Hire in Vietnam
Here’s where you get started with human resources best practices and hiring in Vietnam.
Key Country Facts
Vietnam laws and customs are based on transparency, compliance and best practices to ensure a lack of corruption and to attract foreign investment.
Vietnam is in Southeast Asia. After many years of war ended in 1975, its economy is now developing very fast. In 1986, the government implemented a series of economic and political reforms, which started Vietnam’s path towards integration into the global economy. It established diplomatic relations with most countries by 2000. Vietnam’s economic growth has been ranked among the world’s highest since 2000. In 2011, the country boasted the highest Global Growth Generators Index among 11 major economies.
Vietnamese are warm and friendly people who easily accept foreigners into their circle of friends.
Vietnamese is the first language in Vietnam and compulsory for all documents submitted to the Vietnam Government. English, which is widely spoken and mostly used in international companies, is an active second language.
Vietnam HR at a Glance
From January 1, 2021, the main law regulating employment relationships in Vietnam is the new 2019 Labor Code, Decree 45/2019/QH14 (“New Labor Code”). For foreign nationals, there are also two sets of implementing regulations, including Decree 11/2016/ND-CP, which mainly provides guidance on matters related to work permits for foreign workers in Vietnam and Decree 143/2018/ND-CP regarding the mandatory social insurance payments and payroll for foreign workers employed in Vietnam.
An employment contract must be concluded in a written document and made in two copies, of which the employee keeps one copy and the employer keeps one copy. However, for a contract of less than one month, the two parties can conclude a verbal employment contract. For foreign employees, employment contracts must be written in both Vietnamese and a second language (usually English) that the employer and employee both agree with (in the case of an expat position).
There are now only two types of labor contracts in Vietnam. Definite-term labor contracts are for terms of 36 months or less. Indefinite-term labor contracts do not have a defined duration. Definite-term labor contracts can only be renewed once, except for directors of enterprises having state capital, elderly employees, foreign employees and members of executive boards of employee representative organizations. These can be signed multiple times. Definite-term labor contracts in Vietnam can no longer be extended using appendices.
Foreigners holding work permits (valid for two years) will also be able to renew only one time. Seasonal contracts will no longer be permitted in Vietnam starting in 2021.
The concept of implied terms in an employment contract is not recognized under Vietnamese labor laws. However, the conditions for terminating an employment contract are strictly regulated by Vietnamese law and can be (but are not required to be) stated in the employment contract. Employers must implement and comply with a collective labor agreement (CLA).
Internal labor regulations (ILRs) are mandatory for companies employing 10 employees or more. ILRs can be created by the employer to reflect the specificities of the business and industry of the employer but these must not be contrary to the Vietnamese labor legislation. The employer is required to discuss the proposed ILRs with the executive committee of the relevant trade union (if there is one) they must be registered with the relevant government agency once adopted.
Probation Period / Trial Period
- A probation period is discretionary up to a maximum of 60 days, or up to 180 days for executive positions of enterprises. The definition of executive positions is quite ambiguous in Vietnam and varies from other countries. GoGlobal should be consulted directly for specific positions before hiring.
- This period can be outlined in either the labor contract or in a separate probation agreement. If included in the probation letter, there is no obligation to pay social security contributions during the probationary period.
- During the probationary period, the employer must pay at least 85% of the salary for the job.
- Either party can terminate the employment during probation without observing a notice period or paying compensation.
Per Vietnam law, overtime must be implemented based on voluntary negotiations from the two sides. The employee’s overtime hours must not exceed 50% of normal working hours per day. A normal work week is 48 hours.
The overtime cap has increased from 40 to 60 hours per month and 300 hours per year for all industries and sectors, effective April 1, 2022.
Termination in Vietnam is difficult in practice. The alternative option of negotiation is therefore highly recommended. Mutual agreement with compensation for the employee can potentially save time, money and legal risks for the company.
The New Labor Code provides more bases for both employers and employees to unilaterally terminate labor contracts, as outlined below:
- Labor contracts with foreign employees will be terminated if the employee is expelled following judgements or decisions made by courts and relevant authorities. Termination can also occur if their work permits expire.
