An Employer of Record (EOR) in Vietnam is a company that takes on the responsibility of being the legal employer for a worker. This includes managing payroll, benefits, and other employment-related tasks on behalf of the worker's actual employer.
Discover the key considerations and essential details you should be aware of before opting for an Employer of Record (EOR) in Vietnam.
On this page: Employment Contracts | Employment Laws | Social Security | Personal Income Tax | Employment Types | Employee Benefits
| Overview | |
| Continent | Asia |
| Country | Vietnam |
| Capital | Hanoi |
| Time zone | UTC+07:00 (Indochina Time) |
| Total Time zones | 1 |
| Working hours per week | 40 |
| Working week | Monday–Friday |
| Typical hours worked | 8 |
| Personal Tax filing deadline | For employment income, individuals must submit tax declarations monthly by the 20th of the next month or quarterly by the last day of the first month after the quarter ends. |
| Financial Year | 1st January to 31st December |
| Date format | dd/mm/yyyy |
| Currency | Vietnamese Dong (VND) |
| VAT | the standard rate is 10% |
Employment Contracts in Vietnam
An employment contract in Vietnam is a formal agreement outlining the terms and conditions of employment between an employer and an employee. This encompasses aspects such as job responsibilities, salary, working conditions, and the rights and obligations of each party in the employment relationship.
Form and Information Obligations
- Contract Form and Copies: An employment contract must be in writing, with both the employer and employee retaining a copy. Electronic contracts are valid as per electronic transaction laws.
- Information Before Contract Conclusion: Employers must provide truthful information about job details, workplace, working conditions, wages, and more. Likewise, employees need to provide accurate personal information requested by the employer.
Prohibited Acts by Employers
- Identity Documents: Employers cannot retain employees' original identity documents, diplomas, or certificates.
- Cash or Property Deposits: Employers are prohibited from requesting cash or property deposits from employees as security.
- Forced Contract Continuation: Employers cannot force employees to continue working to pay off debts.
Multiple Employment Contracts
- Permissible with Conditions: Employees can enter into contracts with multiple employers, provided they fulfill all terms in each contract.
- Insurance Compliance: Compliance with social insurance, health insurance, and unemployment insurance regulations is mandatory for employees with multiple contracts.
Types of Employment Contracts
- Indefinite-term Contract: A contract without a fixed term or specified termination time.
- Fixed-term Contract: A contract with a specified duration, not exceeding 36 months. If no new contract is signed after expiration, it may become indefinite.
- Special Cases: Certain job categories may allow for additional fixed-term contracts, subject to specific conditions.
Protection of Business Secrets and Technology Know-How
Employers can sign agreements with employees related to business secrets and technological know-how, defining protection terms and compensation in case of violations.
Effect and Probationary Period
- Contract Effect: An employment contract becomes effective upon conclusion by both parties, unless agreed otherwise.
- Probationary Period: The probation period's duration is negotiated based on job nature, with specified limits depending on the position's requirements.
Termination Rights for Employees and Employers
- Employee's Right to Terminate: Employees have the right to unilaterally terminate the contract with notice, the duration of which depends on the contract type.
- Employer's Right to Terminate: Employers can unilaterally terminate in various circumstances, with notice periods defined by law.
Employment Laws in Vietnam
Vietnam's vibrant and evolving economy is supported by a carefully regulated employment environment. The Labor Code plays a pivotal role, establishing equitable treatment and basic standards for all workers, with certain exclusions for high-level managerial positions surpassing specified salary criteria. This framework is designed to protect essential rights, including minimum wage provisions, working hour limitations, entitlements to leave, and procedures for termination. Through these measures, Vietnam promotes a balanced and secure workplace, contributing to the well-being of both employers and employees.
Minimum Wages
In Vietnam, the minimum wage system consists of two main categories to establish fair compensation for employees across various sectors. Firstly, there is the Common Minimum Wage, fixed at VND 1,800,000 (US$76.6). This benchmark is employed for salary computations in state-owned organizations and enterprises. Additionally, it serves as the basis for calculating social contributions across all enterprises, with the maximum social contribution set at 20 times the common minimum wage.
