Question 9: What type of contract do paid internship contracts fall into from the perspective of labour law? If an internship contract is a training contract, must Employers register training activities and comply with the requirements on training programs and teacher’s certificates in accordance with the enterprise law?

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What type of contract do paid internship contracts fall into?

  1. Case 1: One party to the contract is a student expecting graduation and wishing to work as an Intern for the Employer.

In consideration of the regulations of the Labor Code, there are no regulations governing the admission of Interns. However, pursuant to Article 12.6 of the Law on higher education and Article 97 of the Law on education, enterprises may admit Interns who are studying in universities, and they are obliged to create conditions for Interns to practice and do scientific research in order to raise the education quality. In other words, enterprises will help Interns to put the knowledge that they have gained from schools into practice, meaning that they will not be trained to work for the enterprises after the internship ends.

Therefore, if Employers admit Interns in the form as aforesaid, this admission will be governed by the Law on higher education and the Law on education instead of the Labor Code. Accordingly, Employers may admit Interns into their enterprises for the period agreed upon between them and the Interns.

Regarding the regimes and benefits for Interns, the Educational Law does not have any regulation that requires enterprises to provide any benefit for Interns during the internship. Therefore, Employers should consider providing a reasonable allowance for Interns, such as lunch allowance, parking fees, gasoline expenses. corresponding to their capabilities. In reality, to avoid misunderstanding, Employers and Interns may sign an internship agreement which defines the rights and responsibilities of each party during the internship. In the agreement, Employers will set out the following contents: period of internship, job details, and allowances (allowances for lodging and travelling expenses, toxic job). In addition, Employers may buy insurance for Interns voluntarily.

  1. Case 2: One party to the contract is an apprentice with whom the Employer will sign an LC if he/she satisfies the Employer’s requirements at the end of the internship.

Besides the regime to admit Interns as prescribed by the Educational Law, pursuant to Article 62 of the Labor Code, before making the decision to sign LCs with Employees, Employers may require Employees to pass a period of apprenticeship at their premises (becoming an “apprentice”). In the training period, Employers and apprentices must sign training contracts with the key contents prescribed in Article 62 of the Labor Code, specifically: job to train; training position, training period; training costs; the period for which Employees undertake to work for Employers after being trained; the responsibility to re-pay training costs and the Employers’ responsibilities.

Accordingly, Employers can only admit apprentices under training contracts instead of internship contracts since the Labor Code does not have any regulation that governs the signing of internship contracts. Furthermore, training contracts are different from seasonal LCs since seasonal LCs are construed as being made between Employers and Employees and constitute an official employment relationship which is binding on the concerned parities (e.g. salary, obligation to pay compulsory insurance etc.) By comparison, the relationship between Employers and trainees is just a relationship between trainers and apprentices, instead of the one between Employers and Employees.

Regarding the regimes and benefits for apprentices during the apprenticeship, Employers should note the following points:

  • Training period: The Labor Code does not have any regulation that limits the training period, but in practice this period usually lasts no more than 12 months. Employers and apprentices may agree on a training period that is in line with the Employers’ policies;
  • Salary in the apprenticeship
  • Article 61.2 of the Labor Code prescribes that: “In the apprenticeship, if apprentices directly get involved in the production to make products in compliance with specifications, they will get paid with the salaries as agreed by both parties”. Therefore, depending on the apprentices’ working capacity during the training period, Employers must pay them a reasonable salary as agreed by the parties;
  • While the labour law allows the parties to agree on a salary level in this case, to avoid legal risks in the future (such as if apprentices complain about their salaries), Employers should consider paying them a salary at least 7% higher than the area minimum salary prescribed by the Government (as this job may be seen as a form of labour through training activities provided by enterprises which have self-training programs as prescribed in Article 7.3. (b) of Decree 49/2013/NĐ-CP);
  • Of note, other than the salary that Employers must pay to apprentices during the training period, the Labor Code does not have any regulation that requires Employers to provide other allowances for apprentices. Therefore, regarding other amounts such as lodging and travelling costs, Employers may consider providing support for apprentices if necessary.
  • Annual leave
  • Article 111 of the Labor Code prescribes that: “Employees who have spent full 12 months working for Employers shall be entitled to annual leave with full pay”. For Employees who have worked for less than 12 months, the period of annual leave shall be calculated as a ratio corresponding to the time spent working. As such, the right to annual leave will be applied to Employees who have signed LCs with Employers;
  • Therefore, since apprentices must go through a training period before they can sign LCs (if they meet Employers’ requirements), they are not the subjects entitled to annual leave during the training period. However, if they are accepted to work as the enterprise’s Employees after that, the training period will be added to the working time to calculate their annual leave days.
  • Compulsory insurance
  • Similar to the rule on applying annual leave, pursuant to Article 2.1 of the Law on SI, Article 43.1 of the Law on employment, and Article 12.1 of the 2008 Law on HI as amended and supplemented in 2014, only after apprentices have signed LCs with Employers, Employees will become the subjects who must participate in compulsory insurance. Accordingly, since apprentices are not the subjects who must participate in compulsory insurance, enterprises will not be obliged to pay compulsory insurance premiums for apprentices during this time;

