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 the end of many years of war in 1975, its economy is now developing very fast. In 1986, the government initiated a series of economic and political reforms, which began Vietnam’s path towards integration into the world economy. By 2000, it had established diplomatic relations with most nations. Vietnam’s economic growth has been among the highest in the world since 2000, and in 2011, it had 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 is an active second language, which is widely spoken and mostly used in international companies.
Vietnam HR at a Glance
Foreigners who have work permits (valid for two years) will also be able to renew only once. Seasonal contracts will no longer be permitted from 2021.
Concept of implied terms in employment contracts 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 may be created by the employer to reflect the specificities of the business and industry of the employer, but these cannot be contrary to the Vietnamese labor legislation. The employer must discuss the proposed ILRs with the executive committee of the relevant trade union, if there is one, and once adopted, they must be registered with the relevant government agency.
Probation Period / Trial Period
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 different from other countries; consult us for specific position before hiring. Can be included 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, employer must pay at least 85% of the salary for the job.
Either party may terminate the employment during probation without observing a notice period or paying compensation.
Per the 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/month, and 300 hours/year for all industries & sectors, effective 1st April 2022.
Difficult in practice. The alternative option of negotiation is therefore highly recommended. Mutual agreement with compensation for the employee could 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 outline below:
Labor contracts with foreign employees will be terminated if the employee is expelled due to judgements or decisions of courts and competent authorities, or if their work permits expire.
Either employers or employees can unilaterally terminate labor contracts upon employees reaching 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 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 revises provisions on responsibilities upon the termination of labor contracts with the below notable changes:
Increase the statute of limitations for employers to pay termination benefits to employees from 7 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 permitted by law), employers must provide advance notice to the employees within a minimum statutory time limit. 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
Applicable to employees who have worked regularly for at least full 12 months and not covered by unemployment insurance. A half a month’s salary is payable for each year of work.
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.
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. Common to offer a 13th month salary bonus across all sectors.
Other Standard Items
Limited. Generally taxable, although prefixed lump sum amounts, or “khoan chi” amounts, 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. See additional details below.
Vietnam has a compulsory social, health, and unemployment insurance (SI, HI, UI) scheme. Contributions are to be borne by 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. See additional details below.
Tax and Social Security
PERSONAL INCOME TAX (PIT) AND DEDUCTIONS
The resident individual that has a labor contract will be subjected to the rates below. 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 personal allowance of VND 11,000,000 per month and 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:
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.
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 tax department in the following month.
The PIT declaration must be made monthly or quarterly depending on the employer’s period of VAT declaration.
The deadline for annual PIT finalization is March 30th of the following year. Employer needs to submit only one return to declare the PIT amount of all employees in the year.
Vietnam has a compulsory social, health, and unemployment insurance (SI, HI, UI) scheme. Contributions are to be borne by both the employer and the employee. The basis for calculating the contributions is the monthly salary as stipulated in the labor contract (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 subjected to change during a 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 who have labor contracts from one month (except for probation contract as confirmed by Official Letter 1734) shall be required to participate in SI, whereas the threshold for HI and UI contribution is employees with labor contracts from three months.
|Social Security System||Monthly Salary Cap (VND)||Employer Contribution||Employee Contribution (%)||Foreign Employee Contribution (%)|
|Social Insurance||29,800,000||17.0%*, including: Sickness & Maternity (3%), Occupational Accidents & Diseases (0.0%), Retirement & Death (14%)||8.0||8.0|
|Unemployment Insurance (Region 1)||88,400,000||0.0%||1.0||1.0|
|Trade Union Fee||88,400,000||2.0%||0.0||0.0|
* The statutory rate for Social Insurance is usually 17.5%. However, this has temporarily been reduced to 17% from 1 July 2021 to 30 June 2022 due to the reduction of the Occupational Accidents and Diseases contribution (0.5% to 0.0%). Employers are to provide the monetary support obtained from this 0.5% reduction to the employees during the COVID-19 pandemic.
** Unemployment insurance contribution by employer is reduced from 1.0% to 0.0% from 1 Oct 2021 to 30 Sept 2022 due to COVID-19.
The above rates serve as a broad guideline. Actual rates charged will differ.
Employers of foreign employees may pay 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.