The second category is the Regional Minimum Wage, which is applicable to non-state enterprises and varies based on different regions defined by the government. The 2023 monthly minimum wages for each region, along with the recent increases, are as follows:
| Region | Salary (VND) | Salary (US$) | Hike (VND) |
|---|---|---|---|
| Region I (Urban Hanoi and Ho Chi Minh City) | 4,680,000 | 202 | 260,000 |
| Region II (Rural Hanoi and Ho Chi Minh City, along with Da Nang) | 4,160,000 | 179 | 240,000 |
| Region III (Provincial cities and districts of specified provinces) | 3,640,000 | 157 | 210,000 |
| Region IV (Remaining localities) | 3,250,000 | 140 | 180,000 |
Notably, Region I covers urban Hanoi and Ho Chi Minh City, Region II includes rural areas of these cities and Da Nang, Region III comprises certain provincial cities and districts, and Region IV encompasses the remaining localities.
Moreover, the labor code stipulates minimum hourly wage rates corresponding to the regions:
- Region I: VND 22,500 (US$0.97)
- Region II: VND 20,000 (US$0.86)
- Region III: VND 17,500 (US$0.75)
- Region IV: VND 15,600 (US$0.67)
It's important to note that employees paid on a daily or weekly basis must receive compensation not lower than the minimum wage when converted to monthly or hourly rates, ensuring equitable remuneration in line with labor regulations.
Overtime Compensation in Vietnam
Overtime compensation is a crucial aspect of labor regulations in Vietnam, ensuring fair remuneration for employees who exceed standard working hours outlined in their contracts. Regardless of the agreed-upon wages, employers are obligated to provide additional compensation beyond the regular pay for overtime work.
Limitations on Overtime Hours:
- Standard Limitations: The labor code establishes limitations on the number of overtime hours an employee can work, capping it at 40 hours per month.
- Exceptions for Specific Cases: However, certain exceptions allow for up to 300 hours of overtime per year in specific cases, such as the manufacturing and export of electric and electronic products or tasks demanding high technical qualifications.
Mutual Agreement on Overtime:
Extended Overtime Beyond Standard Limits:
Compensation and Additional Benefits:
- Night Shift Compensation: In situations where overtime work extends into the night, employees receive additional compensation as per regulations.
- Compensatory Time Off: Employees granted compensatory time off for extra hours worked should receive payment reflecting the difference between their regular and overtime wages.
- Special Rates for Night Shifts: Notably, employees working night shifts are entitled to at least 30 percent higher pay than their standard rate.
Special Considerations for Unique Circumstances:
- Pregnant Women: Pregnant women in their 7th month onward and those nursing children under 12 months are restricted from overtime work, night shifts, or long-distance business trips.
- Minor Employees: Special considerations apply to minor employees, with different regulations for those under 15, aged 15 to 18, and specific restrictions on hazardous work.
Ensuring Fairness and Well-being:
Employee Well-being: These regulations ensure that overtime compensation aligns with the principles of fairness and employee well-being, addressing unique considerations for various groups of workers in Vietnam.
Payroll Cycle
In Vietnam, full-time employees receive their salaries on a monthly basis, with payday typically falling on the last working day of the month or as mutually agreed upon in the employment contract.
Probation Period and Notice Period
Probationary Period
Parties involved shall negotiate the probationary period based on the job's nature and complexity. A single probationary period is permitted for a position, and its duration should not exceed:
- 180 days for roles such as enterprise executive, as specified by the Law on Enterprises and the Law on the management and use of state investment in enterprises.
- 60 days for positions requiring a junior college degree or above.
- 30 days for positions requiring a secondary vocational certificate, professional secondary school, as well as roles for technicians and skilled employees.
- 6 working days for other positions.
Notice Period
The notice period for employees in Vietnam varies based on the type of employment contract. For indefinite-term contracts, the notice period is 45 days, for definite-term contracts, it is 30 days, and for seasonal contracts, it is three days.
Working Hours
Normal Working Hours- The standard working hours should not exceed 8 hours per day or 48 hours per week.
- Employers have the authority to establish daily or weekly working hours, ensuring that daily working hours do not surpass 10 hours and weekly working hours do not exceed 48 hours, when calculated on a weekly basis. The state encourages a 40-hour workweek.
