I. Introduction to Vietnam and Manufacturing

According to the World Bank, in 2021, the manufacturing sector contributed 24.26% to the GDP of Vietnam. This figure is expected to be significantly higher due to what The Economist in February 2023 referred to as a “global shift in [the] supply chain” based on geopolitical factors. Supply chain security and a lack of dependence on any single source of supply have made Vietnam a critical piece in the global supply chain puzzle.

And the shift is happening. Many multinational corporations, such as Unilever, Procter & Gamble (P&G), IBM, Foxconn, Honda, and Samsung. have opened factories in Vietnam. Many more, including Lego, Sharp, Nintendo, Komatsu, and Lenovo, have announced plans to move to or expand their presence in Vietnam.[1]

Manufacturing has challenges that require structural improvements, such as a lack of skilled labour, poor infrastructure, inefficient logistics, and bottlenecks at the port. However, Vietnam’s investment opportunities are still very promising. Vietnam still has an abundant labour force with competitive labour costs. Furthermore, Vietnam has embraced multilateralism and entered into many multilateral and bilateral trade agreements, including the Accession to the World Trade Organization, the Comprehensive and Progressive Agreement for Trans-Pacific Partnership, the EU-Vietnam Free Trade Agreement, the ASEAN Free Trade Agreement, and the Regional Comprehensive Economic Partnership.

This Vietnam manufacturing publication provides a legal overview of the manufacturing sector in Vietnam. The purpose is to provide foreign investors with a highlight of the key issues that they will need to consider including licensing issues, access to land and employment issues.

II. Key manufacturing hubs and locations

Vietnam’s manufacturing is centralised in four key economic regions: the Northern, Central, Southern, and Mekong Delta regions. Binh Duong and Dong Nai are considered two of the most important manufacturing hubs in Vietnam, one hour from Ho Chi Minh City. Other key manufacturing hubs include Bac Ninh, Bac Giang, and Hai Phong.

Foreign investors can conduct manufacturing in Vietnam’s industrial zones. Currently, there are approximately 500 industrial zones across the country. Each zone is permitted for certain products and types of manufacturing. The types of industrial zones include

• Industrial Park (“Khu công nghiệp”),
• Processing Industrial Park (“Khu chế xuất”),
• Supporting Industrial Park (“Khu Công nghiệp hỗ trợ”),
• Specialising Industrial Park (“Khu Công nghiệp chuyên ngành”),
• Eco-industrial Park (“Khu Công nghiệp sinh thái”),
• High-tech Industrial Park (“Khu Công nghiệp công nghệ cao”),
• Coastal Economic Zone (“Khu Kinh tế ven biển”),
• Border Economic Zone (“Khu Kinh tế cửa khẩu”), and
• Specialising Economic Zone (“Khu Kinh tế chuyên biệt”).

Foreign investors should conduct due diligence on the industrial zones to ensure that the targeted industrial zone master plan permits the types of manufacturing and products they wish to manufacture.

Investors who want to produce goods in Vietnam only for export can consider obtaining export processing enterprise status. An export processing enterprise will not have to pay import tax for imported materials for production or VAT for exported products.

1. Licensing and regulatory authority

For very large-scale investment projects or request to be allocated land use rights to implement the investment project, the investor may first be required to obtain an investment policy approval (“IPA”) from either the National Assembly, Prime Minister, or the provincial people’s committee. (E.g., for manufacturing projects that require land use rights for their implementation, the investor may request a land lease or land allocation from the people’s committee, and in such case, an IPA from the people’s committee will be required).

In most cases, manufacturing projects do not require an IPA if carried out in an industrial zone.

An Investment Registration Certificate (“IRC”) is the principal license required for a manufacturing project. This license not only verifies the status of a foreign investor in Vietnam but also defines the scope of business activities, provides the legal ground for the registration of the project company, and provides access to land for implementing investment projects in Vietnam.

An IPA application requires the submission of the following documentation:

1. a completed application form for project registration;
2. an investment project proposal, which sets out, among others, the proposed project name, investor information, project objectives, location, scale, investment capital, project’s social economic, and labour demand;
3. documents evidencing the proper project location (such as a lease agreement or a lease MOU with the landlord);
4. documents evidencing the financial capacity of the investor (such as audited financial statements in the last two years of the investor, bank balance statement issued by the bank showing the account balance of the investor, or commitment for financial support of the investor’s parent company or a financial institution); and
5. incorporation documents of the investor, which must be legalised. The legalised copy must also be translated into Vietnamese and notarised for submission.

