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 hiring Vietnamese employees, this article provides comprehensive information and guidelines on Vietnam employment practices.

1/ 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.

• A 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, which 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.

• Infinitive contract: An infinitive 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.
• 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.

2/ EMPLOYMENT SALARY AND TAXES/DUTIES PAID BY THE EMPLOYER

THE EMPLOYMENT SALARY AND OVERTIME PAYMENT IN VIETNAM

The minimum wage in Vietnam undergoes 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.

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.

As per Vietnamese labor laws, an employee is permitted to work a maximum of 8 hours per day and 48 hours per week. 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, 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).

TAXES AND DUTIES PAID BY THE EMPLOYERS

By standard employers must pay 4 main types of insurance and fees for the employees are

• 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 you must pay the total percentage of 23.5% of the gross fixed salary with a capped number at $333/person/month.

3/ PAID TIME OFF, ANNUAL LEAVE, AND HOLIDAYS

PAID TIME OFF AND ANNUAL LEAVE

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. 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.

Moreover, 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.

In general, every country has its own set of national holidays, and Vietnam is no exception. However, the number of holidays in Vietnam during which employees can take days off is not very high. The list of such holidays is provided below:

• New Year’s Day (1st of Jan)
• 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)

HOLIDAYS DAYS OFF

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. For example, if both Reunification Day (30th of April) and Labor Day (1st of May) fall on a Saturday and Sunday, employees may enjoy two additional days off on Monday and Tuesday.

It should be noted that Vietnam uses two calendar systems: the International Calendar and the Lunar Calendar, and some holidays are observed according to the Luna Calendar. These holidays include Lunar New Year and Hung Kings Commemoration Day, which do not have fixed dates and may vary from year to year. While the dates of these holidays can be checked online, it is advisable to seek assistance or use HR services in managing employee benefits related to them.

4/ THE EMPLOYER OF RECORDS (EOR) AND THE PAYROLL SERVICES

As previously mentioned, if your business is new to the Vietnamese market or you seek to reduce expenses by avoiding the establishment of a fully functional HR department in Vietnam, VNBG provides a viable alternative solution: the Employer of Records (EOR) services.

Simply put, EOR services entail engaging 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.

Nevertheless, 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 be required to calculate the salaries of all employees. In this case, if you do not wish to use a comprehensive service like EOR, as you already have a sufficient team in place to handle human resource responsibilities, VNBG offers a Payroll service. 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 VNBG, we believe in going above and beyond for our clients. That’s why in addition to offering incorporation, payroll, and EOR services, 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.

You may be also interested in the following:

WORK PERMIT IN VIETNAM – APPLICATION PROCESS EXPLAINED

PAYROLL OUTSOURCING IN VIETNAM – VNBG HR SOLUTIONS

MANAGE REMOTE EMPLOYEES IN VIETNAM USING AN EOR COMPANY

PERSONAL EOR – SOLUTION FOR EXPAT FREELANCERS AND RETIREES

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