International Employment Lawyer recently invited employment specialists at Tilleke & Gibbins in Vietnam to share insights on key issues currently impacting employers in the country.
What are the main concerns for employers in Vietnam at the moment?
Although Vietnam remains an attractive destination for investment with a large and resilient labor force, employers are increasingly navigating a more complex business environment. Key challenges include skills shortages, external economic uncertainty, an evolving regulatory framework, and rapid technological transformation.
While Vietnam benefits from one of Southeast Asia’s largest labor forces, workforce quality remains a challenge. By the end of 2025, the country’s labor force comprised 53.3 million people, of whom 52.3 million were employed, reflecting Vietnam’s strong labor market fundamentals. Nevertheless, only 29.2% of workers possessed a recognized diploma or vocational qualification, indicating that the supply of skilled labor has not kept pace with the evolving needs of employers.1 As industries increasingly demand specialized technical and digital skills, businesses face growing difficulties in recruiting qualified employees, despite the abundance of available labor. This skills mismatch has become a key concern for employers, prompting greater investment in workforce training, reskilling, and talent development.
Another growing concern for employers is the increasing volatility of Vietnam’s labor market, which is becoming more susceptible to external economic and geopolitical developments. As Vietnam has become deeply integrated into global supply chains, fluctuations in international demand, trade policies, and geopolitical tensions can have a direct impact on domestic employment. According to the International Labor Organization, approximately 76.8% of Vietnam’s global supply chain-related employment depends on demand from just six major trading partners—the United States, China, the European Union, Japan, South Korea, and ASEAN.2 Consequently, any slowdown in these markets may lead to reduced export orders, production cuts, and workforce adjustments, particularly in export-oriented sectors such as electronics, textiles, footwear, and manufacturing. Against this backdrop, employers are increasingly required to adopt more agile workforce planning, invest in employee reskilling, and develop resilient human resource strategies to mitigate the effects of global economic uncertainty.
Another significant challenge for employers is keeping pace with Vietnam’s rapidly evolving regulatory environment. Recently, a series of legislative reforms have introduced new compliance requirements across various aspects of business operations, including employment, social insurance, taxation, personal data protection, and corporate governance. As the regulatory framework continues to evolve, employers must proactively review and update their policies, employment practices, payroll processes, and internal compliance systems to ensure ongoing compliance. Failure to keep pace with these changes may expose businesses to regulatory related matters, administrative penalties, employment disputes, and reputational risks. In this environment, regulatory compliance is no longer merely a legal obligation but an essential component of effective risk management and sustainable business operations.
Finally, rapid technological advancement is fundamentally reshaping Vietnam’s workplace. The increasing adoption of artificial intelligence, automation, robotics, and digital technologies is transforming business operations and raising productivity across industries, particularly in manufacturing, e-commerce, and financial services. However, these developments also require employers to make substantial investments not only in modern machinery, digital infrastructure, and production technologies, but also in developing a workforce capable of operating in increasingly technology-driven environments. As routine and repetitive tasks become more automated, demand is shifting towards employees with stronger technical, digital, and analytical skills. Consequently, employers are placing greater emphasis on workforce reskilling and upskilling while modernizing their production facilities and business processes to remain competitive.
- What is the most important piece of legislation entering force this year in Vietnam, and why?
Among the legislative developments that have taken effect in Vietnam recent years, the expansion of the social security framework through the new Social Insurance Law and the Employment Law 2025 stands out as particularly significant. Together, these reforms represent a major policy shift towards broader workforce protection, bringing a larger segment of the labor market within the scope of compulsory social insurance and unemployment insurance obligations.
Legislators have significantly widened the categories of workers who must participate in compulsory social insurance and unemployment insurance schemes. Coverage now extends to additional groups, including part-time employees whose monthly income meets or exceeds the statutory minimum reference level. This represents an important step towards bringing previously uncovered workers into the formal social security system and strengthening long-term social protection.
Perhaps more significantly, the new framework moves beyond the formal label attached to a contractual arrangement and places greater emphasis on the substance of the employment relationship. In practice, this means that businesses can no longer assume that statutory insurance obligations can be avoided simply by classifying workers under service agreements, consultancy contracts, freelance arrangements, or other non-employment labels. Instead, the actual nature of the working relationship will be increasingly relevant when determining whether mandatory insurance obligations arise.
