Vietnam’s thriving economy has made it an attractive destination for foreign investors looking to expand their businesses. The country’s workforce is mainly composed of young, ambitious individuals who are eager learners and actively seek out new opportunities. Vietnamese employees are well-known for their strong work ethic, exceptional skills in their respective fields, and a high aptitude for learning, which makes them highly competitive compared to foreign employees. Additionally, due to the lower cost of living in Vietnam, salaries are generally lower than in other countries, making hiring Vietnamese employees a wise business decision.
If you are a newly established business in Vietnam or considering incorporating an offshore company in Vietnam, or hiring Vietnamese employees, this article provides comprehensive information and guidelines on Vietnam employment practices.
Types of Employment in Vietnam
In Vietnam, employment can be categorized based on the type of contract signed by the employees. There are four primary types of contracts available:
Probation contract:
A probation contract is a temporary employment agreement that lasts for a maximum of two months. This period serves as a trial for both the employer and the employee. The probation contract is not governed by the Labor Code, which means that the company is not required to provide prior notice or pay for social security for employees during this time. However, if the company decides to hire the employee after the probation period, they must then offer them an employment contract that is governed by the Labor Code.
Fixed-term contract:
A fixed-term contract is a legally binding agreement between two parties that specifies the exact term and termination date of the contract. The term of a fixed-term contract can range from a minimum of 3 months to a maximum of 36 months, starting from the effective date of the contract. The most commonly used fixed-term contract in Vietnam is for a duration of one year. A company can renew a fixed-term contract twice, but after that, it must offer the employee an indefinite contract. Additionally, this type of contract requires a 30-day prior notice for termination.
Indefinite contract:
An indefinite contract is a type of agreement where the duration and termination date of the contract are not specified by both parties. This type of contract requires prior notice of 45 days before termination and is comparatively more challenging to end. This is the most common type of employment contract in Vietnam.
Service (Temporary) contract:
A temporary service contract is an agreement between a company and an individual to perform a specific job or project for a limited period of time, typically less than three months. This type of work is often irregular and does not provide a stable income. It should be noted that this type of contract is not classified as a labor contract, which means that the individual is not considered an employee of the company. However, the company must still comply with certain labor laws, such as paying the minimum wage and providing safe working conditions.
The type of contract that you choose will depend on a number of factors, such as the nature of the work, the length of time that the employee will be working for you, and your company’s budget.
Employment Salary and Taxes/Duties Paid by the Employer
The minimum wage in Vietnam is subject to annual revisions and is typically raised. At present, the minimum salary in Vietnam is approximately VND 1,800,000, which is the nationwide minimum salary and distinct from the regional minimum wage.
When employees works full-time
The employer must pay the employee’s salary in full and on time. The salary must be paid in Vietnamese dong and cannot be paid in goods or services. The employer must also pay the employee’s social security contributions, which are currently 17.5% of the employee’s salary.
In addition to the salary and social security contributions, the employer may also be required to pay other taxes and duties, such as income tax, value-added tax, and corporate income tax. The specific taxes and duties that the employer must pay will depend on a number of factors, such as the nature of the business and the employee’s income.
| Regional Level | Definition | Minimum wage (VND) Per month |
| Regional I | Including cities, districts, and towns with developed economies (such as Hanoi, HCMC, and central cities of province/prefecture) | 4,680,000 |
| Region II | Including districts, provinces, and suburban cities with relatively developed economies (2-ranked cities of the province or prefecture). | 4,160,000 |
| Region III | Including districts, and towns, with a decent economic level but lower than in Region II. | 3,630,000 |
| Region IV | Including districts and towns with undeveloped, difficult, and extremely difficult economies (remaining regions and areas). | 3,250,000 |
The Vietnamese labor laws stipulate that an employee can work a maximum of 8 hours per day and 48 hours per week. However, in case of overtime, an employee can work for a maximum of 4 additional hours per day, 40 hours per month, and 200 hours per year.
