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FAQ: Can Two Consecutive Fixed-Term Labor Contracts Be Signed

8 min readFLAT LAW FIRM
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FAQ: Can Two Consecutive Fixed-Term Labor Contracts Be Signed?

"Sign a 1-year contract with a new hire, then renew for another year when it expires — is that allowed? What happens after two rounds?" — Almost every HR department asks this, and it is one of the most common labor-management violations in Vietnam: signing third and fourth fixed-term contracts as if no limit existed.

This article answers decisively under Article 20 of the 2019 Labor Code, covering every practical scenario: how to count, the 30-day "decision window," the appendix "workaround," exceptions, and penalties.

Table of contents

1. Short answer: max 2 times; the 3rd must be indefinite-term

The decisive answer: a maximum of 2 consecutive fixed-term labor contracts may be signed with the same employee. After the second, if the employee keeps working, the parties must sign an indefinite-term contract — no third round, except narrow statutory exceptions.

This protects employees from perpetual "short-termization" — yearly renewals to dodge long-term obligations. For employers, it is a hard limit to build into contract administration, because violations trigger administrative penalties and disputes upon termination.

2. Legal framework: Article 20 of the 2019 Labor Code

Everything here is governed by Article 20 of the 2019 Labor Code (45/2019/QH14, effective 01/01/2021):

Clause 1 defines two contract types:

  • Indefinite-term contract: the parties do not determine the term or expiry.
  • Fixed-term contract: the parties determine the term, expiring no later than 36 months from effectiveness.

Clause 2 governs what happens when a fixed-term contract expires while the employee keeps working:

  • Point a: within 30 days of expiry, the parties must sign a new contract; until signed, rights, obligations, and benefits follow the concluded contract.
  • Point b: after 30 days without a new contract, the concluded contract becomes indefinite-term.
  • Point c: if the new contract is fixed-term, it may be signed only one more time; thereafter, if the employee keeps working, an indefinite-term contract must be signed — except statutory exceptions.

3. Understanding "2 times": counting and real-life scenarios

"2 times" counts the continuous employment relationship between the same employer and same employee:

  • Time 1: the first fixed-term contract (e.g., 12 months).
  • Time 2: the next fixed-term contract after time 1 expires (e.g., another 24 months).
  • After time 2: only two lawful options remain — sign an indefinite-term contract, or terminate when the term ends.

Confusing real-life scenarios:

  • Changing title or position mid-way does not "reset" the count. Even moving from sales staff to team lead, the employment relationship stays continuous within the same contract chain.
  • A break then rehire: if employment truly ended (contract liquidation, insurance book closed) and the employee is rehired later, that is a new relationship. But authorities look at substance — "one month off then restart from zero" to dodge the rule may be treated as circumvention.
  • Probation contracts don't count toward the 2 times — probation is separately regulated and is not a fixed-term contract within Article 20's meaning.

4. After the 1st contract expires: the 30-day window and consequences of "forgetting"

Points a and b of clause 2 create a "30-day window" many HR departments miss:

Within 30 days of expiry, the parties must sign a new contract. While waiting, all rights, obligations, salary, and insurance follow the old contract — employment is uninterrupted.

But after 30 days without a new contract, the old contract automatically converts to indefinite-term. This is automatic by operation of law, needing no paperwork. Many companies "forget" to renew after the first contract expires; six months later, wanting to let the employee go, they discover they face an indefinite-term contract — with all consequences for severance and unilateral-termination procedures.

Management lesson: HR must have an expiry reminder system at least 45 days ahead, and the renew-or-liquidate process must complete within the 30-day window.

5. Can a contract appendix "work around" the limit

A common "trick": instead of signing a new contract at expiry, the company signs a contract appendix "extending the term by 12 months." The law's answer is no.

Contract appendices may detail, amend, or supplement certain clauses — but may not amend the contract term. When a fixed-term contract expires, the only way to continue employment is concluding a new labor contract under Article 20.

An "extension" appendix has no legal effect in prolonging the term — and in disputes, courts determine the actual employment relationship under Article 20 regardless of what the appendix says. Companies using this trick both fail their purpose and manufacture their own violation evidence.

