Labor Law Compliance: Common misconceptions among FDI enterprises

Date: 2026.01.05

Labor Law compliance: What do FDI enterprises often misunderstand?

When expanding operations into Vietnam, many FDI enterprises—especially from Japan, South Korea, and Europe—face significant challenges in complying with labor regulations. According to reports, more than 60% of labor violations by FDI companies stem from misunderstandings of regulations, leading to unintentional non-compliance but serious legal risks.

Below are the most common misconceptions, compiled from labor inspections, official guidance, and practical experience supporting newly established FDI enterprises in Vietnam.

1. “We can apply the parent company’s labor regulations in Vietnam” – Incorrect

Many Japanese companies bring internal regulations, Work Rules, or HR Handbooks from their headquarters and assume they can be applied directly.

However, under the Labor Law 2019, all internal regulations must:

– Comply with Vietnamese law
– Have a Vietnamese version
– Be registered with the Department of Labour, Invalids and Social Affairs (DOLISA) if the company has 10 or more employees

Non-compliance → internal regulations become invalid, and the company loses its legal basis for disciplinary actions.

2. “An employment contract in English/Japanese is sufficient” – Incorrect

Under Article 14 of the Labor Code:
– Employment contracts must have a Vietnamese version
– English/Japanese versions may be attached, but the Vietnamese version is the legal reference

Labor inspectors have penalized many FDI enterprises for using bilingual contracts without a legally compliant Vietnamese version.

3, “Casual contracts under 1 month do not require full compliance” – Incorrect

Under Decree 145/2020/ND-CP:

– Employees working under 1 month must still have a written agreement
– If the job is of a regular nature, casual contracts must not be used

FDI enterprises often misunderstand this point, especially in logistics, retail, and manufacturing sectors.

4. “Overtime (OT) can be required based on parent company culture” – Incorrect

Vietnam has very clear regulations on overtime:
– Maximum 40 hours/month
– 200 hours/year (some sectors are allowed up to 300 hours)
– Employee consent is required
– Overtime pay must be calculated correctly (150% – 200% – 300%)

According to MOLISA, overtime violations are the most common issue among enterprises.

5. “Probation does not require a contract or written agreement” – Incorrect

In practice:
– A written probation agreement is mandatory
– Probation salary must be at least 85% of the official salary
– Probation periods are capped depending on the job position

Failing to separate probation properly from the labor contract → high dispute risk.

6. “Labor reports are only required upon request” – Incorrect

Enterprises are required to submit:
– Semi-annual labor reports
– Annual labor reports
– Labor change reports
– Occupational Safety and Health (OSH) reports

Failure to submit on time may result in penalties under Decree 12/2022/ND-CP.

7. “Small companies do not need to register salary scales” – Incorrect

Even with a small workforce, enterprises must:
– Establish salary scales and salary tables
– Publish them internally
– Retain documentation as required

These documents are mandatory during labor inspections.

8. “Office staff do not need OSH training” – Incorrect

Under the Law on Occupational Safety and Health:
– All employees must receive OSH training
– Groups 1–4 have specific training requirements
– Training records are mandatory documents during OSH inspections

Failure to provide training → penalties of VND 1–6 million per employee.

9. “Foreign employees only need a working visa” – Incorrect

Under Decree 152/2020/ND-CP:
– Foreigners must have a Work Permit or a Work Permit Exemption Certificate
– Enterprises must submit periodic reports on foreign labor usage

Non-compliance → enterprises may be fined, and foreign employees may be deported.

10. “Employment contracts can be terminated immediately if the employee is unsuitable” – Incorrect

In Vietnam, contract termination:
– Follows strict procedures
– Requires advance notice
– Requires lawful and provable grounds
– Requires consultation with employee representative organizations

FDI enterprises often lose labor disputes due to missing documents or procedural errors.

Conclusion: Correct understanding is the first step to proper compliance

Labor compliance in Vietnam is a complex and highly detailed system, requiring FDI enterprises to:

– Clearly understand regulations
– Maintain complete documentation
– Conduct periodic compliance reviews
– Establish a dedicated HR–Legal function or outsource these services

Many Japanese enterprises have chosen Back Office Outsourcing services to ensure full compliance and minimize risks when expanding operations in Vietnam.