- Either the employer or the employee can unilaterally terminate labor contracts once the employee reaches the retirement age.
- Providing falsified information at recruitment or being absent from work for five consecutive working days without permission or legitimate reason are now both bases for employers to unilaterally terminate labor contracts.
- Employees, regardless of the term of contract, can unilaterally terminate a labor contract without providing reasons (if they serve the required advance notice).
The New Labor Code also amends provisions on required responsibilities upon the termination of labor contracts with the following notable judgments: :
- The statute of limitations for employers to pay termination benefits to employees has increased from seven working days to 14 working days from the termination date.
- Employers are responsible for providing employees with copies of documents relating to their working period upon request. Incurred costs of copies and deliveries are paid by employers.
For unilateral termination (when allowed by law), employers must give advance notice to the employees within a minimum statutory timeline. Employees who resign are also required to give advance notice to their employers within a minimum statutory time limit. In both cases, the relevant time limits are 45 days in advance for indefinite-term employment contracts, 30 days for definite-term employment contracts with a duration of more than 12 months and three working days for definite-term employment contracts with a duration of less than 12 months.
Redundancy / Severance Pay
Severance pay is applicable to employees who have worked regularly for at least a full 12 months and are not covered by unemployment insurance. A half a month’s salary is payable for each year of work.
There are a minimum of 12 days of paid annual leave, exclusive of public holidays. An employee must be given one additional annual leave day for every five years of consecutive service for an employer.
Bonus and 13th Month Pay
Normally, a bonus clause is agreed to in the relevant employment contract. There are no restrictions or guidelines on bonuses. An employer can issue bonus regulations to be notified to its employees subject to consultation with the trade union. It is a common practice to offer a 13th month salary bonus across all sectors in Vietnam.
Other Standard Items
Additional bonuses are limited in Vietnam and they are typically taxable, although prefixed lump sum amounts (‘khoan chi’) for phone services, stationery, uniforms and per diem allowances are not subject to taxes if the amounts are within the levels set out under the relevant regulations.
Vietnam has a compulsory social, health and unemployment insurance (SI, HI, UI) scheme. Contributions are sourced from both the employer and the employee. Trade Union (TU) contribution of 2% is compulsory for employers, regardless of having a union established in the company. Employers will transfer total contributions for both employees and employers by the last day of each month.
Tax and Social Security
Personal Income Tax (PIT) and deductions
A resident individual that has a labor contract will be liable to pay personal income tax (PIT). The resident individual who has no labor contract will be subjected to the PIT rate of 10%. Taxable income, prior to calculating PIT, is further reduced by a personal allowance of VND 11,000,000 per month and a dependent allowance of VND 4,400,000 per month for each registered dependent.
A resident is a person who satisfies at least one of the two following conditions:
The individual spends at least 183 days in Vietnam within one calendar year or within a consecutive 12-month period from the date of first entry into Vietnam.
The individual has a “regular residential location” in Vietnam, meaning that the person has either a residential location for which permanent residence has been registered under the Law on Residence or a leased residence under the Law on Residential Housing with a lease term of at least 90 days.
A non-resident is a person who does not satisfy the conditions above. Taxable income from salaries or wages is the entire monetary salaries or wages that a non-resident receives from doing work in Vietnam, irrespective of the location where the income is paid. Non-resident status is subject to a flat income tax rate of 20%.
|Monthly Taxable Income (VND)||Tax Resident PIT Rates (%)||Maximum Tax in Brackets (VND)||Cumulative Tax including Current Bracket (VND)|
|<5,000,000||5.0||5,000,000 x 5% = 250,000||250,000|
|5,000,001 – 10,000,000||10.0||(10,000,000 – 5,000,000) x 10% = 500,000||750,000|
|10,000,001 – 18,000,000||15.0||(18,000,000 – 10,000,000) x 15% = 1,200,000||1,950,000|
|18,000,001 – 32,000,000||20.0||(32,000,000 – 18,000,000) x 20% = 2,800,000||4,750,000|
|32,000,001 – 52,000,000||25.0||(52,000,000 – 32,000,000) x 25% = 5,000,000||9,750,000|
|52,000,001 – 80,000,000||30.0||(80,000,000 – 52,000,000) x 30% = 8,400,000||18,150,000|
|>80,000,001||35.0||(Actual salary – 80,000,000) x 35%||18,150,000 + maximum tax|
PIT: Employer Requirements
The PIT deducted from payroll will be transferred to the bank account of the tax department in the following month.