The authority that issues the IRC is (i) the provincial Department of Planning and Investment if the project location is outside the industrial zones or (ii) the provincial Industrial Zones Authority if the project location is in an industrial zone.

An IRC provides the following information: the project name, project code, investor information, project location and land area, project objectives and scale, investment capital (including contributed capital and loan capital), project term, project proposed schedule, incentives applicable, and other conditions applicable to the investor (if any).

The licensing authority is required to issue the IRC within 15 days after the submission of a complete application. Typically, it takes 2–4 months to obtain the IRC.

For obtaining the IRC, the investor should take the following notes from a practical perspective:

• Financial capacity. The recent practice of the Vietnamese authority has been to require documents evidencing the investor’s financial capacity for the total investment capital (including the charter capital and loan capital) when applying for the IRC – not just the charter capital or equity. Therefore, if the investor is a special purpose vehicle that does not have available funds to prove the total investment capital, the investor may submit a combination of (i) a commitment for financial support from the investor’s parent company, (ii) a bank balance statement showing the balance of the investor’s parent company for the entire total investment capital, and (iii) incorporation documents showing the relationship between the parent and the SPV. Otherwise, the investor should register appropriate investment capital at the beginning and subsequently increase the investment capital when required.
• Equity and loan ratio. The total investment capital amount comprises the charter capital and loan capital. Although there is no explicit thin capitalisation rule in Vietnam for an investment project, the licensing authority may typically require not less than 10%–20% of the total investment capital to be contributed as equity. We have seen this request from a number of licensing authorities when applying for an IRC.
• Loan capital. Loan capital is not compulsory and can be registered as zero. However, even where loan capital is registered, using the debt is not required. Vietnamese law provides that any medium- and long-term loans (with a term of longer than 12 months) may be taken out by the project company only if it has registered loan capital under the IRC. Therefore, registering loan capital is recommended to remain flexible if any loan funding is required in the future. Otherwise, only short-term loans can be drawn down but will need to be repaid within 12 months.
• Project term. The project term can be approved for up to 50 years. However, if the project company is established in an industrial zone, the maximum project term under the IRC will be limited by the remaining term of the lease term of the industrial zone land from the State. The investor should still apply for 50 years, which is commonly approved for investment in manufacturing, unless there is any limitation on this, as discussed based on the circumstances of the particular industrial zone. Upon expiration of the approval, the investor can file for an extension of the project term, but not for more than 70 years in aggregate.
• Legalised process. The incorporation documents of the investor (e.g., certificate of incorporation, business profile, and constitution) must be legalised for submission to the licensing authority. The standard legalisation process comprises the following steps: (i) First, a document is certified as a true copy by a notary public in the home jurisdiction; (ii) second, it is certified by the Ministry of Foreign Affairs of the investor’s home jurisdiction; and (iii) third, it is authenticated by the Embassy of Vietnam in the home jurisdiction. This process can take up to 3–4 weeks to complete.

After the issuance of the IRC, the investor will incorporate a Vietnamese project company by applying for an Enterprise Registration Certificate (“ERC”). An ERC is issued by the local Department of Planning and Investment; this is a straightforward process that may take 5–7 working days to complete. The project company must also fulfil certain post-establishment requirements in relation to company seals, tax declarations, and bank account opening (including an investment capital account, as applicable). The charter capital of the project company must be fully contributed within 90 days from the date of ERC issuance.

2. Foreign ownership

100% foreign ownership is permitted in the manufacturing sector. Unlike in China, where joint ventures are common, a foreign investor does not need to joint venture with a Vietnamese partner. The ease of access to land in industrial parks means that joint ventures are no longer a viable structure for establishing a manufacturing business in Vietnam.

However, there are certain restrictions depending on the products manufactured. These restrictions are described below.

Prohibited products: Products prohibited from manufacturing and production in Vietnam include narcotic substances, certain chemicals and minerals provided by Vietnamese laws, certain specimens of wild flora and fauna provided by Vietnamese laws, pornographic materials, human tissues, and firecrackers.

Restricted products: Products restricted from being manufactured or produced by foreign-owned companies include weapons, military equipment and gear, and related products.