- Employers must restrict exposure to harmful elements in compliance with relevant National Technical Regulations and laws.
Working Hours at Night
Working hours at night are defined as the period from 22:00 (10 pm) to 06:00 (6 am).
13th Month Salary
A 13th-month salary is a voluntary bonus in Vietnam, not mandated by law but commonly practiced to enhance employee retention. Typically given to employees with at least one year of service, it is usually provided at the year-end or during Tet (Vietnamese New Year). The bonus amount is prorated based on the length of employment, ranging from a minimum of 8.33% to a maximum of 20% of the employee's annual salary.
Termination and Severance Pay
Article 46 of the Labour Code in Vietnam outlines the provisions for severance allowance. If an employment contract is terminated under specific conditions mentioned in Article 34, the employer is obligated to provide severance allowance to employees with at least 12 months of regular service. The allowance is calculated at half a month's salary for each year of work, excluding cases where the employee is entitled to retirement pension under social insurance laws or falls under specific conditions stated in Article 36. The qualified work period for calculating severance allowance is the total actual work period minus unemployment insurance participation and any prior severance or redundancy allowance received. The salary considered for calculating severance allowance is the average salary of the last six months before termination.
Personal Income Tax in Vietnam
Income tax rates applicable to employment income in Vietnam vary for resident and non-resident taxpayers. Resident taxpayers are obligated to pay personal income tax (PIT) on their global employment earnings, regardless of the income's source or where it is earned. The progressive PIT rates for residents range from five percent to a maximum of 35 percent. Employment income encompasses salaries, wages, allowances, subsidies, various forms of remuneration, benefits from participation in business associations, and premiums and bonuses, excluding those received from the government.
Here are the Personal Income Tax Rates in Vietnam for resident taxpayers:
- Up to 5 million VND (Up to 215 USD): 5%
- Over 5 to 10 million VND (Over 215 to 430 USD): 10%
- Over 10 to 18 million VND (Over 430 to 774 USD): 15%
- Over 18 to 32 million VND (Over 774 to 1,377 USD): 20%
- Over 32 to 52 million VND (Over 1,377 to 2,237 USD): 25%
- Over 52 to 80 million VND (Over 2,237 to 3,442 USD): 30%
- Over 80 million VND (Over 3,442 USD): 35%
On the other hand, non-resident taxpayers are subject to a flat personal income tax rate of 20 percent on income sourced within Vietnam.
Employment Types in Vietnam
In Vietnam, there are various employment types that individuals can be engaged under, each with its own characteristics and legal implications.
- Employee: Individuals in Vietnam can be employed under either an indefinite-term contract or a definite-term contract. A definite-term contract specifies the agreed-upon term and termination time, which should not exceed 36 months.
- Independent Contractor: Vietnamese individuals have the option to provide services to enterprises or organizations in Vietnam as independent contractors. However, it is generally expected that independent contractors have a household business registration. This type of arrangement falls under the jurisdiction of the Civil Code, Law on Enterprises, and Commercial Law, and is not considered an employment relationship governed by labor laws. Consequently, independent contractors do not enjoy the statutory employment rights granted to employees. The Labor Code 2019 has introduced stronger protections for individuals engaged under services or consultancy agreements to prevent the avoidance of employment regulations. If a contract specifies the "work to do," wages, management, and administration of the hired party, it may be regarded as an employment contract, regardless of its name.
It is generally discouraged to use service contracts for permanent and long-term work, as it may be seen as an attempt to circumvent employment-related requirements. This is particularly true if the individual does not have a household business registration. - Agency Worker: Agency workers in Vietnam are employees recruited by an enterprise that holds an Outsourcing License for "labor outsourcing activities." These workers are subsequently assigned to work for another employer, known as the subleasing employer. The scope of work covered by the Outsourcing License is determined by a government-created list. The agency worker remains under the management of the subleasing employer but maintains an employment relationship with the employment outsourcing enterprise. The duration of employment outsourcing should not exceed 12 months. Agency workers are entitled to receive pay and benefits equivalent to those specified in the employment contract between the employer and the employment outsourcing enterprise. The employment outsourcing enterprise must ensure that the agency worker receives a wage that is not lower than that of an employee with the same job and qualifications or a job of equivalent value at the subleasing employer. Additionally, the subleasing employer has an obligation to prevent labor condition discrimination between agency workers and other employees.
