5 biggest HR challenges in Vietnam for foreign companies in prevalent practices

Tra Mac

May 4, 2021

Currently, the labour market in Vietnam has basically met the general requirements of the economy. However, the Covid – 19 put a large change to the general HR activities in Vietnam resulted in a chain of difficulties in doing business in the market. So, here are 5 biggest challenges of doing business in Vietnam for foreign business related to HR activities:

1. Low proportion of labors with vocational and skills training putting challenges of doing business in Vietnam

As of 2019, according to the General Statistics Office, in the whole country, the number of people with vocational training and skills (with elementary qualifications or higher) accounts for only 22.8% of the total workforce. The proportion of workers without degrees / training certificates in FDI enterprises accounts for nearly 80% of employees and this proportion has almost unchanged from 2011 up to now.

This number is still very low compared to the current socio-economic development requirements and also lower than the target set. Moreover, the labor force training structure still has many irrationalities. The number of workers with professional secondary education and technical workers is too insufficient compared to the requirements. This number mainly concentrated in big cities and urban areas.

2. Lacking of quantity and quality make challenges of doing business in Vietnam

In general, the knowledge workforce in Vietnam is still poor in both quantity and quality compared to the world and the region. The group of science and technology workers has not met the requirements of deploying new technology, lacks the goals of industrialization and modernization. The group of business management workers in the private sector has little opportunity to be trained, so they have little knowledge about the market and market mechanism, while the demand for this type of labor is becoming increasingly scarce and fierce by market pressure, competition and integration. Vietnam has a serious shortage of high-tech and high-level service workers, especially in finance, auditing, law and mostly industry. FDI enterprises are in desperate need of high quality human resources in Vietnam right now.

3. Indiscipline labour is one of the challenges of doing business in Vietnam regarding to HR activities

Most of Vietnam’s current labor force has not yet been trained in industrial labor discipline. Most of the labours come from rural areas, still carry the “heavy and slow” working style of small farm agriculture, and are arbitrary in terms of time and behavior. Employees lack teamwork capacity, are unable to cooperate and bear risks, are afraid to promote personal initiatives and share work experience. Most of the FDI enterprises have to spend a lot of time just to retrain the style of workers before recruiting to work officially.

4. Covid – 19 make labour management struggled

One of the important reasons that FDI enterprises choose Vietnam as the destination when moving factories from China is an abundant human resource with high skills that can meet the requirements of this business.

However, with a huge number of employees, to both train and build a skilled workforce, develop a long-distance development and ensure smooth production and business activities between departments in the factory. not a small challenge for human resource management in companies.

According to the General Statistics Office report, as of December 2020, there were 32.1 million people aged 15 years adversely affected by the pandemic, including job loss, job leave, and rotating leave. , reduce working hours, reduce income … 2021 is also a time when businesses are undergoing many changes and spend most of their time and budget on training and developing core staff, engaging and building a corporate culture, bringing technology applications into corporate management to be more proactive and find new growth opportunities in this challenging Covid-19 period.

As for the management work in factories, factories of multinational companies where the total human resources are hundreds of thousands of employees, working in conveyor belts, different groups, groups, in blocks. Office and factory block, obviously, there will be difficulties, limitations and lack of heterogeneity in communication and internal communication leading to ineffectiveness at work.

5. HR restructuring during Covid – 19

Article 36.10 of the 2012 Labor Code (valid tillJanuary one, 2021, once it’ll get replaced by the new 2019 Labor Code) permits employers to terminate the labor contracts of staff within the case of layoffs/redundancy thanks to“restructuring, changes in technology, or economic reasons.” Decree No. 05/2015/ND-CP of the govt. dated January 12, 2015, as amended on United Nations Day, 2018, more defines economic reasons to incorporate depression or recession. Thus, it might be argued that if the COVID-19 pandemic has led to a recession (which presently is true in Vietnam), then terminations via layoffs would be excusable.

However, below Vietnam’s labor law, if 2 or a lot of staff square measure created redundant, the leader should formulate a “labor usage plan” for the restructuring, distinguishing WHOare leaving behind, and send this to the nativebrotherhood, or the employer’s own brotherhood, if it’s one. The leader should then await the trade union’s consent, which, in apply, might take 2 months or a lot of.

Some native trade unions might not offer a transparent opinion on whether or not they consent to the provided labor usage set up, however can instead merely reply that the corporation is needed to formulate and implement a labor usage set up in accordance with the applicable laws and rules of Vietnam. If this can be the case, the leader might have to figure once more with the native brotherhood, which is able to take time beyond regulation.

The provincial labor authority should then be notified of the employees’ termination a minimum of thirty days before the terminations occur. Thus, the timeline for such restructuring is often terribly long.

Each worker leaving behind should receive one month’s wage p.a. of service (which doesn’t embrace the time that the workers participated in state insurance)—and a minimum of 2 months’ salary—as payment thanks to termination as a result of redundancy.

Due to the impact of the Covid-19 outbreak, there are many changes in HR activities in the Vietnamese market, this is a big challenges of doing business in Vietnam, putting challenging the acumen and flexibility of the business in human resource management. Please contact us if you’re in need of comprehensive support by leading experts in the field!

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