The PIT declaration must be filed monthly or quarterly, depending on the employer’s period of VAT declaration.
The deadline for annual PIT finalization is March 30 of the following year. The employer only needs to submit one return to declare the PIT amount of all employees in the year.
Vietnam has a compulsory social, health and unemployment insurance (SI, HI and UI) scheme. Contributions are sourced from both the employer and the employee. The basis for calculating the contributions is the employee’s monthly salary as outlined in the labor contract. This is capped at 20 times the common minimum salary for SI/HI and 20 times the regional minimum salary for UI. Effective from January 1, 2020, the minimum salary cap is VND 29,800,000 per month (approximately USD 1,283 per month) and the minimum regional salary cap varies from VND 61,400,000 to VND 88,400,000 per month, depending the region (approximately USD 2,645 – USD 3,800 per month). These minimum salaries are subject to change during the year.
The contribution rate to trade union (TU) funds, compulsory only for employers, is set at 2% of the salary fund for SI contributions for employees. This fee must be paid into TU funds once per month. If the employer and its employees agree to establish a Trade Union, employees will be required to contribute 1% to the Trade Union Fund.
Employees under labor contracts for one month or longer (except for a probationary contract, as confirmed by Official Letter 1734) are required to participate in SI. The threshold for HI and UI contribution is employees under labor contracts for three months and longer.
|Social Security System||Monthly Salary Cap (VND)||Employer Contribution||Employee Contribution (%)||Foreign Employee Contribution (%)|
|Social Insurance||29,800,000||17.5%, including: Sickness & Maternity (3%), Occupational Accidents & Diseases (0.0%), Retirement & Death (14%)||8.0||8.0|
|Unemployment Insurance (Region 1)*||93,600,000||1.0%||1.0||1.0|
|Trade Union Fee||88,400,000||2.0%||0.0||0.0|
The above rates serve as a broad guideline. Actual rates charged by GoGlobal will differ.
Employers of foreign employees may pay the salary in either VND or USD. Salaries paid in USD must be converted into VND for tax and social security purposes. Standard is monthly payment, with manufacturers sometimes adopting bi-weekly payments.
Payslips can be made available monthly on a website, PDF or paper.
The public holidays under the New Labor Code will be increased from 10 days to 11 days, with full salary payment for employees in Vietnam. If public holiday falls on a weekend, the employees are entitled to take the next weekday off. In addition to these public holidays, an expatriate employee is also entitled to one day off for the traditional new year and another day off for the national day of his or her country.
By law, employees working in normal working conditions in Vietnam are entitled to a minimum of 12 days of paid annual leave (excluding public holidays). Employees working in heavy, hazardous or toxic working conditions are entitled to a minimum of 14 annual leave days. Employees working in ‘extremely’ heavy, hazardous or toxic working conditions are entitled to a minimum of 16 annual leave days. An employee must be given one additional annual leave day for every five years of consecutive service for an employer.
Employees who suffer from illness or disability, or employees who take leave in accordance with a doctor’s order, receive an allowance paid by the social insurance fund. The sick leave allowance is based on the employee’s salary figure that is used to calculate the social insurance premium. The maximum entitlement is:
- 30 days per year (if the employee contributes to the social insurance fund for less than 15 years) or
- 40 days per year (if the employee contributes to the social insurance fund for between 15 and 30 years) or
- 60 days per year (if the employee contributes to the social insurance fund for more than 30 years).