Understanding the different employment types in Vietnam is essential for both employers and individuals to ensure compliance with labor laws and regulations, and to provide appropriate rights and protections to the workforce.
Employee Benefits in Vietnam
Leave Entitlements in Vietnam
Annual Leave:
Employees in Vietnam are entitled to the following annual leave based on their working conditions:
- 12 working days for those in normal working conditions
- 14 working days for individuals engaged in heavy or dangerous work
- 16 working days for those involved in extremely heavy or hazardous work
Public Holidays in Vietnam:
Several public holidays are observed in Vietnam, including:
- New Year’s Day: 1st January
- Lunar New Year: 23rd to 29th January
- Vietnamese New Year's Eve: 24th January
- Hùng Kings' Festival: 2nd April
- Reunification Day: 30th April
- Labor Day: 1st May
- Independence Day of Vietnam: 2nd September
Maternity Leave in Vietnam:
Female employees in Vietnam are entitled to six months of paid maternity leave at 100% of their salary, based on the social insurance contribution's base salary. An additional 30 days are provided for each additional child. The salary during maternity leave is covered by compulsory social insurance. In cases of miscarriage, abortion, or stillbirth, maternity leave ranges from 10 to 50 days, depending on the fetus's age.
Paternity Leave in Vietnam:
Fathers in Vietnam are eligible for the following paternity leave:
- 05 working days for normal delivery
- 7 working days in case of Cesarean birth or delivery under 32 weeks of age
- 10 working days in case of twins, with an additional 03 days for each child from the third child
- 14 working days in case of Cesarean birth for twins
Sick Leave in Vietnam:
Employees facing illness or disability, as recommended by a doctor, receive an allowance from Vietnam’s social insurance fund. The allowance is based on the employee’s salary used for calculating the social insurance premium. The maximum entitlement is:
- 30 days per year (for employees contributing to the social insurance fund for less than 15 years)
- 40 days per year (for employees contributing for 15 to 30 years)
- 60 days per year (for employees contributing for more than 30 years)
Embracing an Employer of Record (EOR) Solution in Vietnam
Embracing an Employer of Record (EOR) solution in Vietnam is a strategic imperative for companies aiming at global expansion. By offloading critical tasks such as compliance with local employment laws, navigating complex payroll intricacies, and ensuring statutory adherence to the EOR, businesses can seamlessly establish their presence in Vietnam without the hassles tied to setting up a legal entity. This collaborative partnership empowers companies to concentrate on their core objectives and growth strategies, assuring that their workforce in Vietnam operates in full compliance with local regulations. The EOR simplifies international employment processes, offering invaluable guidance in navigating the multifaceted landscape of Vietnamese employment regulations.
EOR Thailand | EOR Vietnam | EOR Indonesia | EOR Malaysia | EOR Singapore
Social Security in Vietnam
In Vietnam, social insurance is a mandatory requirement for both local and foreign employees, encompassing contributions for sickness, maternity, occupational diseases, accidents, retirement, and death. The system is governed by the Labor Code, and all companies, irrespective of their origin, are obliged to make monthly contributions. Social insurance rates are consistent for both Vietnamese and foreign employees, with an 8% contribution from employees and a 17.5% contribution from employers.
The calculation of social insurance contributions is based on the monthly salary or wage of employees. However, there is a wage ceiling for calculating contributions, set at 20 times the common minimum wage for social and health insurance, which is currently VND 36 million (US$1,527.27), and 20 times the regional minimum wage for unemployment insurance. The salary subject to social insurance contribution is determined by the labor contract but is capped at 20 times the government-defined minimum salary for social insurance.
The minimum salary for social insurance contributions varies by region:
Foreign workers can claim a one-off payment from the social insurance agency upon the expiration of their employment in Vietnam under specific circumstances, including reaching retirement age without 20 years of contribution, suffering from a fatal disease, meeting pension conditions but residing outside Vietnam, or experiencing termination of employment or work permit expiration without renewal. Social insurance for foreign workers became mandatory on December 1, 2018, under Decree 143/2019/ND-CP.
Social Security Minimum Contribution