Pursuant to Article 20 of the Labor Code 2019, currently, there are two types of labor contracts that are allowed to be concluded between employer and employee, namely, indefinite-term labor contract and fixed-term labor contract. (The type of seasonal or work-specific labor contract with terms under 12 months has been officially eliminated).
- An indefinite-term labor contract is a contract in which the two parties neither fix the term nor the time of termination of the contract.
- A fixed-term labor contract is a contract in which the two parties determine the specific term of the contract and this term can be up to 36 months from the date of its conclusion.
For a fixed-term labor contract, does the law prescribe a limited number of times for renewal, or businesses are wholly entitled to decide it?
Pursuant to Clause 2, Article 20 of the Labor Code 2019, when fixed-term labor contract expires but the employee keeps working, both parties shall conclude a new labor contract within 30 days from the expiration date of the previous labor contract.
- If a new labor contract is not concluded after the 30-day period as stated above, the existing fixed-term labor contract shall become an indefinite-term labor contract.
- The parties may enter into one more fixed-term labor contract. If the employee then keeps working after the expiration of this second fixed-term labor contract, the third labor contract shall be an indefinite-term one.
Thus, a fixed-term labor contract can only be signed up to 02 times.
However, the Labor Code 2019 allows the parties to enter into fixed-term labor contracts many times in the following cases:
- Individuals hired as directors in state-owned enterprises;
- Employment of elderly people;
- Employment of foreign employees working in Vietnam;
- The signed contract shall be extended until the end of the term of office for members of the management board of the employees’ representative organization at grassroots level who are holding office but the labor contract expires.
Penalties if signing a fixed-term labor contract more than the specified number of times
Previously, some enterprises have “dogged the law” by choosing to sign an Annex attached to the labor contract with the aim of changing the duration thereof. However, with the new provisions of the Labor Code 2019, signing an Annex to a labor contract to change the duration of the labor contract will be considered a violation of the law.
Specifically, Clause 2, Article 22 of the Labor Code 2019 stipulates: An Annex to a labor contract may elaborate or amend certain contents of the labor contract but must not change the duration of the labor contract.
As a result, if enterprises violate the above provisions, they shall be administratively sanctioned according to Clause 1, Article 8 of Decree 28/2020/ND-CP as FAILING TO ENTER INTO THE RIGHT TYPE OF LABOR CONTRACT WITH EMPLOYEES. Specifically:
a) A fine ranging from VND 2,000,000 to VND 5,000,000 shall be imposed if the violation involves 01 – 10 employees;
b) A fine ranging from VND 5,000,000 to VND 10,000,000 shall be imposed if the violation involves 11 – 50 employees;
c) A fine ranging from VND 10,000,000 to VND 15,000,000 shall be imposed if the violation involves 51 – 100 employees;
d) A fine ranging from VND 15,000,000 to VND 20,000,000 shall be imposed if the violation involves 101 – 300 employees;
e) A fine ranging from VND 20,000,000 to VND 25,000,000 shall be imposed if the violation involves 301 or more employees.
* Simultaneously, the enterprise is compelled to sign the right type of labor contract with employees.