Conditional products: Products manufactured or produced by foreign-owned companies subject to certain conditions include paper, vehicles with 29 or more seats, aircraft, railway trains, cigarettes and cigarette-related products, construction materials, and any products permitted to be produced under a sandbox mechanism. The conditions may include a foreign ownership threshold, investment form (e.g., joint venture or business cooperation contract), operation scope (e.g., regional restriction) and/or investor capacity (e.g., years of experience in the same or similar business).

3. M&A in manufacturing

The recent top M&A deals in Vietnam have been in the manufacturing sector. They include (i) the US$1.015 billion acquisition of the bottling factories of Coca-Cola in Vietnam by Swire Beverage Holdings, (ii) the US$700 million acquisition of the animal-feed sector of Masan MEATLife by De Heus Group (Netherlands), and (iii) the US$300 million acquisition of 70% interest in Duy Tan Plastics by SCG (Thailand).[2]

Share sales are the most common form of M&A in Vietnam for manufacturing projects. Though we have seen increasing use of asset sales as the land use terms of many manufacturing projects are reaching their expiration date. The common legal issues for an M&A transaction are listed below.

M&A approval: The Law on Investment 2020 requires the buyer and the target company to obtain M&A approval from the provincial-level department of planning and investment. The application process requires the foreign buyer to submit legalised documents and provide details of the foreign buyer’s ownership after completion. This M&A approval process typically takes 2–3 months to complete.

Merger control clearance: According to the Law on Competition 2018, parties to an economic concentration must obtain a merger control clearance from the National Competition Committee if the below-mentioned thresholds are met. An economic concentration includes the acquisition of an enterprise, which means the purchase by one enterprise of all or part of the capital contribution or assets of another enterprise sufficient to control or dominate the acquired enterprise or any of its business activities.

Table 1: Merger Notification Thresholds

Sub-licenses: These licenses are operational licenses required for certain manufacturing activities. Sub-licenses are granted to an operating company and are not transferable. For example, these may include an alcohol manufacturing license applicable to an alcohol manufacturer, a food safety and hygiene certificate for a food manufacturer, and a pharmaceutical manufacturing license applicable to a pharmaceutical manufacturer.

Employees: If there is an asset sale and there is a requirement to transfer employees to a new manufacturing company, a labour usage plan must be developed, and consultations with the labour trade union are required. Severance payments will need to be made if there is retrenchment due to the asset sale.

4. Access to land

Land is owned by all the Vietnamese people and managed by the State. The State will grant land use rights to a land user in the form of either an allocation or a lease.

In addition, land in Vietnam is classified into many categories subject to land use purposes. For manufacturing projects, the land use may be classified as an industrial park or non-agricultural production land. The maximum land use term for a manufacturing project is 50 years.

There are various ways to access land for manufacturing projects, as summarised below.

Lease from industrial park developer: The developer leases land from the State to develop an industrial park, and the manufacturer may sub-lease land inside the industrial park from the developer. In Vietnam, this is the most common way to obtain land use rights for manufacturing. A sub-lease in the industrial park gives the manufacturer certain advantages, such as transportation connections, power and water sources, and waste treatment.

Lease from the State: For special or large-scale manufacturing projects where the manufacturer does not want to sub-lease in an industrial park, the manufacturer may directly lease land from the State. However, the land lease and the project will be subject to the IPA of the local provincial people’s committee, which requires a lengthy approval process.

Lease or purchase from land user: The manufacturer may also lease or purchase land use rights from local land users, provided that the land use purpose and land use planning are suitable for the intended manufacturing activities. It is worth noting that a foreign-owned company cannot purchase land use rights in Vietnam for the purposes of manufacturing. Manufacturing land can be only leased from the State or allocated by the State to a foreign land user.

Capital contribution: The manufacturer (either a local business entity or joint venture company) may receive land use rights as a capital contribution, provided that the manufacturer must obtain approval from the State if they receive land classified for agricultural purposes and the approved land use planning is suitable for the intended manufacturing activities.

5. Environmental considerations and solar rooftop

Requirements for environmental approval. Under the Law on Environmental Protection 2020 (“LoEP”), investment projects are classified into four groups (I, II, III and IV) with different requirements for environmental approval. The investor is recommended to engage an environmental advisor to conduct a preliminary analysis of the types of environmental approvals that will be required based on the proposed scale of the manufacturing investment project.