6. Exceptions allowed more than 2 times

Point c of clause 2, Article 20 lists exceptions permitted multiple fixed-term contracts:

  • Labor contracts with persons hired as directors in state-owned enterprises.
  • Cases under clause 1, Article 149 (elderly employees), clause 2, Article 151 (foreign employees), and clause 4, Article 177 (other special cases) of the 2019 Labor Code.

In private and FDI practice, the most common exception is foreign employees (experts, managers): their contracts attach to time-limited work permits, so repeated fixed-term contracts are allowed. Caution: exceptions apply only to the statutory subjects — "elderly" or "foreign" cannot be invoked formally to dodge the rule for ordinary workers.

7. Penalties for violations

Concluding the wrong contract type — including fixed-term contracts beyond the permitted count — violates labor law and attracts administrative penalties under the labor-field penalty decree, scaled by the number of affected employees.

Beyond fines, the practical consequences bite harder:

  • Termination disputes: when the company unilaterally ends the "3rd contract" on expiry grounds, the employee sues and the court finds the real relationship indefinite-term — the company pays compensation, severance, and may have to reinstate the employee.
  • Insurance arrears: inspections may uncover related social-insurance contribution violations during the "workaround" period.
  • Broad inspection risk: one contract violation often triggers comprehensive labor, wage, and insurance inspections.

8. Practical recommendations for HR

  1. [ ] Build an expiry reminder system at least 45 days ahead for 100% of employees.
  2. [ ] Complete the renew-or-terminate decision within the 30-day window after expiry.
  3. [ ] Never use contract appendices to extend terms — sign proper new contracts.
  4. [ ] Track each employee's fixed-term contract count in the HR system.
  5. [ ] For foreign employees, align contract terms with work-permit validity and review exception conditions.
  6. [ ] Standardize templates for 2nd contracts and indefinite-term contracts; don't let line managers draft freely.
  7. [ ] Run an internal HR audit on labor contracts at least annually.

9. Frequently asked questions

Can two consecutive fixed-term labor contracts be signed with the same employee?

Yes. Under point c, clause 2, Article 20 of the 2019 Labor Code, when a fixed-term contract expires and the employee keeps working, the parties may sign one more fixed-term contract — i.e., a maximum of 2 consecutive times. After that, if the employee keeps working, an indefinite-term contract must be signed.

What happens with a third fixed-term contract?

It violates the law, except for statutory exceptions (directors hired in state-owned enterprises; cases under clause 1 Article 149, clause 2 Article 151, and clause 4 Article 177 of the 2019 Labor Code). A third contract signed unlawfully has no intended effect, and the employer may face administrative penalties.

What if both sides "forget" to sign a new contract after expiry?

Under points a and b, clause 2, Article 20: within 30 days of expiry, the parties must sign a new contract; until signed, rights and obligations follow the old contract. After 30 days without a new contract, the old contract automatically becomes indefinite-term.

Can a contract appendix extend the term instead of signing a new contract?

No. Labor contract appendices may not amend the contract term. To continue employment after expiry, the parties must conclude a new labor contract under Article 20.

Which cases may exceed two fixed-term contracts?

Exceptions under point c, clause 2, Article 20: contracts with directors hired in state-owned enterprises; contracts with elderly employees, foreign employees, and other special cases under clause 1 Article 149, clause 2 Article 151, and clause 4 Article 177 of the 2019 Labor Code.

Must the employer keep the employee after the second contract ends?

No. When the second fixed-term contract expires, if the employee does not continue working, the employment relationship ends as agreed. The "maximum 2 times" rule only limits how often this contract type may be signed; it does not force the employer to retain the employee.

10. When to work with a lawyer

Contract disputes are the labor disputes companies lose most — not because the law is hard, but because accumulated administrative errors compound over years. Work with a lawyer when: reviewing and standardizing the company's entire labor-contract system (HR audit); disputes over contract validity or unilateral termination involving employees with multiple fixed-term contracts; facing labor inspections and needing violation assessment and remediation; or building HR policies for foreign or elderly employees under the exceptions.

FLAT Law Firm advises FDI and domestic companies on labor law — from contract drafting and internal labor regulations to labor dispute resolution and court representation. Contact hotline 0988424851 for a risk review of your company's labor contracts.

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References

  1. Labor Code No. 45/2019/QH14 dated 20/11/2019, effective 01/01/2021 (Articles 20, 149, 151, 177).