Fixed-term employment contracts are one of only two types of employment contracts currently recognized by law, following the official abolition of seasonal contracts. Understanding the regulations regarding contract duration, number of contract changes, and related legal risks not only helps employees protect their rights but also helps businesses avoid heavy administrative penalties from authorities.
What is a fixed-term employment contract?
According to the regulations at Clause 1, Article 20 of the 2019 Labor Code, A fixed-term employment contract is a type of contract in which both parties clearly define the duration and termination date of the contract. This period must not exceed 36 months from the date the contract comes into effect.
Essentially, this type of fixed-term employment contract has the following specific legal characteristics:
- Time-related characteristics: The agreement term must be between one month and a maximum of 36 months.
- Formal requirements: Both parties must clearly state the start and end dates in a fixed-term employment contract.
- Target audience: Typically used for routine tasks where businesses want to monitor employee workflows or for short-term projects.
Distinguishing fixed-term employment contracts from other types of employment contracts.
In human resource management practice, confusion between different types of contracts can lead to errors in insurance and benefits arrangements. To gain a clearer understanding of fixed-term employment contracts, we need to compare this type of contract with other forms of employment.
| Criteria | Fixed-term employment contract | Indefinite term contract | Seasonal contract (Old) |
|---|---|---|---|
| Duration | From 1 to 36 months | No end date specified | Under 12 months |
| Number of signatures | Maximum of 2 consecutive times | Unlimited | Abolished since 2021 |
| Social insurance scheme | Full participation is mandatory. | Full participation is mandatory. | Often illegally avoided. |
Note: Since the Labor Code 2019 came into effect, the term "seasonal contract" is no longer legally valid. All work agreements, even short-term ones, must be concluded in the form of a fixed-term labor contract to ensure the supremacy of law and the rights of all parties.
Number of times a fixed-term employment contract can be signed under the new law.
Many businesses tend to want to sign these types of contracts repeatedly to avoid employees becoming "permanent employees." However, current laws have very strict regulations on the number of times fixed-term employment contracts can be signed in order to protect the stability of employees.
The principles regarding the number of times a contract can be signed include:
- Renewal principle: When the first contract expires and the employee continues to work, the two parties may only sign one more fixed-term employment contract.
- Consequences of signing too many contracts: If, after signing the second fixed-term employment contract, the employee continues working when the contract expires, the third contract must be converted to an indefinite-term contract.
- Exceptions: Certain groups such as elderly workers, work permit Foreign nationals or members of the management team as employees at the facility may be offered fixed-term employment contracts multiple times, depending on specific agreements.
Risks when businesses sign seasonal contracts instead of fixed-term contracts.
Misusing company names to evade social insurance contributions is a common mistake that plunges businesses into a spiral of legal risks. In reality, this practice... Businesses that sign seasonal contracts should take note. Transitional provisions to avoid violating the law. Through the process of assisting in reviewing the use of fixed-term employment contracts for many units, experts at MAN – Master Accountant Network It has been observed that these violations are often detected very quickly during routine insurance audits.
Penalties for businesses that violate contract and insurance regulations.
Below are the administrative and criminal penalties applied to businesses that intentionally violate regulations regarding fixed-term employment contracts:
- Administrative penalty: Basis Decree 12/2022/ND-CP, The act of evading or failing to pay sufficient social insurance contributions for employees under fixed-term employment contracts will be subject to a fine of 50-70 million VND.
- Financial recovery: According to Clause 1, Article 41 of the Social Insurance Law 2024, businesses must pay the full amount of evaded contributions along with interest equal to twice the average investment interest rate of the social insurance fund in the previous year.
- Criminal liability: For systemic violations related to fixed-term employment contracts, commercial legal entities may be prosecuted. Article 216 of the Penal Code with fines of up to 3 billion VND.
Rights of employees when entering into a fixed-term employment contract
When signing a fixed-term contract, employees need to be aware of their fundamental rights and benefits. The law stipulates that there should be no discrimination in basic rights when entering into fixed-term employment contracts between short-term and long-term employees.
Key rights that employees need to know
- Insurance coverage: Employees are entitled to full social insurance, health insurance, and unemployment insurance from the second month of employment upon signing a fixed-term employment contract (for a term of 1 month or more).
- Salaries and bonuses: The salary in a fixed-term employment contract must not be lower than the regional minimum wage stipulated by the State and must be paid on time.
- Leave and workplace safety: Employees are entitled to at least 12 days of annual leave for normal work and will be provided with all necessary protective equipment throughout the duration of their fixed-term employment contract.
Standard procedure for drafting a fixed-term employment contract template.
To ensure a contract has the highest legal validity and avoids unnecessary disputes in court, the drafting process requires special attention to mandatory clauses. According to advice from the MAN – Master Accountant Network team, standardizing the content of fixed-term employment contract templates from the outset helps businesses optimize risk management costs.
Essential elements of a fixed-term employment contract template.
A complete contract should contain the following key information.
- Identifying information: Full name, personal identification number (CCCD), permanent address, and information of the legal representative of the enterprise entering into the fixed-term employment contract.
- Job description: Clearly state the job title, department, and key responsibilities to serve as a basis for performance evaluation.
- Term and working hours: The term of the fixed-term employment contract must be specifically stated, indicating the start and end dates. Working hours shall not exceed 8 hours per day.
- Benefits package: Details of base salary, hazardous work allowances, fuel allowance, telephone allowance, and the periodic salary review schedule for employees with fixed-term employment contracts.
Frequently Asked Questions about Fixed-Term Employment Contracts
Does a fixed-term employment contract include a probationary period?
After signing two fixed-term contracts, what type of contract should be signed next?
Can a business unilaterally terminate a contract before its expiration?
What happens to the contract if the company doesn't give notice when it expires?
How much notice do employees need to give when their contract expires?
Conclude
Strict adherence to regulations regarding fixed-term employment contracts is not only a legal obligation but also a foundation for businesses to build a sustainable work environment. In the context of increasingly stringent social insurance regulations, partnering with professional consulting firms like MAN – Master Accountant Network will help businesses improve their personnel records, minimizing the risks of penalties and disputes related to fixed-term employment contracts.
Contact information for MAN – Master Accountant Network
- Address: 19A, 43rd Street, Tan Thuan Ward, Ho Chi Minh City
- Mobile/Zalo: 0903 963 163 – 0903 428 622
- Email: man@man.net.vn
Content production is overseen by: Mr. Le Hoang Tuyen – Founder & CEO of MAN – Master Accountant Network, CPA Vietnam auditors with over 30 years of experience in accounting, auditing, and financial consulting.
