Increasing Overtime Cap – Positive or negative

The Covid-19 pandemic has imposed negative impacts on the production and business situation of Vietnam since the beginning of 2019, in September 2021, the Ministry of Labour, War Invalids and Social Affairs (“MOLISA”) has proposed to the Government to increase the overtime cap higher than the current regulations to help enterprises restore their production and businesses[1]. When this proposal was made, legislators and enterprises, as well as employees, had discussions on whether to increase overtime hours.

Recently, the MOLISA has just proposed to the Government to submit to the Standing Committee of National Assembly for promulgation a Resolution on the overtime cap in a month and that in a year not exceeding 300 hours and not limited to groups of industries and occupations, jobs or cases specified in the Labour Code 2019[2].

Overtime hours according to the current labour laws

Currently, overtime hours of an employee must not exceed 50% of the normal daily working hours; if enterprises apply the regulation of normal weekly working hours, the total normal working hours and overtime hours must not exceed 12 hours per day; must not exceed 40 hours per month[3]. Moreover, the overtime hours of employees must not exceed 200 hours per year. In addition, only for some special cases, enterprises can organise and allow employees to work for no more than 300 hours per year, including[4]: Manufacturing, processing and exporting textile and garment products; Production and supply of electricity; In case of urgent work that cannot be delayed due to seasonality, …

Furthermore, to apply overtime hours of no more than 300 hours per year, enterprises also need to get the consent of employees for overtime work and must notify in writing to the Department of Labour, War Invalids and Social Affairs (“DOLISA”).

What are the benefits of increasing overtime cap?

Benefits for Enterprises

First of all, increasing overtime cap is expected to bring many benefits to enterprises, especially in increasing labour productivity, making up for the shortage of labour force in the post-Covid-19 pandemic period, cutting costs, helping enterprises get rid of the burden of new recruitment and meeting the requirements of customers as well as meet the expectations of the economy demand during the recovery period after the Covid-19 pandemic. Besides, enterprises can also mobilise employees to work overtime in cases where enterprises consider that they need human resources to serve production and business on time without going through complicated and time-consuming procedures such as notifying the Provincial labour management authorities as analysed above.

Benefits for Employees

As for employees, in addition to working overtime according to the mobilisation and organisation of enterprises, employees can also proactively register to work overtime according to their work needs and receive approval from enterprises. Employees will be entitled to receive overtime salary by-laws in case of working overtime, thereby enhancing employees’ employment income, especially for those who have low or middle income.

However, increasing overtime cap is more negatives than positives

In fact, working overtime arises from the agreement between the parties. However, it is the fact that the “voluntary” of employees is only comparative. As the weaker party in the labour relationship, in certain cases, employees agree to work overtime under the organisation and mobilisation of enterprises, which do not completely depend on their voluntary will. Employees also have the right to refuse to work overtime, however, this refusal may lead to negative consequences for employees during their working time at enterprises such as the impact on consideration for promotion in terms of positions, salaries, bonuses, etc… Moreover, enterprises can also take advantage of this to mobilise employees to work overtime to the maximum extent and not recruit new employees to avoid the obligations of labour reporting, paying personal income tax and compulsory social insurance for employees.

On the other hand, according to the current regulations on working overtime, it is difficult for competent State authorities to manage the overtime mobilisation of enterprises. Although before mobilising employees to work overtime from 200 hours to 300 hours in any year, they must notify the DOLISA, some enterprises did not notify or did not comply with their commitments to the DOLISA when organising to work overtime.

Besides, for overtime hours as currently regulated, if working overtime at the maximum level, i.e. continuously for 12 months, the average overtime hours that employees has to work each month would be approximately 17 hours. This high overtime level will greatly affect the health, life balance as well as other social issues of employees such as rearing children, taking courses to improve necessary vocational skills helping increasing productivity.

Careful consideration should be made before issuing specific regulations on increasing overtime cap

It is the fact that under the impact of the Covid-19 pandemic, increasing labour productivity is necessary for economic recovery. Therefore, increasing overtime cap is considered to be only a temporary solution to facilitate economic recovery, not radical and long-term ones. Accordingly, on 15 December 2021, the DOLISA issued Circular No. 18/2021/TT-BLDTBXH (“Circular 18”) stipulating working time, rest time for Employees doing seasonal production, custom work. The introduction of Circular 18 at present has basically and urgently solved the needs of working overtime for seasonal production Enterprises in the fields of agriculture – forestry – fishery – salt production, manufacturing, business that requires immediate harvesting or that must be processed immediately after harvest, or Enterprises that process goods according to orders, depending on the time of delivery.

The MOLISA has not yet issued any other legal documents on the adjustment of overtime cap for enterprises running other fields but has proposed to the Government to submit to the Standing Committee of the National Assembly to issue a Resolution on increasing overtime to no more than 300 hours/year without limitation on groups of industries and occupations. When considering whether to increase overtime hours according to the recommendation of the MOLISA, the Standing Committee of the National Assembly should consider and survey each field and industry to see which areas need to increase overtime hours before adjusting accordingly. As for other professions that need to improve their knowledge and skills continuously, such as lawyers, accountants, engineers, etc., it is necessary to keep the current overtime cap. Because these are professions that need to have time outside of working hours to learn more knowledge and skills by participating in courses to better serve the jobs.

Conclusion

It is undeniable that the adjustment of increasing overtime cap can meet the urgent needs of enterprises. This is especially true in the context that the number of employees who have recently moved to the countryside and do not intend to return to big cities to work is very high, leading to a shortage of skilled workforce because of the negative impacts of the Covid-19 pandemic. Increasing overtime cap can help increase income for employees and thereby attract them to return to work. However, increasing overtime cap can bring more negative consequences to the economy if applied systematically and in the long term. Therefore, the MOLISA should consider and examine thoughtfully before issuing further regulations on overtime hours. Besides, after the Covid-19 pandemic, employees tend to pay more attention to their health so that working longer means to affect their health as well as have a significant impact on decisions backing to their work.

[1] Article 107 of the Labour Code 2019 and Article 60 of Decree 145/2020/ND-CP

[2] Article 107.3 Labor Code 2019 and Article 61 Decree 145/2020/ND-CP

[3] Proposing to increase overtime hours to no more than 300 hours per year for all occupations – Economic Lifestyle of Vietnam & the World (vneconomy.vn)

[4] https://vietnamnet.vn/vn/thoi-su/de-xuat-tang-gio-lam-them-khong-qua-300-gio-moi-nam-779308.html