The above entitlements increase by 10 days per year for employees working in heavy, hazardous or toxic occupations or in jobs on the list promulgated by the Ministry of Labor and the Ministry of Health (or those working regularly in specified regions).
The sick pay is covered by the social insurance fund, not by the employer. This applies to Vietnamese employees only.
The allowance granted in lieu of salary is equal to 75% of the SHI contribution salary of the previous month.
Vietnamese employees infected with a disease on the list of diseases requiring long-term treatment, as promulgated by the Ministry of Health, are entitled to the following paid sick leave regime:
- A maximum of 180 days in a year (this includes public holidays and weekends)
- Employees still needing treatment after 180 days continue to be entitled to the paid sick leave regime at a lower level (45% to 65% of their salary or remuneration as defined above)
Sick leave entitlement for expatriate employees will be left to an agreement between the employer and the expatriate employee.
Maternity & Parental Leave
- Female employees are generally entitled to six months of prenatal and postnatal leave. Prenatal leave should not be longer than two months.
- In the case of a multiple birth, the leave will be extended by one month for each child (counting from the second child).
- After the stated maternity leave expires, if so demanded, the female employee may be granted an additional leave without pay under terms agreed upon with the employer.
- If a woman decides to return to work following four months of maternity leave, she must first obtain a document of permission from a qualified medical center stating she is fit to work.
- For each month of leave, employees who are Vietnamese nationals are entitled to 100% of their average monthly salary on which social insurance premiums were based on the six months preceding their leave. This is a monthly allowance. However, the maximum salary or remuneration during maternity leave is capped at 20 times the minimum common salary.
- The payment for maternity leave of Vietnamese employees is covered by the social insurance fund.
- The payment for the maternity leave of expatriate employees is left up to an agreement made between the employer and the employee.
- For natural births: five days
- For birth by cesarean section: seven days
- For natural birth to twins: 10 days
- For the birth of twins by cesarean section: 14 days.
- For the birth of more than two children at one time: additional three days of leave for every additional child (from the third child onwards).
- In addition, if the male employee is the only one participating in the social insurance program and the baby’s mother dies or faces health risks, the male employee will be entitled to leave until the child reaches six months of age.
- For each leave day, the employee must be paid a prorated amount of the monthly allowance by the social insurance fund (applicable to Vietnamese employees only).
- The payment for paternity leave of an expatriate employee is subject to an agreement made between the employer and the employee.
Parental leave: Parents are entitled to paid leave to take care of their sick children. The maximum period of entitlement within a year, for each child, is 20 working days if the sick child is under three years of age and a maximum of 15 working days if the sick child is from three years to seven years of age. The pay for employees during their leave for taking care of their sick children is calculated in the same way as their own sick pay. It is covered by the social insurance fund and applies to Vietnamese employees only.
An employee may also take fully paid leave for personal reasons in the following cases:
- Marriage: three days
- Marriage of his or her child: one day
- Death of a blood parent or a parent of his or her spouse, his or her spouse or child: three days.
Any additional unpaid time off is left up to an agreement made between the employer and the employee.
There is a clause stated under Law on Occupational Safety and Health, Article 21 that the employer must provide health checks for workers at least once a year. Workers performing heavy, toxic, hazardous work, workers with disabilities, minor workers and elderly workers must be provided with a health check-up at least once every six months. Employers are responsible for managing the occupational health records of employees, informing employees on the results of health checkups and reporting on the health of employees to health management agencies annually.
Benefits to the Employee in Vietnam
Vietnamese labor law requires employers to make severance payments to terminated employees who had been regularly working for the employer for 12 months or more. The severance allowance is equal to one half of one month’s wage for each year of employment. The reference salary for the calculation of the severance allowance is the average salary under the employment contract for the six months immediately preceding the termination of the employment contract.
No severance allowance is required by law if:
- At the time of the termination, the employee has worked for the company for less than 12 months.
- The employee illegally and unilaterally terminates his or her employment contract.
- The employee is dismissed for breaching the company’s internal labor rules.
- The employee retires on a pension.
