The streets are empty, and the quiet blowing of the wind is undisturbed even by the sound of a footstep. Despite having a population estimated at 13 million people, not a human voice or the rumble of a car motor can be heard in Ho Chi Minh City. The bustling metropolis has been transformed into a quiet country town. While this silence is in many ways beautiful, it is also heart-rending. It signifies the cessation of business and trade which has resulted in the closure of once thriving businesses that supported the local economy
The city has been largely locked down since mid-June 2021, in an effort to fight the challenging fourth wave of the Covid-19 pandemic. As the lockdown continues into its third month, with no sign of ending, many businesses are forced to cut costs to ensure their survival.
In this article, we explore the various options available to employers to cut labor costs, as well as government relief measures to support both workers and employers.
1. Temporary Measures
Many businesses remain hopeful that the lockdown will soon end and their normal operations will resume in a matter of weeks or months. Thus, they may wish to take temporary measures to cut their labor costs while retaining their staff members. However, even those businesses which intend to permanently reduce their workforce are recommended to first implement temporary measures, as this strengthens the legal basis if they must ultimately terminate some of their employees, explained in further detail below.
(a) Unilateral Measures
Vietnam is an extremely pro-employee jurisdiction, thus there are few actions that employers can undertake to reduce employee salaries, benefits, or working time without employee consent. The only temporary measures an employer may take without employee consent are: (i) temporarily reassigning employees to other positions; (ii) suspending employees on the basis of force majeure; or (iii) forcing employees to take their annual leave.
(i) Reassigning employees to different job positions
Employers who are impacted in a more minor manner may consider temporarily reassigning employees to other job positions. This option may be useful if the employee's regular job requires a physical presence or is otherwise impeded by the prolonged lockdown. The business may be able to find another way for the employee to contribute productively, or at least reduce the employee's salary on a temporary basis.
An employer may reassign an employee to another job position due to the occurrence of a force majeure event, which includes epidemics, or due to business demands, provided business demands are defined in the employer's registered internal labor regulations. According to Official Letter No. 1064/LDTBXH-QHLDTL issued by the Ministry of Labor, Invalids and Social Affairs (MOLISA) on March 25, 2020, to guide salary and other payments during work stoppages due to the Covid-19 pandemic, if an employer wishes to rely upon the epidemic as a reason to reassign the employee, the employer must have been ordered to temporarily suspend their business operations under a decision from a competent State authority, causing difficulties for the employer such as problems sourcing raw materials and selling products. On the other hand, if the employer has not been subject to an explicit order to suspend operations, but has instead been indirectly affected, it must instead rely upon the reason of "business demands" to transfer employees.
Employees must be provided with three working days' notice and may be temporarily reassigned for up to 60 working days in one year. For the first 30 days, employees must receive their same salary and after this time, employees' salaries may be reduced by 15%. At the end of the 60 working days, if the employee refuses to continue the reassignment but the employer cannot return the employee to his or her regular position, the employer may then suspend the employee's employment, described in further detail below.
(ii) Suspension of employment
Suspending the employment of the employees is a much more drastic measure, but may be necessary in order to comply with government orders. The MOLISA has recently released an official letter clarifying the circumstances when an employer may suspend the work of the employees, and at the same time, cut the pay of its employees.
In Official Dispatch No. 264/QHLDTL-TL dated July 15, 2021, the MOLISA clarifies the circumstances that would constitute a suspension due to an epidemic, listed as a reason where any employer may unilaterally suspend its engagement with employees under Article 99.3 of the Labor Code. An employer may suspend employment due to the epidemic in cases where: (i) employees are subject to medical isolation; (ii) the workplace or residence of the employees is blocked as required by the competent authorities; (iii) the competent authorities have requested the company or specific departments to suspend operations; (iv) the company or department cannot operate because other employees or the employer are under medical isolation, so cannot come to work.
For a work suspension in these cases, wages may be paid as follows: (i) if the suspension is 14 days or less, the negotiated wage must be at least the regional minimum wage; or (ii) if the suspension is longer than 14 working days, the wage will be negotiated between the parties, but for the first 14 days it must be at least the regional minimum wage.
While the law specifies that a negotiated wage must be paid, it is not clear if some amount must be paid, or whether the negotiated amount can be nothing.
(iii) Forcing employees to take annual leave
If the suspension of work is anticipated to be very temporary, forcing employees to take their annual leave is the most preferable option. Under the Labor Code, an employer may decide the annual leave schedule after consulting with the employees and notifying them of the same. Thus, employers should first hold a meeting with the employees and explain the situation to them and gather their opinions, but after this meeting, the employer is entitled to unilaterally make a decision on the annual leave schedule.
The employer is also required to provide notice; thus this option cannot be implemented immediately. While the amount of notice required to be provided to employees is not specified in the law, we recommend providing at least one week's notice of the annual leave schedule.
Implementing this option would not save a business any money, as employees must be paid throughout their annual leave, but it could ensure that once operations resume normally, employees can fully devote themselves to increasing productivity and contributing to the business.
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.
