In the constant race to maintain efficiency and transparency in business operations, enterprises must make tough decisions  when applying processes and regulations. More than simply written documents, processes and regulations play an important role in forming and maintaining corporate culture. One of the fundamental purposes of implementing processes and regulations is to create stability and transparency. Processes help enterprises organize work systematically, thereby optimizing production, and minimizing errors. Regulations, meanwhile, establish principles and rules that all members must follow, enhancing transparency and accountability. In the article below, we want to share with you some of our opinions from a legal perspective, so that you can find the answer to the question “Are procedures and regulations really necessary?”

1. Processes, Regulations, and Compliance in Labor Management

Not only do processes and regulations help departments and individuals within an enterprise to operate more smoothly, these documents also help enterprises monitor employee compliance. Because as we can see, not all business activities are regulated by labor law. The law only provides general regulations. Therefore enterprises will need to specify those regulations in their business operating process.

Typically, we can see that enterprises require employees to keep the enterprise’s information confidential and must not take actions that lead to confidential information being leaked or disclosed outside the enterprise. So question’s asked are, What is the specific “enterprise information security process”; Who has access to information; When Information is transferred outside the enterprise, which individual or which departments approval is required; or How to protect confidential information according to the company’s requirements, etc. All of these issues  Can be understood by looking at the separate processes and regulations that apply. Employees’ failure to follow the correct process according to the regulations is the basis for  Workplace discipline. This may include such measures as reprimand, deferment of pay rise, etc. (if the company’s internal labor regulations stipulate this behavior). This is opposed to just dismissing the employee when they disclose confidential information.

Similarly, regulations on frequent failure to complete work, not following financial regulations, annual leave procedures, supplier approval procedures or contract establishment process, etc. also need to be built in accordance with the business sector and the scale of operations of the enterprises. This is the basis for an enterprise to force workers to comply with the regulations, and the basis for enterprises to apply labor sanctions, and require compensation for material liability from workers when they act contrary to the company’s procedures and regulations.

Particularly for the Regulation on frequent failure to complete work is a mandatory regulation that enterprises must implement. This is because according to the provisions of labor law, enterprises have the right to unilaterally terminate the labor contract if the employee regularly does not complete the work. However, the law requires that enterprises build regulations on assessing the ‘level of frequent failure to complete work’ themselves. This means that when  an enterprise has no Regulation on assessing the level of frequent failure to complete work, the enterprise has no basis to unilaterally terminate the labor relationship with employees who repeatedly fail to meet work requirements set by the company.

Just like above, Financial Regulations are also mandatory regulations for enterprises. These regulations may relate to such issues as reasonable costs of enterprises, harmony between labor costs, insurance with payment issues according to the provisions of law on corporate income tax. In certain cases, tax law recognizes expenses that are considered reasonable deductible expenses when calculating corporate income tax because those expenses have been recorded in the enterprise’s financial regulations.

2. How should Enterprises develop Processes and Regulations?

In fact, there will be a number of significant challenges that enterprises need to overcome when implementing processes and regulations in the corporate environment. One of those challenges is the trade-off between control and creativity. An extremely detailed process can slow down work and inhibit creativity, raising questions about the enterprise’s flexibility in a rapidly changing market. Another challenge comes from the misunderstanding that processes and regulations are only tasks for management departments and do not concern everyone working in the enterprise. This can lead to objection from employees about the regulations,and feelings of dissatisfaction. Therefore the this poses achallenge when encouraging positive morale within an enterprise.

Besides, the processes and regulations also need to comply with the legal regulations corresponding to the field and department to which those processes and regulations will be applied. Typically, when an enterprise builds processes and regulations for the administrative and human resources departments, the issues of seals, document storage, recruitment, labor management and handling labor discipline shall be in accordance with the provisions of labor law. In case an enterprise builds a sales process for the business department, it will need to pay attention to the regulations on invoices, documents, transportation, conditions for circulating goods on the market, and conditions on documents when goods are in storage, risk control process for exported goods, opening L/C, etc.

With many years of experience performing in-house consulting services as well as participating in the process of building operating procedures and regulations for large enterprises with diverse fields. We realize that the difficulty for enterprises will probably not be the issue of building processes and regulations, but in how to harmonize legal regulations, employee compliance and actual operations of the enterprise, to ensure that the processes and regulations built and operated will solve problems in the management of the enterprise.

Time of writing: 04/01/2024

The article contains general information which is of reference value, in case you want to receive legal opinions on issues you need clarification on, please get in touch with our Lawyer  at  info@cdlaf.vn

You can refer for more information:

• Foreign investors doing business in mining and purchasing minerals in Vietnam
• When is an Arbitration Agreement Unenforceable?
• Procedures for Vietnamese Enterprises Regarding Outward Investment
• Transferring Profits to Vietnam and  how to handle Violations in Outward Investment Activities