If contributions to the unemployment insurance fund were made for the benefit of the employee, employers are not required to pay severance for the duration that the employees participated in the unemployment insurance scheme, in accordance with the laws on unemployment insurance.
An employee who performs overtime work must be paid a wage for overtime based on wage unit price or on wage for current work as follows:
- On regular days: at least equal to 150%
- On the weekly day off: at least equal to 200%
- On public holidays and paid leave days: at least 300%.
An employee who performs overtime work at night must be paid an additional amount for each hour that is at least 20% wage unit price or the real wage for the work performing in daytime. This is paid on top of the amount of at least 30% of wage unit price or the real wage for the work performed in daytime.
Social insurance covers employee benefits, including sick leave, maternity leave, allowances for work-related accidents and occupational diseases, pension allowances and mortality allowances.
Health insurance entitles employees to medical examinations and inpatient and outpatient treatments at authorized medical establishments.
Unemployment insurance, which takes the place of severance pay, is paid out to employees in quantities depending on the period for which they and their previous employers contributed. The monthly unemployment allowance is equal to 60% of the persons’ average salary of the last six months of employment.
Pensions in Vietnam are administered through a government pension scheme called social insurance and private life insurance-type schemes.
The government pension system, called social insurance, is administered by the Social Insurance Agency (SIA).
Upon reaching retirement, the worker is entitled to receive a repayment contribution in a lump sum or, if they contributed to the SIA for 20 years or more, a lifetime pension.
Social insurance pensions are, in most cases, insufficient to live on. Most elderly people in Vietnam still depend on their families to care for them, regardless of whether they receive a pension. Individuals can also elect to contribute additional funds to life insurance schemes and receive either a lump sum or pension payments upon retirement. However, this practice is uncommon among low-income workers.
An employee may be entitled to several types of allowances and monetary or non-monetary benefits aimed at retaining staff. Some allowances and benefits are subject to personal income taxes but some are not.
Taxable benefits include:
- One-off allowances for relocation
- Once per year home leave round trip airfare for expatriate employees
- School fees up to high school in Vietnam (for children of expatriates)
- Housing rent;
- Payments for power, water and associated services for employees (including housing rent) that amount to more than 15% of their total taxable income (where such payments are made directly by the employer)
- Transportation allowances (to and from work)
- Premiums for life insurance
- Healthcare services
- Entertainment fees
- Sports/athletics fees or membership fees to golf clubs, tennis courts and other exclusive clubs
Prefixed lump sum amounts (‘khoan chi’) for telephone calls and services, stationery, uniforms and per diem allowances are not subject to taxes if the amounts are within the levels set out under the relevant regulations.
Additional private health insurance, annual round-trip air tickets and company paid accommodations are common for expats.
Team outings and company trips are commonly expected by employees in Vietnam and are considered a bonus.
Visas and Foreign Workers
|Business Visa (DN)||Work Permit||Temporary Resident Card|
|Validity||Up to 6-12 months for US citizens and up to 3 months for other nationalities||24 months*||24 months|
|Requirements||Business partner / employer in Vietnam||Higher education, three years of work experience, one year of work experience for directors, employer in Vietnam||Possession of a work permit|
*The New Labor Code limits the term of work permits and extensions. Work permits can now only be extended once for another two-year term. Expats who wish to continue working in Vietnam after the expiration of the extended work permit must apply for a new work permit.
- Medical examination certificate
- Criminal record certificate for the past six months
- Work experience certificate (see below for requirements)
- Legalized passport copy
- For executives in a managerial position: three years
- For non-managerial positions: a Master of Business Administration (MBA) or some similar document is also acceptable if the executive does not have enough work experience.
- Directors are required to have one year of work experience in their field.
Public Holidays in 2023
|1||New Year’s Day1||01.Jan.2023|
|2||Lunar New Year2||21-27.Jan.2023|
|3||Hung Kings Commemoration Holiday||09.Apr.2023|
|4||National Reunification Day||30.Apr.2023|
1. Falls on Sunday, So the off date will be 02.01.2023
2. Yet to confirm
3. 2nd November falls on Saturday, so we have off in lieu