For employers, the implications are considerable. Companies with complex workforce structures, extensive use of part-time personnel, or flexible engagement models, particularly technology companies, service-sector businesses, and foreign-invested enterprises, may find that workers previously treated as outside the scope of compulsory insurance are now required to be enrolled. In many cases, this may necessitate a comprehensive review of workforce arrangements and corrective action where under-enrolment has occurred.
Alongside the expansion of social security coverage, another notable development has been the digitalization of employment administration. Vietnam has taken a major step forward with the introduction of the legal framework governing electronic labor contracts. Decree No. 337/2025/ND-CP on electronic labor contracts came into effect on 1 January 2026, followed by Circular No. 08/2026/TT-BNV, effective from 1 July 2026, which provides detailed implementation guidance. Together, these instruments establish the regulatory foundation for the National Electronic Labor Contract Platform operated by the Ministry of Home Affairs. Nevertheless, the new framework does not require employers to abandon traditional paper-based labor contracts. Paper contracts remain fully valid and may continue to be used without restriction. Rather, the reforms create a standardized and government-backed infrastructure through which electronic labor contracts can be concluded, stored, and managed. The introduction of the National Electronic Labor Contract Platform is particularly noteworthy because it reflects the Government’s broader commitment to modernizing labor administration through digital infrastructure. By creating a centralized and traceable database of employment contracts, the system is expected to enhance transparency, improve administrative efficiency, reduce contractual disputes, and facilitate data sharing among labor, social insurance, and immigration authorities.
- What is one area of labor/employment law that can cause issues for multinationals with Vietnamese operations, and why?
One of the most challenging areas for multinational employers operating in Vietnam is employee termination. Although Vietnam’s labor framework has continued to modernize, it remains employee-protective and does not recognize the concept of “at-will” termination from the employer side. Employers may only terminate an employee on specific statutory grounds, each of which is subject to detailed procedural requirements.
The risk is particularly pronounced in cases involving disciplinary dismissal. Dismissal in particular is tightly regulated and must be grounded in one of the specific bases recognized by the Labor Code. Dismissal for disciplinary reasons is one of the most litigated areas of Vietnamese labor law. The Labor Code specifies the grounds on which an employer may dismiss an employee for misconduct, including theft, embezzlement, gambling, deliberate violence causing injury, sexual harassment contrary to the regulations in the Internal Labor Regulations (ILRs), disclosure of confidential information and/or trade secrets, unauthorized absence from work for a defined period and causing serious damage or threatening to cause extremely serious damage to the employer’s interests or assets. In practice, the labor authority sets the threshold for “serious damage” at 10 times the regional minimum wage, and this monetary threshold must be specified in the ILRs. The impugned misconduct must be listed within the ILRs, and they must also be properly registered with the competent labor authority before they can be relied upon in disciplinary proceedings. It is also worth noting that dismissal must be carried out in strict compliance in respect to limitation periods and procedural requirements. Otherwise, the dismissal will be considered unlawful regardless of whether it was founded on valid legal grounds.
Workforce restructuring presents similar challenges. Redundancy termination requires employers to execute internal corporate governance documents; prepare a comprehensive labor usage plan; consult with the grassroots trade union (if any); hold a dialogue in the workplace session between the Employee Dialogue Representative Group and the Management Dialogue Representative Group; notify the labor authority, provincial People’s Committee and the terminated employees; and pay statutory job-loss allowances where applicable. The process is considerably more structured and complicated than many foreign employers expect, and any failure to comply with any of the statutory steps may undermine the validity of the redundancy exercise and give rise to otherwise avoidable employment claims.
For multinational employers, successfully managing employee termination in Vietnam requires more than identifying a valid legal ground. It also demands careful planning, thorough documentation, and strict adherence to procedural requirements. Taking a proactive and compliant approach can significantly reduce the risk of costly employment disputes and business disruption.
Footnotes
2. https://en.vneconomy.vn/vietnams-labor-market-amid-ongoing-global-volatility.htm
This article was originally published by International Employment Lawyer in July 2026.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
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