What is a probationary contract? How is it regulated under current law? In this article, NPLAW shares essential information regarding probationary contracts.

I. What is a probationary contract?

1.1. Definition

A probationary contract is an agreement between an employee and an employer about the trial working period. It includes the main terms such as the job and workplace, the salary or wage for the position, how and when the salary will be paid, any allowances or extra payments, working hours, rest periods, and the provision of protective equipment for the employee.

1.2. Characteristics of probationary contracts

Firstly, a probationary contract is an agreement between the employee and the employer.

Secondly, the probationary terms can either be written as a part of the main labor contract, included in a separate probationary contract, or expressed in other forms that show both parties have agreed on a probationary period.

Thirdly, the main contents of a probationary contract include the probation period and related details such as: general information about the employee and the employer, the job to be tested and the workplace, the probationary salary, working hours during the probation, and rest periods, etc.

Fourthly, depending on the nature and complexity of the job, both parties may agree on the length of the probation period, but it must comply with the legal maximum probation duration.

1.3. Distinction from a labor contract

- Regarding the content:

  •  The probationary contract should include the following details: the probation period; general information about the employee and the employer; the job to be performed and the workplace; the probationary salary, the method and timing of payment, any allowances or additional payments; working hours and rest periods during the probation; and the provision of protective equipment for the employee.
  • The contents of a labor contract include: general information about the employee and the employer; the job and workplace; the term (duration) of the contract; the salary or wage for the job or position, the method and timing of payment, any allowances or additional payments; the policy on salary increases and promotion; working hours, rest periods, and any probation period; provision of protective equipment; social insurance, health insurance, and unemployment insurance; and training or professional development programs to improve skills and qualifications.

- Regarding the duration of the contract:   

  • Probationary contract: Has a shorter maximum duration.
  • Labor contract: Has a longer maximum duration.

- Regarding the salary:

  • Probationary contract: the agreed salary is usually lower.
  • Labor contract: the agreed salary is usually higher.

II. Legal regulations on probationary contracts

According to Clause 1, Article 24 of the Labor Code 2019, a probationary contract may take the following forms: (1) It can be included as a clause within a labor contract; or (2) It can be made as a separate, independent probationary contract.

The main contents of a labor contract: According to Clause 2, Article 24 of the Labor Code 2019, a probationary contract must include the following contents: the name and address of the employer and the full name and position of the person signing the contract on the employer’s side; the full name, date of birth, gender, residence, and ID card number, citizen identification number, or passport number of the person signing the contract on the employee’s side; the job and workplace; the term (duration) of the labor contract; the salary or wage based on the job or position, the method and timing of payment, any allowances or additional payments; working hours and rest periods; and the provision of protective equipment for the employee.

Regarding the probation period:According to the Labor Code 2019, the probation period is agreed upon by both parties based on the nature and complexity of the job, but each job position can only be subject to one probation period, and it must comply with the following limits: (i) No more than 180 days for managerial positions in enterprises as defined by the Law on Enterprises and the Law on Management and Use of State Capital Invested in Enterprises; (ii) No more than 60 days for positions that require a professional or technical qualification of college level or higher; (iii) No more than 30 days for positions that require an intermediate-level qualification, technical workers, or professional staff; (iv) No more than 6 working days for other jobs.

Regarding salary: According to Article 26 of the Labor Code 2019, the probationary salary is agreed upon by the employee and the employer but must be at least 85% of the official salary for that job.

Regarding the end of the probation period: The Labor Code 2019 provides the following regulations: (i) At the end of the probation period, the employer must inform the employee of the probation results; (ii) If the employee meets the requirements, the employer must continue to perform the signed labor contract (if the probation was included in that contract) or must sign an official labor contract (if a separate probationary contract was used); (iii) If the employee fails to meet the requirements, the signed labor contract or probationary contract shall be terminated; (iv) During the probation period, either party has the right to cancel the probationary contract or the signed labor contract without prior notice and without compensation.

III. Questions on probationary contracts 

3.1. What happens after the probation period if the employee continues working?

According to the Labor Code 2019, when the probation period ends, the employer must inform the employee of the probation result. If the employee meets the requirements, the employer must continue performing the signed labor contract (if the probation was included in that contract) or must sign a new labor contract (if a separate probationary contract was used).

Therefore, if the probation period ends and the employee passes the probation, the employer shall continue to perform the signed labor contract.

3.2. Which salary is used to calculate the 85% probationary rate?

According to Article 90 of the Labor Code 2019, the structure of a salary includes: (i) the wage or salary based on the job or position; (ii) salary allowances; and (iii) other additional payments.

The probationary salary must be equal to 85% of the wage or salary for that job or position, which means it is calculated based on the first component of the salary structure.

3.3. Is social insurance required during probation?

Pursuant to Points a and b, Clause 1, Article 2 of the Social Insurance Law 2014, the subjects required to participate in compulsory social insurance are as follows: Employees working under an indefinite-term labor contract, a fixed-term labor contract, a seasonal labor contract, or a labor contract for a specific job with a duration of at least 3 months but less than 12 months, including labor contracts signed between the employer and the legal representative of a person under 15 years old in accordance with labor law; and employees working under a labor contract with a duration of at least 1 month but less than 3 months.

The Social Insurance Law 2014 does not require employees on probationary contracts to participate in compulsory social insurance. Therefore, employees signing a probationary contract are not required to pay social insurance contributions. In addition, the employer is not obliged to make social insurance contributions for the employee until an official labor contract is signed.

3.4. Can a company terminate a probationary contract if a female employee becomes pregnant during probation?

Under current law, when the probation period ends, if the employee meets the requirements, the company must inform the employee of the result and sign a labor contract. If the employee fails the probation, the company may terminate the signed contract. In addition, during the probation period, either party has the right to cancel the probationary agreement without prior notice and without compensation.

Therefore, during the probation period, either party may terminate the probationary agreement without notice. As a result, if a female employee becomes pregnant during probation, the company still has the right to terminate the contract. However, once an official labor contract has been signed, the company is not allowed to terminate the contract with a pregnant female employee, in accordance with Article 137 of the 2019 Labor Code.

4. Legal consulting and drafting services

If you need a legal service provider to advise and answer questions regarding probationary contracts, please contact us for support. In addition to providing legal advice tailored to your needs, we also draft contracts and assist clients throughout the process until the best results are achieved.

NPLAW is confident that our team of experienced legal consultants and lawyers will provide you with the best experience when using our services.