ASEAN Employment Legal Update 2017 #Q2

Regional Legal Update on Labor and Employment Law Issues

DFDL’s Employment Practice Group is dedicated to advising clients on employment and labor issues, and preparing human resources documentation compliant with local law.  Our employment team’s in-depth knowledge of the law and practices in the countries in which we operate allows us to provide specialized, practical advice on issues that arise in employment relationships.  The head of our regional Employment Practice Group is Danyel Thomson, who has been with DFDL for over nine years and has worked in our Laos, Thailand, and now Myanmar offices.  This legal update serves to advise you on important legislation and employment issues in the region.


Prevention of Narcotics in the Workplace

Guideline No. 008/17, dated 14 February 2017

The purpose of Guideline No. 008/17, issued by the Ministry of Labor and Vocational Training (“MLVT”), is to notify relevant parties, including employers, employer associations, employees, unions, and shop stewards, to jointly implement their respective duties in order to effectively combat illegal narcotics in the workplace, in accordance with the initial phase (1 January to 30 June 2017) of Plan No.1 of the Royal Government of Cambodia, dated 13 December 2016, on Mechanisms to Combat Illegal Narcotics in the Workplace.

With support provided by the labor inspectors and the Departments of Labor and Vocational Training, enterprises which have not yet formed an HIV/AIDS committee, must now do so in due course. The composition of the HIV/AIDS committee must include representatives of the union(s), shop stewards, or employees. This guideline also imposes additional duties on HIV/AIDS committees with respect to combating illegal narcotics in the workplace.

Under this guideline, employers must cooperate with employees, unions and shop stewards to adopt plans to prevent the usage and sale of narcotics in the workplace. All enterprises are required to display slogans in the workplace, such as “Say no to drugs,” “Keep the workplace clean and drug free,” “Drugs destroy our Lives and our Workplace,” or “Employer and Employees working together in the fight against drugs.”

This Guideline also instructs employers, unions, and shop stewards or employees’ representatives to hold joint consultations in situations where an employee is found to have used narcotics in the workplace, in order to assist such an employee in receiving treatment and rehabilitation without discrimination.


Regulation on Pay Structures and Wage Scales

The Ministry of Manpower’s Regulation No. 1 of 2017 on Wage Structure and Scales (the “2017 Wage Scale Regulation”) issued in March 2017 obliges all companies in Indonesia to inform individual employees of the wage structure and scales for the functions or positions of those employees based on their roles. The 2017 Wage Scale Regulation replaces the previous regulation the Decree of Ministry of Manpower (MOM) No. 49 of 2004 (the “2004 Wage Scale Regulation”). According to the 2017 Wage Scale Regulation, Companies that have not formulated a wage structure and scale must do so by 23 October 2017.

One of the essential differences between these two regulations concerns the preparatory steps required to establish a wage structure and scale. The 2017 Wage Scale Regulation sets out much clearer analysis and evaluation of the employment positions, and it is far more definitive in terms of the determination of wages and scales than its preceding legislation.

The requirement of putting wage structures and scales in place is aimed at creating certainty for employees regarding their wages, and to reduce large disparities between low and high salaries for employees with similar positions, titles, or duties. Failure to fulfil these requirements will render an employer liable to possible administrative sanctions by the government such as:

a. written warnings;

b. restrictions on business activities;

c. temporary removal of all or part of production equipment; and

d. termination of business activities.

Companies must present their wage structure and scale to the MOM when they seek to register their company regulations. As company regulations in Indonesia must be registered with the MOM in order to be valid, the inclusion of a wage structure and scale is now compulsory.


Amended Investment Promotion Law – Additional Rights and Incentives

While there has not been any significant employment-related legislation passed since our last update, the new Investment Promotion Law (No. 14/NA, 17 November 2016) (the “Amended Investment Promotion Law”) provides investors with some additional incentives and rights relevant to employment matters in the Lao PDR.

Article 9 of the Amended Investment Promotion Law allows for investors who invest in certain sectors to avail of certain promotion incentives (in the form of tax and duty exemptions) provided that: (i) the investment value is more than LAK 1.2 billion; (ii) the investor employs at least 30 Lao technical staff; or (iii) employs 50 or more Lao employees under employment contracts of at least one year’s duration.

