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Human Resources in Vietnam

Many foreign investors move operations to Vietnam to take advantage of its large, skilled and inexpensive labor force. As the economy expands further and more business enters the country, it will increasingly become an important part of corporate strategy to find ways to effectively motivate staff while also complying with local labor laws.

In this section, we provide information about the labor market in Vietnam.

Labor laws

Foreign companies wanting to do business in Vietnam must ensure they follow the provisions of the Labor Code, which contains the legal framework for the rights and obligations of employers and employees with respect to working hours, labor agreements, social insurance, overtime, strikes, and termination of employment contracts, to name a few.

Further, Vietnam also approved an amended Labor Code, which came into effect in January 2021. The amendment to the labor regulations are a step towards aligning with international labor standards particularly as Vietnam integrates into the world economy as noted by the International Labor Organization (ILO).

Most of the code remains the same however, changes have been introduced to probationary employment, mandatory work rules, notice requirements, and other provisions generally suited to employees.

To understand the laws governing labor in Vietnam, read this section.

Hiring employees

Vietnam is an attractive place for businesses of all types. The country has a growing consumer base and a young and dynamic workforce with an ever-evolving skill set. In fact, Vietnam’s labor force is growing by more than one million people per year.

There are several important HR concerns in Vietnam. Some of these include:

  • While labor costs are still low, wages are steadily increasing. Compounding the costs of employing staff in Vietnam are the comparatively high social insurance contribution and income tax rates.
  • A Vietnamese entity is permitted to recruit foreign workers to work as managers, executive directors and experts where local hires are not yet able to meet production and business requirements.
  • Unlike in certain other Asian countries, Vietnamese representative offices are also able to hire staff directly.

To know more about how to hire employees in Vietnam, read this section

Terminating employees

Terminating an employee can be challenging for foreign investors in Vietnam. Vietnamese labor law is generally considered employee friendly, and the termination process must be based on statutory grounds, subject to formal requirements and procedures.

The Vietnamese labor law applies to all employers working in Vietnam under labor contracts regardless of whether such employees are Vietnamese or foreign nationals.

However, the law does not apply to foreign national working in Vietnam via an internal company transfer under a foreign labor contract.

To mitigate the risks associated with labor retrenchment and to maximize flexibility in hiring, it is of significant importance for employers in Vietnam to understand the circumstances under which termination of contracts can be achieved as well as the financial obligation that may arise in these situations.

Gain insights about terminating employees in Vietnam in this section

Business visas

Vietnam’s visa and work permit procedures can be confusing for first-time visitors. In order to enter Vietnam, a foreigner needs a visa issued by the Vietnamese Embassy or Consulate. A Vietnamese visa can be granted while in a third country or from within Vietnam.

For information regarding Vietnam’s Visas, read this section.

Payroll

In recent years, foreign direct investment (FDI) flows into Vietnam have been on the rise as greater numbers of foreign companies decide to establish businesses in the country. Employers, however, need to develop a good understanding how human resources work in the country. For many, salary structures are usually a beginning point, particularly as it rationalizes wages and motivates staff. Foreign employers that want to attract and retain the best talent need to ensure they understand payroll in Vietnam and coordinate salary structures with HR management.

Wages and salary

In Vietnam, there are two kinds of minimum wages. The first type is the common minimum wage VND 1,490,000 (~US$64) which is used to calculate salaries for employees in state-owned organizations and enterprises, as well as to calculate the social contribution for all enterprises (i.e. the maximum social contribution is 20 times the common minimum wage). The second type of minimum wage is used for employees in all non-state enterprises based on zones as defined by the government

The employees in Vietnam are also subject to bonuses, which are given to employees based on company earnings and performance and as a way of boosting company morale and productivity. There are various kinds of bonuses that a company may grant its employees throughout the year.

Apart from salary and bonuses, an employee may be entitled to several kinds of allowances and monetary or non-monetary benefits designed to retain staff. Some of these are subject to PIT.

Read our article to know more about wages and salary in Vietnam

Social insurance

Foreign workers in Vietnam are subject to increased social insurance (SI) since January 1, 2022. Now, foreign employees must pay an 8 percent social insurance rate, while employers will have to contribute 17.5 percent to the social insurance fund. Thus, this will be in line with the same rates as Vietnamese employees.

Similar to Vietnamese employees, the mandatory SI scheme for foreign employees covers sickness, maternity, occupational diseases, and accidents, retirement, and death.

To know more about social insurance in Vietnam, read this section

Personal income tax

Vietnam’s Law on Personal Income Tax recognizes ten different categories of income, with a host of different deductions, tax rates, and exceptions applying to each of them.

A tax resident is defined as someone residing in Vietnam for 183 days or more in either the calendar year or a period of 12 consecutive months from the date of arrival. Tax residents are subject to PIT on their worldwide employment income, regardless of where the income is paid or earned, at progressive rates from five percent to a maximum of 35 percent. Non-resident taxpayers are subject to PIT at a flat rate of 20 percent on their Vietnam-sourced income. 

Gain insights on the various deductions, employee benefits, tax rate, among other considerations.

Public holidays

In Vietnam, employees are compensated with bonuses for public holidays or other special days (e.g., International Labor Day or National Day) as well. Senior management and other valued employees may be given bonuses during these days as well, including in the form of share certificates with a vesting period, for which the corresponding stock can be sold only after the employee had worked for the company for a certain amount of time In addition, there is also a special bonus called the “Lunar New Year” bonus (or “Tet Bonus”) that is often paid to employees prior to their leaving for the Lunar New Year holiday

Learn about public holidays in Vietnam here.

 

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