Are enterprises required to establish grassroots trade unions?

Are enterprises required to establish grassroots trade unions? This is a critical question that many businesses in Vietnam are concerned about. Grassroots trade unions play a role in protecting the rights of employees while promoting cooperation between employees and employers. However, is the establishment of a trade union truly a legal obligation or merely voluntary? If it is not mandatory, are there risks or limitations that businesses need to be aware of? 

See more: Trade Unions – Establishment Procedures And Conditions For Maintaining The Primary Trade Union Activities

Trade Union means a great socio-political organization of the working-class and laborers. Trade Unions are founded on the voluntary basis and are a component part of the political system of the Vietnamese society, placed under the leadership of the Communist Party of Vietnam. Trade Unions are representatives of cadres and civil servants, public employees, workers and other laborers (hereinafter referred to as laborers), together with state agencies, economical organizations, social organizations shall care and protect for laborers’ legitimate and legal rights and interests. Trade Unions join in state management, eco-social management, inspection; examination, supervision of activities of state agencies, organizations, units, enterprises; and mobilization, propagation for laborers to study, improve knowledge, professional skill, observe law, build and defend the socialist fatherland of Vietnam.(1) The trade union shall cooperate with competent authorities in assisting the development of progressive, harmonious and stable labor relations; supervising implementation of labor laws; protecting the legitimate rights and interests of employees.(2)  

Based on the above definition of trade unions and current regulations, enterprises are not obligated to establish grassroots trade unions, as trade unions are formed on a voluntary basis.(3) If employees in the enterprise are not willing to voluntarily establish a grassroots trade union, the enterprise is not required to do so. However, several risks may arise from not establishing a grassroots trade union, specifically: 

1. Regarding legal responsibilities or administrative penalties for not establishing grassroots trade unions

The failure of an enterprise to establish a grassroots trade union does not give rise to direct legal liability or administrative penalties, as the establishment of such unions is based on a voluntary basis. 

However, there are obligations that enterprises must comply with and fulfill regardless of whether a grassroots trade union is established. One of these obligations is the payment of trade union fees. Specifically: 

a) Identifying entities subject to trade union fee payments:

According to Article 4.4 of Decree 191/2013/ND-CP, which regulates entities required to pay trade union fees: 

“Entities required to pay trade union fees as stipulated in Clause 2, Article 26 of the Trade Union Law include agencies, organizations, and enterprises, regardless of whether these agencies, organizations, and enterprises have established grassroots trade unions or not, including: 

4. Enterprises of all economic sectors established and operating under the Law on Enterprises and the Law on Investment.”  

Based on the above provision, even if a grassroots trade union is not established, enterprises are still obligated to pay trade union fees. 

b) Contribution rate, basis, and method for paying trade union fees

According to Article 5 of Decree 191/2013/ND-CP, the contribution rate and basis for trade union fee payments are as follows: 

• The contribution rate is 2% of the wage fund used as the basis for calculating social insurance contributions for employees. 

• This wage fund is the total salary of employees who are subject to mandatory social insurance contributions under the law on social insurance. 

As stipulated in Article 6.1 of Decree 191/2013/ND-CP, trade union fees are paid once per month, at the same time as mandatory social insurance contributions for employees. 

2. Potential impact on the issuance of internal documents and policies

Under the Labor Code 2019, certain processes such as the issuance of performance evaluation regulations, labor rules, salary scales, pay tables, and obtaining opinions on the suspension of employees require the involvement and opinion of grassroots trade unions before implementation.  

If a grassroots trade union has not been established, the enterprise may need to seek assistance from the superior trade union to provide opinions and participate in the process. This can prolong the timeline for finalizing and issuing internal documents or policies.  

Additionally, submitting requests for support from the superior trade union may require extended processing times. In some cases, members of the superior trade union may express disagreements with the enterprise’s policies for various reasons, potentially necessitating further explanation and persuasion efforts from the enterprise, thereby delaying the process.

3. Potential impact on handling labor discipline

Regarding labor discipline, enterprises must ensure the participation of the employee representative organization at the workplace to which the disciplined employee belongs, as stipulated in Article 122.1(b) of the Labor Code 2019. Failing to involve the employee representative organization violates the principles of labor discipline and may render the disciplinary process unlawful. In such cases, the labor discipline decision risks being nullified, and the enterprise could face liability for compensating the employee.  

Furthermore, as analyzed above, enterprises may encounter delays and difficulties when seeking support from the superior trade union for handling such issues. Labor discipline must adhere to statutory limitation periods as prescribed in Article 123 of the Labor Code 2019. Consequently, delays caused by engaging the superior trade union may lead to the enterprise being unable to issue a labor discipline decision within the prescribed time frame, potentially resulting in the inability to enforce discipline due to the expiration of the limitation period. 

(1) Article 1 of the Trade Union Law 2012 

(2) Article 7.3 of the Labor Code 2019 

(3) Article 6.1 of the Trade Union Law 2012 

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