Depending on the anticipated environmental impact and the group the manufacturing project will fall under, the investor normally needs to undergo a so-called environmental impact assessment (“EIA”). The EIA report must be approved before commencing any construction but only after the establishment of the economic organisation implementing the manufacturing investment project (i.e., after obtaining the IRC and ERC).

For projects under Group I that can cause high-level adverse environmental effects (such as projects for production, business, or services that are likely to cause environmental pollution of a large scale and capacity; projects of a large or medium scale using land and with elements sensitive to the environment; projects of a large or medium scale that require a change of land use purpose and with elements sensitive to the environment; or projects that require a large-scale migration or resettlement, etc.), a preliminary environmental impact assessment is required as part of the pre-feasibility study for the project and as part of an application for an IRC or IPA.

With respect to the hazardous or industrial solid waste generated during the operation of the manufacturers, the hazardous or industrial solid waste must be properly treated by a licensed treatment facility. The owner of hazardous waste is allowed to store hazardous waste only for a maximum of one year in a manner that meets technical standards. For an investment project under Group I, II, or III that generates hazardous waste with a total quantity of at least 1,200 kg per year or at least 100 kg per month during its operation, it is required to obtain an environmental permit, except for urgent public investment projects.

Rooftop solar power. A rooftop solar power (“RTS”) system is a system with photovoltaic panels installed on rooftops of construction works, having a capacity of no greater than 1 MW, directly or indirectly connected to power buyer’s electrical grids with a voltage of 35kV or less. There are two main types of business models in RTS projects: (i) the self-ownership model, in which the manufacturer fully develops and operates the RTS system for self-consumption, and excess electricity is sold to Vietnam Electricity and (ii) the third ownership model, in which a solar developer occupies the rooftop to install the RTS system and then sells electricity to the rooftop’s owner (e.g., the manufacturer) and/or EVN. While the installations of RTS systems on the rooftops of manufacturers have seen recent growth, the legal framework for implementing RTS projects remains uncertain. Business conditions and relevant approval requirements vary in each province in Vietnam. In particular, in relation to environmental requirements, as guided by certain management boards of industrial zones, the developers can invest in RTS projects for business electricity distribution only in industrial zones that are stated under the EIA report or environmental permit of such industrial zones.

6. Incentives and export processing

Investment incentives are available to certain investment projects based on various factors, such as preferential investment business lines, investment geographical areas, investment capital, and labour demand. Investment projects that satisfy conditions for entitlement at different levels of investment incentives can apply for the highest tax incentive.

Corporate income tax (“CIT”) incentives. This category of incentives comprises the application of a lower rate of CIT than the normal 20% CIT rate (e.g., 10%, 15%, or 17%) for a definite period (e.g., 15 or 10 years) or the whole duration of the project and exemptions from and reductions of tax and other incentives depending on the business activity, the geographical location, and any technology used. Enterprises established in industrial zones (except for industrial zones located in geographical areas with advantageous socio-economic conditions), economic zones, high-tech zones, geographical areas with difficult socio-economic conditions, and geographical areas with especially difficult socio-economic conditions are entitled to CIT incentives.

Exemption from import duty. There is an exemption from import duty for goods imported to form fixed assets or for raw materials, supplies, and components imported for production. For example, the following goods are exempt from import duty: goods exported from non-tariff zones (e.g., export processing zones or EPEs) to foreign countries and goods imported from foreign countries into non-tariff zones for use in non-tariff zones only (including the fixed assets/ machinery imported for the investment of the project).

Exemption from and reduction of land rent, land use fees, and land use tax. Land rent incentives are applied to investment projects only where the investor directly leases land from the State. The investor who sub-leases land from the industrial zone developer will not be eligible for any land rent incentives.

The relevant investment incentives that an investor is entitled to will normally be approved and set out in the IRC (or IPA, if applicable) for the project, and the investor will be required to complete the necessary procedures for entitlement to such investment incentives at the tax authority, department of finance (if land rent incentives apply), customs office, and/or other competent authorities for each type of investment incentive.

Export processing enterprises. An export processing enterprise (EPE) is an enterprise that is established and operating in a so-called export processing zone or otherwise exports all its products while operating in an industrial or economic zone. The legal status of an EPE is stated in the entity’s IRC. An EPE established in a regular industrial zone must satisfy certain conditions, including (i) having a hard fence that separates the EPE from the outside area and gates/doors to ensure the delivery of goods in and out of the EPE through the gate/door; (ii) having a camera system that observes the gate/exit, entry, and storage locations 24/7 (including days off and holidays); the camera data is linked online to the responsible customs office that manages the EPE and is archived at the EPE for a minimum of 12 months; and (iii) having software to manage the EPE’s imported goods not subject to tax payment, to report on the import-export inventory settlement of the use of the imported goods in accordance with the law on customs.