In the event that investment activities require the import of physical labor or technical personnel exceeding the permitted foreign labor quota as provided in the Law on Labor (No. 43/NA, 24 December 2013) (the “Labor Law”), Article 69 of the Amended Investment Promotion Law permits the investor to apply to the (yet to be established) Investment One-Stop Service Office which will consider the request with the assistance of the (yet to be established) Investment Promotion and Management Committee.

Additionally, under Article 70 of the Amended Investment Promotion Law, foreign investors and their families have the right to reside within the territory of the Lao PDR “throughout the term of investment”. It remains to be determined whether this provision is intended to supersede Article 45 of the Labor Law which provides a maximum stay period of 12 months for foreign employees, which can be extended each year up to a maximum of five years.

The Amended Investment Promotion Law entered into force on 19 April 2017.


Update on Requirement to Use Standard Employment Contract

As stated in our Q.1 update, in August 2015, the Ministry of Labor issued Notification No. 1/2015, requiring all employers in Myanmar to use the Standard Employment Contract (“SEC”) as the employment contract with their employees. Using the SEC presents challenges for employers, given that the SEC does not account for varying levels of employees, and is overly prescriptive in some of its terms, which have no basis in legislation. The inability to freely add provisions within an appendix to the SEC means that employers must decide whether to leave out important provisions of management level contracts, e.g., non-compete clauses, non-solicitation; or, utilize their internal template contracts and not submit them to the Township Labor Office (“TLO). The alternative is to have two different contracts – one submitted for registration to the TLO, and a separate one including the desired provisions which will de facto govern the employment relationship. None of these options are ideal.

Following months of discussion on the SEC, modifications to this requirement are expected soon. In the interim, following our discussions with one TLO, an employer can now use its own employment contract (“EC”) format provided that all the topics set out in the law are covered in the EC, subject to the employer obtaining prior written consent from the employees. The feedback from the TLO appears to diverge from the ostensible policy on use of the SEC being obligatory, although this is not a formal written directive. This new approach represents a positive change in certain respects, but a number of key outstanding issues remain.

When we contacted the MOL regarding the TLO’s instructions, the MOL officer confirmed that an employer can use its own EC when a new employee joins, and must submit it to the TLO for approval. The TLO may request the employer and employee to appear in person to determine the basis of mutual consent regarding the EC; or the TLO can request further guidance from the MOL.

In summary, the unofficial, updated view from one TLO is that an employer can now use its own EC. However, a draft of the EC must be submitted first for TLO approval. We recommend contacting the relevant TLO first before proceeding with the preparation of an EC.

Furthermore, notable draft employment legislation includes: (i) the draft Workplace Safety and Health Law; and (ii) the Employment and Skill Development Rules, which have been long-awaited since the enactment of the Employment and Skill Development Law 2013.


Cancellation of submission of work rules requirement to facilitate the ease of doing business

In accordance with the Order of the National Council for Peace and Order (“NCPO”) No. 21/2560 re: Law Revision for the Ease of Doing Business, taking effect from 4 April 2017, the previous requirement of submitting work rules to the Department of Labor Protection and Welfare was cancelled. In accordance with the Order of the National Council for Peace and Order (“NCPO”) No. 21/2560 re: Law Revision for the Ease of Doing Business, taking effect from 4 April 2017, the previous requirement of submitting work rules to the Department of Labor Protection and Welfare was cancelled.

As a result, employers are now only obliged to distribute and post the work regulations at the workplace for the employees’ reference and acknowledgement:(i) within 15 days of the date on which the number of employees reaches ten persons, or (ii) within seven days of the announcement of the amendment to work rules. The employer must retain a copy of the work rules at the place of business or at the employer’s office at all times. However, a copy of the work regulations no longer needs to be submitted to the Department of Labor Protection and Welfare.


Compulsory Accident and Occupational Disease Contributions Reduced in Vietnam

On 14 April, the Vietnamese Government issued Decree No. 44/2017/ND-CP stipulating that employer contributions on behalf of employees to the Fund for Work Accidents and Occupational Disease Insurance will be reduced from the current level of 1% to 0.5% of an employees’ monthly salary. This change, in effect since 1 June 2017, will reduce the total compulsory social insurance contributions that are made by employers on behalf of employees from 18% to 17.5%. The Government is expected to undertake another review of the compulsory social insurance contribution rates at the end of 2019, with any change to take effect from 1 January 2020.

The current social, health and unemployment insurance contributions required to be made by employers and employees in Vietnam are as follows:

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