How To Hire And Pay Employees In Vietnam

Vietnam has witnessed an economic boom over the past decade, with rates of economic growth reaching over 13% in 2022 and bringing new injections of foreign investment and revenue. Vietnam’s young, dynamic workforce and low cost of living have proven beneficial to businesses relocating to the country. However, there has also been an increase in the migration of Vietnamese workers to other neighbouring Asian countries, particularly Malaysia.

Employees who have completed at least one year’s service for an employer are entitled to 12 paid annual leave days, with a pro rata entitlement granted to employees with less than one year’s service. Employees receive one additional day for each additional five years they work for an employer. Employees are entitled to pay in lieu of annual leave days not taken by the end of the year. In practice, employers usually permit employees to carry over untaken annual leave to be taken no later than 31st March the following year. Employees working under hazardous conditions may earn more leave, and additional leave is often a negotiated supplementary benefit.

Probation periods are common in Vietnam. They must not exceed 60 days for work that requires specialist or highly technical skills, or 30 days for other types of work.

Employers must give 30 working days’ notice for termination of fixed term labour contracts, and 45 working days’ notice for termination of indefinite labour contracts. They must have proper legal grounds for termination. Upon termination of employment, a worker who has completed one year’s service is entitled to severance pay of half a month's salary, plus other benefits (if any), for each year of service. Severance pay shall be paid within 7 days from the termination date.

Generally, non-compete and non-solicitation provisions are permissible, but the labour authorities have taken the view that labour documents may only deal with labour matters during the term of employment, and covenants that are drafted to survive termination of the employment relationship are not enforceable. It is uncertain, therefore, how the courts would interpret this.

Employment agreements may be in written or electronic form, or – if the term of employment is less than one month - in verbal form.

Pregnant employees are eligible for six months of paid maternity leave at 100% of salary (the base salary for the social insurance contribution) for their first child, and an additional 30 days for each additional child. Salary during this period is paid by the compulsory social insurance. The maximum entitlement is VND 29.800.000 and the employer normally cover the difference where the employee’s actual gross salary base is higher than this amount. Fathers are eligible to receive 5-14 days of paid paternity leave, depending on whether the child is born naturally or by C-section and whether it is a single or multiple birth.

Employees who suffer from illness and/or disability, or take leave in accordance with a doctor’s order, receive an allowance paid by Vietnam’s social insurance fund, provided that they submit the required documentation supporting their leave (certificate issued by a public hospital doctor). The sick leave allowance is based on the employee’s salary used to calculate the social insurance premium. The maximum annual entitlement is:

• Less than 15 years’ contribution to social insurance fund: 30 days
• 15-30 years’ contribution to social insurance fund: 40 days
• 30+ years’ contribution to social insurance fund: 60 days

The social and health insurance contribution, which applies to both Vietnamese employees and expatriate employees working in Vietnam, is calculated based on the salary, allowance, and additional payments stated in the labour contract. It does not exceed 20x the common minimum salary provided by the government. The unemployment insurance contribution, which is calculated and capped in the same way, is only required for Vietnamese employees.

All Vietnamese and expatriate employees contribute a mandatory 1.5% of their salary into a health insurance fund, in addition to a 3% contribution by their employer.

This document will only be granted to a foreign national who is sponsored by an entity in Vietnam. The sponsoring entity must submit the demand for employment of foreign nationals to the relevant government’s body at least 30 days before recruiting or transferring the foreign nationals to work in Vietnam. The local DOLISA responds to the sponsoring entity in writing within 15 days, confirming the acceptance or refusal of the demand, which is deemed a pre-approval for using foreign employees in Vietnam. A work permit application must then be filed with the local DOLISA at least 15 business days before the expected commencement date for the employee. Work permits can be granted with a maximum validity period of two years and can be renewed through the reissuance process. Typically, depending on the role, a foreign national wishing to work in Vietnam will require management experience, or at least three years’ relevant professional experience and a Bachelor, engineering or higher degree.

Vietnam's official monthly minimum wage varies by region:

• Region I: VND 3,500,000 per month
• Region II: VND 3,100,000 per month
• Region III: VND 2,700,000 per month
• Region IV: VND 2,400,000 per month

The payroll cycle in Vietnam for full time employees is monthly, paid on the last working day or as otherwise agreed within the employment contract. Part-time employees, independent contractors, and freelancers are paid their salaries as agreed within the employment contract. Though there is no statutory requirement to do so, it is common for employers to pay a 13th month salary as a Christmas bonus. Employees may also receive smaller bonuses for public holidays.

All employees contribute a mandatory 17.5% of their salary into social insurance and 1.5% into a health insurance fund, in addition to 8% and 3% respective contributions by their employer. Vietnamese employees contribute an additional 1% of their salary to unemployment insurance, which is matched by their employer.