EPEs may apply for an import tax refund on materials used to manufacture products intended for offshore export. The application dossier varies depending on individual circumstances, including when the materials were imported, how the constituent goods were used to manufacture the export product, and how the finished product was exported post-manufacturing.

7. Profit remittance

A foreign-invested company can remit any profits offshore to a foreign investor. There are generally no issues with profit remittances provided that the Vietnam manufacturing company has satisfied its tax obligations. The foreign-invested company must have an audited financial statement and pass the relevant resolutions to distribute profits and remit funds offshore to the foreign investor. The foreign-invested company must also show the remitting bank evidence of payment of any relevant taxes.

8. Employment

Labour force. Although facing many challenges after the COVID-19 pandemic, manufacturing continues to be one of the industries that involve a large number of employees in Vietnam. As of Quarter IV of 2022, labour demand in the manufacturing and processing industry accounts for 13.53% of the total labour force demand in Vietnam^[3]. Depending on their business plan and strategy, a manufacturer can consider recruiting and having employment contracts with the workers directly or via workforce providers, selecting and employing the workers for either temporary or permanent terms.

Regional minimum salary/wage. While there is no requirement for a minimum salary based on industrial sectors, an employee’s salary will be agreed upon between the employer and employee and must not be lower than the minimum salary stipulated by the government from time to time and applied to the region where the employees are employed. There are currently four different regional minimum salary rates (I, II, III, and IV), with greater pay for urban workers and lower pay for rural workers. Since 1 July 2022, the minimum regional monthly salary scheme has been as follows:

Table 2: Vietnam Minimum Wage

Internal labour rules An employer with 10 or more employees must register its internal labour rules (“ILR”, similar to a code of conduct or staff manual) with the labour authorities – the provincial Department of Labour, War Invalids, and Social Affairs (“DOLISA”, if the company is outside an industrial zone) and the Provincial Management Authorities of Industrial Zones (if the company is inside an industrial zone).

Trade union at the grassroots. In the event that the company’s employees agree to form a trade union, the company is required to facilitate the establishment of the union. The employer must contribute 2% of the payroll used for the calculation of social insurance contributions to the trade union, regardless of the establishment of a trade union at the grassroots. It is also common for employees in a manufacturing unit to have a trade union at the grassroots. The trade union, as an organisation representing the employees, protects the employees’ interests and provides opinions on employment provisions and issues, such as the company’s ILR, disciplinary procedures, and redundancy. The employer must reach a written agreement with the executive committee of the trade union to unilaterally terminate the employment of, dismiss, or second an employee who is also a trade union officer.

Annual leave. Any employee who has worked full-time for an employer for a term of 12 months is entitled to 12 days of paid annual leave per year and shall be subject to an increase in the number of days of paid annual leave depending on the duration of their employment for the employer. When an employee works under circumstances requiring heavy manual labour, is exposed to a toxic working environment, or works under dangerous circumstances or harsh conditions, the employee is entitled to 14 or 16 days of paid annual leave, depending on the level of disadvantage of the work or the severity of the working conditions. Employees who are junior or disabled are entitled to 14 days of paid annual leave. If the employee has worked for less than 12 months, annual leave will be calculated on a pro rata basis in proportion to the number of months worked during that year. The annual leave schedule may be fixed in advance by agreement between the employer and the employee.

Public holidays. In Vietnam, employees are entitled to take leave with full pay on public holidays, which are 11 days in total per year, including (i) the Western New Year: one day (the first day of January of each calendar year); (ii) the Lunar New Year Holiday: five days; (iii) Victory Day: one day (the 13^th day of April of each calendar year); (iv) International Labour Day: one day (the first day of May of each calendar year); (v) National Independence Day: two days (the second day of September of each calendar year plus either the immediately preceding or the immediately following day); and (vi) Hung Kings’ Commemoration Day: one day (the 10^th day of March of each lunar year). The schedule for the Lunar New Year holiday and the National Independence Day holiday is decided annually by the prime minister.