When employees work overtime
When employees work overtime, the employers are obliged to pay them accordingly. The overtime pay is calculated as follows:
- 150% of the regular salary for weekdays
- 200% of the regular salary for weekends
- 300% of the regular salary for public holidays
For night shifts (between 10 P.M and 6 A.M), an additional 30% should be added to the regular shift rate. For overtime during night shifts, an additional 20% should be added to the regular overtime rate (inclusive of the night shift rate).
It should be noted that the figures mentioned above refer to employees who lack professional training. For employees with professional training, an additional 7% should be added to the aforementioned figures.
Taxes and Duties Paid by Employers in Vietnam
By standard, employers must pay 4 main types of insurance and fees for their employees in Vietnam:
- Social insurance: 17.5% of gross salary, capped at 20 times the national minimum wage.
- Health insurance: 3% of gross salary, capped at 20 times the national minimum wage.
- Unemployment insurance: 1% of gross salary, capped at 20 times the regional minimum wage.
- Labour union fee: 2% of gross salary, capped at 20 times the national minimum wage.
- In total, the employer must pay a total percentage of 23.5% of the gross fixed salary, with a capped number of $333/person/month.
It is important to note that these are just the standard rates. The actual rates may vary depending on the specific circumstances. For example, the rates may be higher for employees who work in hazardous or dangerous industries.
Paid Time Off, Annual Leave, and Holidays in Vietnam
In accordance with the labor laws and regulations of Vietnam, employees have the right to enjoy several types of paid time off days, such as annual leave and holidays.
- Annual leave: The minimum amount of annual leave entitled to an employee is 12 days per year, which can be increased depending on the terms of their employment contract.
- Sick leave: Employees are eligible for sick leave, allowing them to take a maximum of 30 days off per month and 180 days off per year. During such periods of absence, their salary will be covered by the social insurance department.
- Public holidays: Vietnam has 6 public holidays:
- New Year’s Day (1st of January)
- Lunar New Year (Jan-Feb)
- Hung Kings Commemoration Day (10th of March in the Lunar Calendar)
- Reunification Day (30th of April)
- Labor Day (1st of May)
- Independence Day of Vietnam (2nd of September)
In the event that public holidays fall on a weekend, employees in Vietnam are usually entitled to additional days off, which are typically observed on the following weekdays.
It should be noted that Vietnam uses two calendar systems: the International Calendar and the Lunar Calendar. Some holidays are observed according to the Lunar Calendar, such as Lunar New Year and Hung Kings Commemoration Day, which do not have fixed dates and may vary from year to year. It is advisable to seek assistance or use HR services in managing employee benefits related to these holidays.
The Employer of Records (EOR) and Payroll Services in Vietnam
As mentioned earlier, if your business is new to the Vietnamese market or you want to reduce expenses by avoiding setting up a fully functional HR department in Vietnam, Iris International provides a viable alternative solution: Employer of Records (EOR) services.
In simple terms, EOR services involve hiring a company to act as an employer on your behalf, handling tasks such as recruitment, salary negotiations, onboarding, employee benefits, and payroll management. This effectively serves as an outsourced HR team for your Vietnam branch at a lower cost than hiring and maintaining an entire in-house HR department.
However, for small or newly established branches without an HR department, the confidentiality of payroll information may be a concern, as someone in the company would need to calculate the salaries of all employees. In this case, if you do not want to use a comprehensive service like EOR, as you already have a sufficient team in place to handle human resource responsibilities, Iris International offers payroll services. We will assist with salary calculations, payment processing, and delivery of payslips to employees, ensuring that salary information is completely confidential and undisclosed to other employees within the company.
At Iris International, we believe in going above and beyond for our clients. That’s why in addition to offering incorporation, payroll, and EOR services in Vietnam, we also provide free consultations on labor law, employment practices, and cultures in Vietnam. We understand that navigating the complexities of business operations in a foreign country can be challenging, which is why we aim to not only assist our clients in their day-to-day operations but also provide them with valuable information, advice, and guidance to help them better understand the local landscape.
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