the performance of Labor contract. However, agreement on this issue shall not only be in accordance with the law but must also comply with the Internal Working Regulations, as this is one of the main highlight in the Internal Working Regulations (according to Article 27 of Decree 05/2015/ND-CP).
For social insurance regime, like the case of suspension of Labor contract, if the employee does not work and does not receive salary for 14 working days or more in a month, he/she will not be paid the social insurance
Also according to Resolution 42, employees who take unpaid leave for at least 01 month because his/her employer does not have adequate fund to pay wages due to Covid-19 will receive VND 1,800,000 per month. The assistance duration varies according to the duration of unpaid leave and the pandemic situation, beginning from April 1st, 2020 and not exceeding 03 months (similar to case of suspension of labor contract)
- In case of work suspension
The salary that the employee is entitled to receive when they suspend to work shall be different in consideration of whether it’s employer’s or employee’s fault. In light of Covid-19 pandemic which is significantly affecting our nation’s economic , on March 25th 2020, the Ministry of Labor, War Invalids and Social Affairs issued Official Dispatch No. 1064/LDTBXH-QHLDTL Provincial and Municipal Departments of Labor, Invalids and Social Affairs on wage payment and settlement policies for employees during the work suspension time due to COVID-19 pandemic (“Official Dispatch No. 1064”). Whereby:
In case the employees have to stop working due to the direct impact of COVID-19 pandemic, such as:
- foreign workers have not been returned to the enterprise as requested by competent authorities;
- workers who have to stop working during quarantine time as requested by competent authorities;
- workers who have to stop working because of the inability of the enterprise or the enterprise departments since the employer or other workers are in the isolation time or have not been returned to work;
the wage payment shall be agreed upon by the two parties but not lower than the regional minimum wage prescribed by the Government (Clause 3, Article 98 of the Labor Code) and the employee is still entitled to social insurance benefits depending on the wage in case of work suspension.
Unlike the above cases, employees who suspend to work will still receive wage and this is also a basis for workers who are in the period of isolation to earn a salary and enjoy the sickness benefits according to Official Letter No. 422/BHXH-CSXH.
Currently, the region’s minimum wage in 2020 is as follows: Region I (urban/suburban districts) is VND 4,420,000; Region II (districts and towns of provinces and cities) is VND 3,920,000; Region III (districts, towns, villages of provinces) is VND 3,420,000; Region IV (rural areas, islands, extremely difficult areas) is VND 3,070,000.
If the prolonged work suspension period adversely affects the ability of enterprises to pay wages, the employer and the employee may agree to suspend the implementation of the Labor contract.
- Unilaterally terminate Labor contracts ahead of time
In response to complicated situation, instead of temporary leave (as the three cases mentioned above), some enterprises were forced to unilaterally terminate their Labor contracts ahead of time with their employees.
In accordance with point c, Clause 1, Article 38 of Labour Code 2012: “An employer may unilaterally terminate a labor contract in cases, if, as a result of natural disaster, fire or another force majeure event as prescribed by law, the employer, though having applied every remedial measure, has to scale down production and cut jobs”.
Satisfying the conditions to be considered a force majeure event under the Civil Code, the COVID-19 pandemic caused enterprises to be unable to maintain production and sell products, leading to a reduction in the job positions, the employer has the right to unilaterally terminate the Labor contract.
However, before terminating the contract, the employer must notify the employee in advance: At least 45 days for an indefinite-term Labor contract; at least 30 days for a definite-term Labor contract; at least 03 working days for a seasonal or work-specific Labor contract that has a duration of under 12 months.
Also, in this case, employees who work regularly for 12 months or more will receive a severance allowance with the allowance of one-year-working equal to half of the monthly salary as provided for in Article 48 of the Labor Code.
According to the content of support in Resolution 42, a worker who has his/her employment contract terminated but is not eligible for unemployment benefit; a worker who does not have a employment contract and is laid off will receive VND 1,000,000 per month for up to 3 months according to the pandemic situation. This will apply from April to June 2020.
- Cases of wage, bonus reduction
In addition to making the above-mentioned personnel reduction decisions, enterprises may also consider a plan to reduce payments to survive and maintain operations, especially in the current pandemic. However, Vietnamese law has no regulations on cases the employers are entitled to cut wages for employees for any reason, including force majeure events.
In case the employer wishes to cut wages, the two parties may proceed to amend the Labor contract and record a new salary. If the employees do not agree, they have the right to unilaterally terminate the Labor contract.
In case production must be narrowed, leading to a reduction in employment, the enterprises may reorganize employees according to Official Dispatch No. 1064. However, enterprises must also notify employees before cutting wages or changing job positions.
Regarding bonuses, since Bonus Regulations must be decided and publicly announced by the employer at the workplace after consultation with the representative organization of the grassroots-level employees’ collective, the increase or decrease of the bonus will be decided by the employer and needed to be explicit. Failure to publicize the Bonus Regulations at the workplace may result in a fine of from VND 2,000,000 to VND 5,000,000 according to Article 16 of Decree 28/2020/ND-CP regulating fines for administrative violations related to labor, social insurance or sending of Vietnamese workers abroad.
In addition, if the Labor contract has an agreement on the bonus level, when changing the bonus, the employer and the employee must sign to amend the labor contract accordingly.
Due to the complicated and unpredictable of the pandemic, if the enterprise has sought all remedies but still cannot pay the salary on time, it is entitled to owe the employee salary no later than one (01) month and, at the same time, to pay an additional amount if it is late payment more than 15 days under the provisions of Article 24 of Decree No. 05/2015 / ND-CP. As follows:
“a) If such late payment is made within less than 15 days, additional payments are not required;
b) If the late payment is made for 15 days or more, an extra amount shall be at least equal to the arrears of salary multiplied by the ceiling of interest rate for one-month deposits announced by the State bank of Vietnam at the time when the payment is made. If the State Bank of Vietnam does not specify the ceiling interest rate, 1-month deposit interest rate of commercial banks, where businesses and agencies open trading accounts at the time of payment, shall be applied.”