Foreign employees have one additional day off for a national traditional holiday (e.g., Christmas) and another for the national day of their home country (e.g., US Independence Day).

If the public holiday falls on a weekend (e.g., Sunday), the holiday will be taken instead on the following working day (e.g., Monday).

Personal leave. Employees are entitled to take leaves with full pay in case of their marriage (three days), the marriage of their natural or adopted child (one day), and the death of their natural or adoptive parent, their spouse’s natural or adoptive parent, their spouse, or their natural or adopted child (three days).

Sick leave and maternity leave. An employee on sick leave is entitled to an allowance paid by the Social Insurance Fund under the social insurance scheme for 30, 40 or 60 sick leave days per year (or more in special cases), depending on the number of years they have contributed to social insurance. A medical certificate is required to be presented for payment of the allowance. Female employees are entitled to six months of maternity leave and a maternity allowance paid by the Social Insurance Fund. Subject to agreement with the employer, female employees can take non-paid leave after the end of the maternity leave period and resume work after only four months’ maternity leave upon provision of a medical certificate showing that the employee’s health shall not be affected due to early resumption of work.

Compulsory insurance. Employers and employees entering contracts for a term of three months or more must contribute to government insurance schemes managed by the Social Insurance Fund, including (i) social insurance (SI), (ii) health insurance (HI), (iii) unemployment insurance (UI; not applicable to foreign employees), and (iv) labour accident and occupational disease insurance (LAODI). If the contracts are signed for a term of one month to less than three months, the employers and employees must contribute (i) social insurance and (ii) labour accident and occupational disease insurance to government insurance schemes managed by the Social Insurance Fund.

These funds shall then be used to settle benefits for employees, such as maternity leave, sick leave, unemployment, and benefit schemes for labour accidents and occupational disease. The compulsory contribution percentage is as follows:

Table 3: Compulsory insurance contribution rates applicable to Vietnamese employees

Table 4: Insurance contribution rates applicable to foreign employees

The insurance contributions listed above are calculated on the basis of the monthly contract salary (inclusive of monthly salary, certain allowances, and other payments made regularly). The amount of unemployment contributions are capped at 20 months of the minimum regional salary as stipulated by the government. The amount of social insurance, health insurance, and labour accident and occupational disease insurance contributions are capped at 20 months of the basic salary as stipulated by the government.

Termination of employment. There are four methods to terminate a labour contract: (i) automatic and mutual termination, (ii) unilateral termination, (iii) redundancy, or (iv) dismissal. Each method must be used in accordance with the Labour Code of Vietnam and the associated regulations for implementation. An employer or employee who unlawfully terminates a labour contract may be liable to pay compensation to the non-defaulting party and/or continue the labour contract.

On the employee’s side, the employee, regardless of the term of the contract, can unilaterally terminate a labour contract without providing reasons, subject only to observing the advance notice requirements (45 days in the case of an indefinite term contract, 30 days in the case of a definite term contract, or just three working days if the contract term is less than one year). No prior notice needs to be given upon any employee’s unilateral termination of the labour contract if the employee suffers maltreatment or sexual harassment at work, fails to be paid salary in full, is not assigned to the position or work location as agreed in the labour contracts, and so forth.

On the employer’s side, the employer can unilaterally terminate labour contracts, subject to certain conditions and observing the advance notice requirements (45 days in the case of an indefinite term contract, 30 days in the case of a definite term contract, or just three working days if the contract term is less than one year) in certain cases: unrecoverable illness or injury of the employee; regular poor performance of the employee, force majeure events (subject to the employer applying all mitigation measures but still being forced to reduce employee scale), employee’s long-term absence from work, an employee reaching retirement age, failing to turn up for work for five successive days without a legitimate reason, or being dishonest or providing false information during the recruitment process.

Disciplinary procedure. There are four measures for dealing with a breach of labour discipline: (i) reprimand, (ii) deferral of wage increase for a maximum of six months, (iii) demotion, and (iv) dismissal as the severest labour disciplinary measure. The disciplinary procedure requires the involvement of the organisation representing the employees at the grassroots level and is subject to a time limit for labour discipline handling. When dealing with a breach of labour discipline, the employer is prohibited from infringing on the health, honour, life, prestige, or dignity of employees; imposing a fine or reducing wages; or dealing with an employee for conduct in breach of labour discipline when such conduct is not stipulated in the ILR, in the signed labour contract, or in the law on labour.