Also, Employers will not have to pay, at the same time of salary payment, an amount equivalent to the compulsory insurance premiums as prescribed in Article 186.3 of the Labor Code as this regulation is only applicable to the subjects who are the enterprise’s Employees but are not required to participate in compulsory insurance as prescribed by the Law on SI.

At the end of the training period, pursuant to Article 61.3 of the Labor Code, Employers and apprentices must sign LCs if all the requirements are met. However, the Labor Code does not govern the case where apprentices cannot meet all the requirements of the job at the end of the apprenticeship, whether it is possible for Employers to extend the training period or sign probationary contracts with apprentices to provide further training. In practice, the state authorities on labour management have pretty strict opinions for this case since they worry that Employers may abuse this regulation to extend the training or probationary period prior to signing LCs. Employers will almost certainly have to sign LCs with apprentices without the right to extend the training period or sign probationary contracts. Therefore, Employers must carefully consider entering into training contracts with apprentices, and set out a reasonable training period that is appropriate for the enterprise’s business activities.

  • If an internship contract is a training contract, must Employers register training activities and comply with the requirements on training programs and teacher’s certificates in accordance with the law?
  • Must Employers register their training activities?
  • Pursuant to Article 61.1 of the Labor Code, Employers who recruit people to their training programs to work for them will not have to register the training activities and must not collect training fees. So, enterprises which provide training activities for apprentices (not collect fees) before accepting them as official Employees will not have to register their training activities;
  • In addition, Article 10.3 of Decree 139/2006/NĐ-CP guiding the implementation of some articles of the Educational Law and the Labor Code prescribes the case where enterprises recruit people to their training programs to work for them for the period specified in the training contracts, they are not required to register training activities. Of note, Decree 139/2006/NĐ-CP is to guide the implementation of the Educational Law and the 2002 Labor Code (this Code is not valid anymore), but this Decree has not yet been abolished or superseded by any other documents, so Decree 139/2006/NĐ-CP is still valid in practice. As such, enterprises which provide training activities for apprentices before accepting them as official Employees will not have to register their training activities.
  • Must Employers fulfil the requirements on teaching programs and teachers’ certificates as prescribed in Decree 139/2006/NĐ-CP?
  • Regarding the requirements (e.g. training programs, teachers’ certificates or undertakings about training results) for enterprises which provide vocational training programs for apprentices, the Labor Code does not have any regulations that are related to the above responsibilities. However, Decree 139/2006/NĐ-CP sets out general regulations that require enterprises which conduct vocational training activities to build training programs, hire qualified teachers and issue vocational training certificates to apprentices at the end of the training period.
  • The above requirements should be construed as being applicable only to enterprises which specialise in vocational training (e.g. vocational training centres, intermediate technical schools, vocational colleges) to prepare apprentices for finding jobs, self-employment or advance to higher education after the training period ends. For this purpose, the law sets out the requirements above to control the vocational training quality of the said enterprises. However, to get the best results for their training activities, enterprises should also refer to Decree 139/2006/NĐ-CP to build vocational training programs that are suitable for their characteristics.