As one of the fastest and most stable-growing economies in Asia, Vietnam is an attractive market to explore and open up other developing markets in Southeast Asia. Vietnam’s macroeconomics alone are convincing, with a population of 90 million, consistent GDP growth of 5-6% over the last decade, relatively low costs and a literacy rate of over 90%.
To help entrepreneurs open a company and invest in Vietnam and prepare for business, Links has created a legislative page of the main employment laws and best practices in Vietnam. Please note that all the information listed below are to be used as a general guideline, for more detailed accounts of laws and regulations, please visit the official government websites.
Company registration is required for any person/ company conducting business in Vietnam in accordance with Article 5, Decree No. 78/2015/NĐ-CP.
Rep office and branch office of a foreign company must also register for a Licenses of Establishment of rep office/ branch office.
After obtaining a business license, a company is required to register its company stamp with the Police Office. The company stamp should display the name of the company and the company identification number. The required documents for company stamp registration are as follows:
According to Article 6, Part II, Circular No. 95/2016/TT-BTC, a taxpayer has to register for tax code within 10 days from the date on Business license/ Licenses of Establishment of rep office/ branch office.
A company is able to open a bank account in Vietnam after obtaining a business license, tax code and company stamp registration. The required documents are different between different banks.
Normally, the required documents are as follows:
A company is required to register its bank accounts with Investments and Planning Department within 10 days from the date of opening a bank account.
Vietnam is at a favourable location with proximity to some of the world’s most active and flourishing economies in Asia such as Singapore, Hong Kong, Malaysia, Japan, Taiwan, India and China.
The long coastline adjacent to the South China Sea gives some of the major coastal cities a locational advantage in trading, especially via shipping routes.
Since the launch of economic reform in 1986, Vietnam has been displaying consistent economic growth over the last decades. The effort and commitment of the Vietnamese government to improve the ease and transparency of doing business and investing in Vietnam are shown through numerous amendments of regulations, signed agreements with foreign countries and initiatives to support businesses such as funding and grant programs.
Vietnam’s population is among the largest in South East Asia, a relatively young population with a median age of 30.9 years, along with an over 90% literacy rate and high levels of internet penetration, it is not hard to find well-educated, tech-savvy and young workers in the country at a relatively low cost.
A newly set-up company has to obtain Social Insurance (“SI”) code in order to make declaration and payment of Social, Health and Unemployment Insurance (SHUI) contributions for its employees.
A company is required to use digital signature for submitting social insurance reports to SI Department as well as submitting tax declaration to the Tax Office.
According to current regulation, an employer has to obtain PIT withholding receipt book to issue PIT withholding certificate to employees.
According to Labour Code 2019, a company is required to register an internal labour regulation with relevant authorities if employing of all sizes.
According to current regulation, an employer has to set up salary scales.
There are three elements in the Vietnam social security system including Social Insurance (“SI”); Health insurance (“HI”)’; unemployment insurance (“UI”); Trade Union (“TU) and accident insurance (“AI”).
Employers and employees are obligated to contribute social security at the rate below:
From January 01, 2018, the salary base for calculating social security contributions shall include basic salary and fixed allowances (excluding bonus/incentive, innovation bonus, meal allowance, childcare allowance, housing allowance, gasoline allowance, transportation allowance, mobile phone allowances and child support allowance). The current cap for salary base for social security contributions are as follows:
|SI and HI Contributions||VND 29,800,000||1 July 2019|
|UI Contributions||VND 88,400,000||1 Jan 2020|
According to Article 4 of Decree 191/2013/NĐ-CP, an employer has to contribute trade union at the rate of 2% of employee’s salary (with its cap) regardless of having grassroot trade union or not.
Foreigner staff is required to have a work permit/work permit exemption certificate to work in Vietnam before they start working in Vietnam as well as a temporary resident card to stay in Vietnam. Considerations for visa approval for each applicant include:
However, there are some foreign employees who are not required to apply for a work permit/work permit exemption certificate provided are professors, experts, directors, technicians and come to Vietnam for less than 30 days per time and accumulated staying days is under 90 days per year. Foreigners who marry a Vietnamese citizen and reside in Vietnam will be exempt from a work permit.
Common Minimum Wage
The first type is the common minimum wage, which is used to calculate salaries for employees in state-owned organizations and enterprises. The common minimum wage in Vietnam goes from 1,390,000VND /month to 1,490,000 VND /month, starting 1 July 2019.
Regional minimum salary
The second type of minimum wage is used for employees in all non-state enterprises and is based on regions as defined by the government. From 1 Jan 2020, the National Wages Council has finalized the regional minimum salary rates, as follows:
Region I covers the rural and urban districts of Hanoi, Ho Chi Minh City, Hai Phong, Bien Hoa City, Thu Dau Mot City, Vung Tau City of Ba Ria-Vung Tau Province, and some rural districts of Dong Nai and Binh Duong Province.
