Other BriefingsEmployment Contracts and Probation Rules for Foreign Employers in Vietnam
For foreign employers operating in Vietnam, employment contracts and probation arrangements shape how much flexibility remains once operations are underway. Issues rarely arise at hiring.
They emerge later, when roles change, teams scale, or termination becomes necessary, and employers discover that their options are constrained by how contracts and probation were originally structured.
How Vietnam’s employment framework shapes employer flexibility
Vietnam’s employment framework prioritizes job stability. Once employment begins, enforcement focuses on statutory protections and actual working conditions rather than managerial discretion or informal practice. Concepts such as at-will employment, evolving roles without documentation, or broad termination latitude do not translate cleanly.
For foreign employers, this means employment decisions require greater precision upfront, because flexibility narrows significantly after hiring.
Employment contract structures available to foreign employers
Foreign employers typically choose between indefinite-term contracts and fixed-term contracts. Fixed-term arrangements may suit short-term needs but are subject to limits on renewal. Once those limits are reached, conversion to an indefinite-term contract becomes mandatory.
Contract structure, therefore, directly affects workforce planning, cost visibility, and future exit options. Fixed-term contracts do not provide open-ended optionality, and probation cannot be used repeatedly to defer commitment.
Where contract design commonly creates risk
Risk most often arises when contract terms do not reflect how work is performed. Narrow job descriptions, incomplete compensation structures, or working-time provisions that diverge from daily practice create exposure if disputes arise.
In Vietnam, substance prevails over form. When contractual terms and operational reality diverge, the written agreement offers limited protection.
Probation rules and their practical limits
Probation in Vietnam is regulated and role-specific. It is limited in duration, may only be applied once per position, and must be compensated. Probation is intended to assess suitability, not to extend flexibility or postpone long-term employment decisions.
Although probation allows earlier termination than confirmed employment, it does not eliminate compliance risk. Decisions taken during probation are still assessed for consistency and reasonableness if disputes arise. Probation should therefore be treated as a controlled assessment phase, not a risk-free exit mechanism.
When contracts and operations drift out of alignment
As businesses grow, roles often evolve. Informal changes to duties, reporting lines, or working arrangements can create exposure when they are not reflected contractually. These gaps rarely cause immediate issues but tend to surface during inspections, disputes, or termination discussions.
For foreign employers, this risk is usually unintentional and stems from fast-moving operations or regional practices applied without localization.
Why misusing probation or fixed-term contracts backfires
Probation periods and fixed-term contracts are sometimes used to manage uncertainty or test roles informally. In Vietnam, this approach can trigger automatic consequences, including contract conversion or retroactive claims.
Once conversion occurs, employment becomes significantly harder to unwind, reducing flexibility at the point employers often expect to regain control.
Hiring expatriates and local employees
Vietnam’s employment contract rules apply regardless of nationality. Expatriates are subject to the same labor framework as local employees, with additional immigration and work authorization requirements layered on top.
Risk increases when employment terms, work permits, and operational timelines are not coordinated. Alignment between HR planning and immigration processes is therefore essential.
Designing employment arrangements with change in mind
Employment relationships rarely remain static. Role changes, restructuring, and eventual termination should be anticipated at the drafting stage rather than addressed reactively. Contracts that account for change provide more defensible options as business needs evolve.
Key questions foreign employers should resolve before hiring
Before onboarding employees in Vietnam, foreign employers should assess whether probation is being used appropriately, whether contract terms reflect intended working arrangements, and whether internal processes can support ongoing compliance. Addressing these issues early reduces reliance on corrective measures later.
About Us
ASEAN Briefing is one of five regional publications under the Asia Briefing brand. It is supported by Dezan Shira & Associates, a pan-Asia, multi-disciplinary professional services firm that assists foreign investors throughout Asia, including through offices in Jakarta, Indonesia; Singapore; Hanoi, Ho Chi Minh City, and Da Nang in Vietnam; and Kuala Lumpur in Malaysia. Dezan Shira & Associates also maintains offices or has alliance partners assisting foreign investors in China, Hong Kong SAR, Mongolia, Dubai (UAE), Japan, South Korea, Nepal, The Philippines, Sri Lanka, Thailand, Italy, Germany, Bangladesh, Australia, United States, and United Kingdom and Ireland.
For a complimentary subscription to ASEAN Briefing’s content products, please click here. For support with establishing a business in ASEAN or for assistance in analyzing and entering markets, please contact the firm at asean@dezshira.com or visit our website at www.dezshira.com.
- Previous Article Should Foreign Investors Form an Exempt Pte Ltd or a Standard Pte Ltd in Singapore?
- Next Article