The public holidays under the New Labor Code will be increased to 11 days from 10 days, with full salary payment for employees in Vietnam. If any of the public holidays 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 for the national day of his or her country.
See list of Public Holidays below.
By law, employees working in normal working conditions are entitled to a minimum of 12 days of paid annual leave, exclusive of 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 and/or disability or 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 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).
Above entitlements increased 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 working regularly in specified regions.
The sick pay is covered by the social insurance fund, not by the employer (applicable 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, including 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 is subject to the agreement between the employer and the expatriate employee.
Maternity & Parental Leave
Generally entitled to six (6) months of prenatal and postnatal leave. Prenatal leave should not be longer than two (2) months.
In case of a multiple birth, the leave shall be extended by one (1) 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 after four months of maternity leave, she must first obtain a permission document from a qualified medical center stating that 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 (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 maternity leave of expatriate employees is subject to the agreement between the employer and the employee.
For natural births: five days
For birth by caesarean section: seven days
For natural birth to twins: 10 days
For birth of twins by caesarean section: 14 days.
For 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 leave until the child reaches six months of age.
For each leave day, the employee must be paid a pro-rated amount of the monthly allowance by the social insurance fund (applicable to Vietnamese employees only).
The payment for paternity leave of expatriate employees is subject to the agreement between the employer and the employee.
Parental leave: Parents are entitled to paid leave to take care for their sick children. 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 and covered by the social insurance fund and applicable to Vietnamese employees only.
An employee may also take fully paid leave for personal reasons in the following cases:
(a) Marriage: three days;
(b) Marriage of his/her child: one day;
(c) Death of a blood parent or a parent of his/her spouse, his/her spouse or child: three days.
- Any additional unpaid time off is subject to the agreement 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 check for workers at least once a year. For workers performing heavy, toxic, hazardous work, workers with disabilities, minor workers and elderly workers must be provided with health check-up at least once every six months. Employers are responsible for managing occupational health records of employees, informing employees on results of health check-up and reporting on health of employees to health management agencies annually.
Benefits to the Employee in Vietnam
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/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.
- 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 shall be paid for each hour an additional amount of at least 20% wage unit price or the real wage for the work performing in daytime, on top of the amount of at least 30% of wage unit price or the real wage for the work performing in daytime for working at night.
Health insurance entitles employees to medical examination 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 provided through a state pension scheme called social insurance and private life insurance-type schemes.
The state pension system, called social insurance, is administered by the government’s 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 case insufficient to live on, and most elderly people in Vietnam still depend on their families to care for them regardless of whether they receive a pension. People can also choose to contribute additional funds to life insurance schemes and receive either lump sum or pension payments when retiring, though this is uncommon among low-income workers.
Taxable benefits include:
- One-off allowance 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 (to and from work) allowances;
- Premiums for life insurance;
- Health care services;
- Entertainment fees; and
- Sports/athletics fees or membership fees to golf clubs, tennis courts and other exclusive clubs.
Prefixed lump sum amounts, or “khoan chi” amounts, 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 accommodation are common for expats.
Team outings and company trips are commonly expected by the employees and are considered a bonus.
Visas and Foreign Workers
Foreigners and expatriates who wish to work in Vietnam are required to obtain a valid visa at the Immigration Department and work permit from the Labor Department of Vietnam
|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|
A business visa is enough if the employment in Vietnam lasts less than three months. No work permit required. However, sponsorship letter / invitation letter from a business partner in Vietnam is required. It is a convenient option for staying in Vietnam for a few months.
A work permit is required if the employment in Vietnam is longer than three months. Higher education and enough work experience in the chosen field are compulsory.
To apply for a work permit, the following documents are needed:
Medical examination certificate,
Criminal record certificate for the past six months,
Work experience certificate (see below for requirements), and
Legalized passport copy.
Work experience requirements:
For executives in a managerial position: three years
For non-managerial positions, a Master of Business Administration 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 2022
|1.||New Year’s Day||January 1st (observed on January 3rd)|
|2.||Lunar New Year (Tet)||January 29th – February 6th|
|3.||Hung Kings’ Temple Festival||April 10th (observed on April 11th)|
|4.||Reunification Day & International Labour Day||April 30th – May 1st (observed on May 2nd-3rd)|
|5.||National Independence Day||September 1st – 2nd|
Several other holidays are observed, either unofficially at a national level or by official local public observance.