Region II covers the remaining rural districts of Hanoi, Hai Phong, Hai Duong City, Hung Yen City, and some rural districts of Hung Yen Province.
Region III covers the remaining provincial cities, Chi Linh town, and some rural districts of Hai Duong and Vinh Phuc Province.
Region IV covers the remaining localities.
Employees who have worked for a full 12 months are entitled to paid annual leave as follows:
The normal working hours should not exceed 8 hours per day and 48 hours per week
Article 107 in Labour Code 2019, adjusts the monthly overtime cap from 30 hours to 40 hours.
The length of probation will depend on job requirements and range from six days to 180 days as follows:
Salary during the probationary period will depend on the agreement of employee and employer, but must not be lower than 85% salary of the job. SHUI contributions are not required during the probationary period. During the probationary period, employer and employees have the right to terminate the probation contract without notice in advance.
Parties can sign a separate probation agreement or include a probation clause in the employment contract.
An employer can terminate labour contract with employees before expiration if the employee dies, goes missing, loses civil capacity, reaches retirement age, is sentenced to prison or prohibited from performing the job in a court ruling, provides falsified information, absent without reason for 5 consecutive days, reaching mutual agreement to terminate labour contract early; a dismissal of the employee under a disciplinary procedure; a restructuring of the company or based on the right of the employer to terminate the labour contract unilaterally.
In case of employer unilaterally terminate labour contracts with the employee, the employer is obligated to give notice in advance before unilaterally terminating. The notice period is 45 days for an indefinite term labour contract; 30 days for definite term contract and 3 days for contracts under 12 months.
An employee who has worked for the company for over 12 months is eligible for a severance payment. The severance payment consists of a half month’s salary for each year worked that is not contributed to unemployment insurance (i.e. probationary period, maternity period, etc.).
Benefits in Kind
Volunteer private health insurance is not required by the law. However, it is common practice in Vietnam for employers to offer insurance to employees.
When hiring a new employee, the employer is obligated to register the new employee with relevant authorities (i.e. Social Insurance Department, Department of Statistics, etc.)
Female employees are entitled to 6 months of maternity leave with 100% of salary (the average salary of the last six preceding months) paid by Vietnam Social Insurance’s authority. In case of multiple births, there shall be an extension of 1 month on the leave period for each child from the second child onwards.
When the female employee has taken at least 4 months of maternity leave, she can return to work, provided that the employer agrees. In this case, besides the wage of the working days paid by the employer, the female employee shall continue to receive the maternity allowance, in accordance with the Social Insurance Law.
Read more on the Law on Social Insurance.
A male employee is entitled up to 14 days of paternity leave within the first 30 days after the day of childbirth. The number of days off depends on whether it is a single child or multiple births and if it is natural or surgical birth.
Read more on the Law on Social Insurance.
The number of days off depends on working conditions and the length of the social insurance contribution period.
Sick pay is covered by the social insurance fund, not by the employer (applicable to Vietnamese employees only).
Vietnamese employees entitled to sick pay are entitled to 75% of their salary or remuneration on which social insurance premiums were based in the month preceding their leave.
Read more on the Law on Social Insurance.
Resident taxpayer is subject to Personal Income Tax (“PIT”) on worldwide employment income at progressive rates regardless of where the income is paid or earned.
Vietnam’s Progressive Rates
|Tax Bracket||Monthly Taxable Income (Million VND)||Tax Rate|
|1||Up to 5||5%|
|2||Over 5 to 10||10%|
|3||Over 10 to 18||15%|
|4||Over 18 to 32||20%|
|5||Over 32 to 52||25%|
|6||Over 52 to 80||30%|
Non-resident taxpayer is subject to PIT at a flat rate of 20% on income earned in Vietnam.
An employer is obligated to withhold PIT from employee’s salary and transfer to tax authorities on behalf of their employees.
Tax payment will be paid on a monthly or quarterly basis.
An employer is obligated to conduct PIT Finalization on behalf of employees who are qualified to authorize the employer to conduct their PIT finalization on their behalf at the end of the year.
The deadline for submission PIT reports depend on the type of tax reports, guidelines as follows:
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In Vietnam, it is common practice to pay salary to employees via their bank account. The payment period will depend on company policies or practices, but employees should be paid at least once per month.
13th month and bonus payments are not required by the current law. However, employers usually offer 13 months of pay to employees in Vietnam.
Employees are entitled to public holidays as follows:
|January 1||New Year’s Day|
|January 31 to February 4||Lunar New Year (Tet)|
|April 10||Hung King’s Temple Festival|
|April 11||Hung King’s Temple Festival Holiday|
|April 30||Reunification Day|
|May 1||International Labour Day|
|May 2||Reunification Day Holiday|
|May 3||Labour Day Holiday|
|September 2||National Day|
Local Office Working Hours and Time Zone
Working Hours: 08.00/09.00-17.00/18.00
Standard time zone: UTC + 7 hours
Useful Web Links
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