The document discusses the obligations of employers under Vietnamese labor law regarding internal trade unions. It answers four questions: 1. Employers are not legally obligated to set up an internal trade union, but they must allow employees to establish one if requested. 2. While establishing a union has disadvantages like paid time for union activities, it has advantages like involvement in company decisions and retaining a portion of paid union fees. On balance, it is advisable for most employers. 3. Employers must pay annual trade union fees of 2% of the salary fund regardless of whether a union exists. Fees support union activities in the company or at higher levels. 4. Employers are not required to amend

1. THE INTERNAL TRADE UNION: TO BE OR NOT TO BE, MUST HAVE OR NOT?
Author: Oliver Massmann
On a beautiful day, a Hanoi-based enterprise received an unannounced visit from some State officials who
requested that enterprise to, among other points, set up its own internal trade union, pay trade union fees and
register amendments to its current internal labor rules in accordance with the new
Labor Code (2012). The enterprise, in operation, is somewhat confused about the requests of these officials.
That enterprise is definitively not the lonely star. Many employers have expressed their concerns about similar
situations since the adoption of the new Labor Code and recent guidances on trade union issues. With a view
to clarify these employment-related issues, we set out below our comments on the same in the form of Q&A:
Question 1
Is it a statutory obligation for a company to set up an internal “grassroots” trade union (the “Trade Union”)
in accordance with the Labor Code?
Answer 1
The Answer is No.
Legally speaking, the employer, does not have any obligations to set up a Trade Union. Rather, establishment
of a grassroots trade union is considered a right of employees in enterprises that have 05 employees or more.1
The trade union of the higher level (i.e. – district level (the “HLTU”)) is responsible to”create favorable
conditions” for employees to join the trade union and/or establish a grassroots trade union in their workplace.
Having said that, the employer is however obliged by law to create favorable conditions for the establishment
and operation of an internal trade union if so requested (the “Trade Union”) which, simply put, means that
the employer must not prevent its employees or the HLTU from setting up an internal Trade Union).2
Question 2
If the employer is not required to act to establish an internal Trade Union, is it anyway advisable for the
employer to pro-actively press its employees to establish?
Answer 2
There is no absolute answer to this question and each employer need to consider in light of its actual facts.
Broadly speaking however, our view is that it is likely that the advantages of having an internal Trade Union
outweigh the disadvantages.
1
Article 189 of the Labor Code (2012) (the “Labor Code“)
2
Article 192 of the Labor Code.

2. 2
Firstly, pursuant to the new Labor Code, involvement of the Trade Union is compulsorily required for many
labor-related decisions of the employer as an employer (i.e. - registration of / amendment to ILR, preparation
of salary scales, bonus regulations, application of disciplinary measures etc.). In the absence of an internal
Trade Union, the employer is obliged to deal with the HLTU on those points which is likely to be more time
consuming and difficult in practice than dealing with its own employees in an internal Trade Union.
Secondly, the employer is still required to pay trade union fees regardless of whether or not it has an internal
Trade Union. In other words, the employer cannot avoid the obligation to pay trade union fees on the ground
that it does not have a trade union (see below for more on the fee). Interestingly, if the employer has its own
internal Trade Union, 65% of the trade union fees (payable by employer) and 60% of the trade union
membership fees (payable by employees) may be retained at the employer to fund activites of the internal
Trade Union.
One major disadvantage of having an internal Trade Union is that the employer must allow members of the
Trade Union to use working hours to conduct trade unions activities (i.e. - from 12 to 24 hours per month
depending on position of the relevant Trade Union members). In addition, it is very difficult to terminate
employment of “part-time trade union cadres” (i.e. persons being appointed as a sub-chief of the Trade
Union).3
Question 3
Is the employer required to pay “trade union” fees regardless of whether it has the Trade Union? If yes, how
much it has to pay?
Answer 3
Yes. The amount payable by the employer as employer is 2% of the salary fund used to calculate social
insurance of its employees (Article 26.2 of the Law on Trade Unions) (the “Trade Union Fees”). In addition,
a further 1% trade union membership fee (the “TU Membership Fee”) will be paid to the HLTU as the
higher-level trade union. Our understanding is that not all employees are required to pay that 1% TU
Membership Fee but only members of the internal trade union of the relevant company.
The Law on Trade Unions itself does not expressly require enterprises that do not have any trade unions to
pay Trade Union Fees. However, with the adoption of Decree 191,4
all enterprises are clearly required to pay
Trade Union Fees regardless of whether or not they have an internal Trade Union.5
An important note is that 65% of the Trade Union Fees and 60% of the TU Membership can be kept by the
internal Trade Union, if any.6
3
Tổ phó” in Vietnamese. Article 24 of the Law on Trade Unions dated 20 June 2012 (“Law on Trade Unions”) and
Article 192 of the Labor Code.
For employers without Trade Unions, the higher-level trade union body retains
4
Decree 191 dated 21 November 2013 on detailings trade union finance (“Decree 91”).
5
Article 4.
6
Article 6.1 of Decision 270/QĐ-TLĐ of the Vietnam General Confederation of Labor dated 7 March 2014 (“Decision
270”).

3. 3
the entire amount of fees, ostensibly for the purposes of facilatiation of grassroot trade unions, development of
trade union members in relevant enterprises, etc.7
Question 4
Is the employer required to amend its current ILR to reflect the new Labor Code and register the same with
the Department of Labor, Invalids and Social Affairs (“DOLISA”)? If not, is it anyway advisable for the
employer to take such steps?
Answer 4
We are NOT aware of any legal document requiring enterprises to amend and register their existing ILR to
reflect the new Labor Code within a specific deadline.
However, you are strongly advised to amend the ILRs as soon as possible to incorporate changes under the
new Labor Code (2012) and more importantly use the amended ILRs as the main legal basis to impose labor
disciplinary measures on any violating employees. Failure to do that will make it difficult in practice to apply
the current ILR.
If you have any question, please contact me via: omassmann@duanemorris.com;
7
Article 6.1 of Decision 270.