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Raising the employees’ voice, worth it or not?

“Dialogue at the workplace” and “democracy regulation” may sound like new concepts in Vietnam. But in fact they have been in place in Vietnam since the Labour Code 2012 and remain in force under Vietnam’s Labour Code 2019. So, what are they? And what benefits may companies get from implementing them?

“Dialogue at the workplace” in a nutshell

This is a process of sharing information, consulting, discussing and exchanging views between the employer and the employees or their representatives on issues relevant to their rights, benefits and interests at the workplace. The goal of this approach is to facilitate a forum for communication between the employer and its employees to find solutions for matters of common concern.

Companies are required to hold annual dialogues with the employees. In addition, dialogues need to occur on an ad-hoc basis (i) upon the request of the company or its employees or (ii) in circumstances required by law, such as issuance of a work performance evaluation policy, labour restructuring, issuance of a labour usage plan in the events of downsizing, formulation of pay and bonus scale, issuance of internal labour rules, and temporary suspension of work. Voluntarily, the company and its employees may also discuss such matters as the status of the company’s business; working conditions; the performance of employment contracts, collective bargaining agreement or internal labour rules; and other matters of mutual concern.

The procedural arrangements on how to implement the dialogues at the workplace (and thus further detail on the foregoing matters) are necessarily set out in the company’s “democracy regulation”.

“Democracy regulation” in a nutshell

The democracy regulation is the source of procedural guidance for implementing the dialogues at the workplace. This is a set of provisions on rights and responsibilities of the employees, the employer and the employees’ representative organisation with respect to various matters which the law requires to be disclosed to the employees and which the employees are allowed to know, provide their views on, make decisions on, and inspect and/or supervise the performance of (depending on the matters involved). Companies with more than ten employees are required to issue a democracy regulation.

Should these requirements be complied with?

A “yes” answer seems obvious given that these are required by law. Yet, as the sanction for violations is minimal, companies often accept the administrative sanction risks in order to limit disclosure of business information to employees and employees’ interference with the company’s business. That’s exactly the situation here. Failure to comply with these requirements are subject to administrative fines of up to VND12 million – a quite minimal amount for most companies. That said, if companies implement these requirements, there are some additional benefits:

  • Compliance with these requirements will make a company more ethically attractive from a ESG perspective. More and more investment funds make decisions on investment in Vietnamese enterprises based on ESG criteria. We have witnessed this trend in our recent Vietnam M&A transactions. In particular, ESG due diligence review conducted by fund investors have very often identified the non-compliance with these requirements as things to be fixed.

  • These requirements increase the workplace cooperation between the employer and its employees, helping both sides to find suitable solutions for problems of common concern. There have been a variety of successful examples of workplace cooperation, which contribute to a sustainable growth of the business in the long run, such as those reported by Better Work Vietnam here.