10 Labor compliance mistakes most commonly made by FDI enterprises in Vietnam

Date: 2026.01.30

Vietnam is becoming an increasingly attractive destination for foreign investors, especially from Japan, South Korea, and Europe. However, according to reports from the Inspectorate of the Ministry of Labor, Invalids and Social Affairs (MOLISA) and the Department of Work Safety, more than 65% of FDI enterprises experience labor and occupational safety violations within their first 1–3 years of operation.

These issues often stem from differences in legal systems, management culture, interpretation of laws, or a lack of personnel familiar with Vietnamese regulations.

Below are the 10 most common labor compliance mistakes, compiled from official sources and practical experience supporting FDI enterprises in Vietnam.

1. Failure to establish and register Internal Labor Regulations

Under Vietnamese law, enterprises with 10 or more employees are required to issue written Internal Labor Regulations and register them with the Department of Home Affairs.

Many FDI companies mistakenly believe that parent-company policies can be applied directly in Vietnam → leading to serious risks in labor disputes.`

Consequences:

– Labor disciplinary procedures become invalid

– High risk of losing labor disputes

– Administrative penalties

2. Improper use of Labor Contracts

Common mistakes:

– Failure to sign labor contracts on time

– Failing to notify employees of contract types

– Improper use of seasonal contracts

– Using English-only contracts without a Vietnamese version

According to the 2019 Labor Code, labor contracts must clearly define employees’ rights, obligations, benefits, and working conditions in Vietnam.

3. Violations of working hours and overtime (OT) Regulations

Vietnam has strict OT regulations:

– Maximum 40 hours/month

– Maximum 200 hours/year (300 hours for certain industries)

FDI enterprises accustomed to high OT often violate:

– Incorrect OT rate calculations

– Failure to arrange compensatory rest

– No written consent from employees

According to MOLISA, 46% of FDI violations relate to working hours and rest time.

4. Failure to conduct periodic workplace dialogues

Vietnamese law requires:

– 1–4 workplace dialogues per year

– Establishment of a dialogue committee in accordance with regulations

Many FDI companies fail to conduct dialogues due to lack of understanding → resulting in labor relations violations.

5. Failure to Register Salary Scales or Improper Salary Structure

Enterprises must:

– Establish salary scales

– Publicly disclose them internally

– Maintain records in accordance with regulations

Incorrect base salaries, lack of job classification, or improper allowances can lead to complaints, disputes, or social insurance back payments.

6. Violations Related to Social, Health, and Unemployment Insurance

Common violations include:

– Incorrect salary bases for insurance contributions

– Late or insufficient contributions

– Failure to register employees on time

According to Vietnam Social Security, thousands of FDI enterprises are inspected and penalized each year.

7. Incomplete Occupational Safety and Health (OSH) Documentation

FDI enterprises, especially in manufacturing, often lack:

– Risk assessment records

– Workplace accident logs

– Periodic OSH reports

– Safety training records by employee group

According to the Department of Work Safety, OSH deficiencies are the leading cause of penalties for FDI manufacturers.

8. Failure to Establish or Properly Cooperate with Grassroots Trade Unions

Many FDI enterprises:

– Do not fully understand union rights

– Fear “complications”

– Fail to organize employee conferences

Vietnam’s Trade Union Law clearly defines enterprises’ coordination responsibilities.

9. Failure to Submit Labor Reports on Time

Including:

– Occupational accident reports

– Semi-annual and annual labor usage reports

– Labor change notifications

10. Missing labor reports is the most common mistake among newly established FDI enterprises.

Improper Labor Disciplinary Procedures

Japanese enterprises often apply shitsuke (Japanese-style discipline), which may not comply with Vietnamese law.

Common mistakes include:

– No violation records

– Failure to notify the Trade Union

– Incomplete disciplinary meeting participants

– Lack of evidentiary proof

Improper discipline → decisions become invalid, causing major losses in disputes.

COMPREHENSIVE SOLUTIONS TO PREVENT & REMEDY VIOLATIONS

1️⃣ Standardize All Labor Documents & Processes

– Establish, review, and register Internal Labor Regulations

– Draft labor contracts tailored to positions and contract types

– Complete salary scales, wage, bonus, and allowance policies

2️⃣ Strict Control of Payroll, OT, and Social Insurance

– Correct OT calculation and working-hour limits

– Ensure accurate and timely insurance contributions

– Prevent arrears, penalties, and labor disputes

3️⃣ Build a Structured Labor Relations Management System

– Organize periodic workplace dialogues

– Properly cooperate with Trade Unions

– Establish transparent internal communication processes

4️⃣ Complete OSH Documentation & Mandatory Reporting

– Establish and review OSH documentation

– Timely labor reporting with correct templates

– Reduce inspection and compliance risks

5️⃣ Proper Legal Labor Discipline Procedures

– Establish lawful disciplinary processes with clear evidence

– Minimize litigation risks, compensation, and prolonged disputes

Conclusion: FDI Enterprises Must Standardize Compliance from Day One

Vietnam’s labor legal framework is detailed, procedural, and documentation-intensive.
FDI enterprises—especially Japanese companies—face risks due to:

– Management culture differences

– Unfamiliarity with documentation requirements

– Lack of Vietnam-law-experienced HR/Back Office teams

An effective solution for new investors in Vietnam is outsourcing Back Office – HR – Legal services for comprehensive compliance.

🎯 Key Benefits

– Systematic compliance with Vietnamese labor law

– Reduced legal risks and hidden costs

– Focus on core business activities

– Alignment with FDI governance models, especially Japanese enterprises