Vietnam

Vietnam PEO & Employer of Record

WeHG provides an International PEO and global Employer of Record service in Vietnam to companies willing to enter the Vietnamese market or hire local/expat candidates in this area.

The traditional approach requires establishing a subsidiary in Vietnam.  On the other hand, our solution provides you with a beginning of the operations in Vietnam within days hence save time and money.  WeHG would hire candidates on your behalf while you maintain complete operational control of their work. So legally they would be our employees, on our local payroll, 100% compliant but will work on your behalf.

Vietnam fast facts

Population, million: 96
Land area: 331,212 km²
Capital: Hanoi
Local currency: đồng (₫) (VND)

GDP per capita:$ 10,755
GDP in currency:$ 1,047.318

Vietnam officially the Socialist Republic of Vietnam is the easternmost country on the Indochina Peninsula in Southeast Asia. With an estimated 87.8 million inhabitants as of 2011, it is the world’s 13th-most-populous country, and the eighth-most-populous Asian country. The name Vietnam translates as “South Viet”, and was officially adopted in 1945. The country is bordered by China to the north, Laos to the northwest, Cambodia to the southwest, and the East Sea (Bien Dong) to the East.  Its capital city has been Hanoi from 1975.

Hiring, Negotiating and Doing Business in Vietnam

Necessity of written employment contract

As a general rule, an employment contract is effective from the date stated in the contract and there are no filing requirements to effectuate the labour relationship. However, the labour laws require that an employer, within 30 days from the date of its commencement of operation, must declare its use of employees to the labour authority. Further reports on changes in the use of employees must be made every six months.

The employer is under an obligation to submit statutory insurance files to the relevant insurance authority for its employees.

There are also filing requirements as to the declaration, payment and finalisation of personal income tax under the Law on Personal Income Tax and its implementing provisions.

Different forms of engagement: employment, contracting, work with private entrepreneur

Vietnam labour laws do not make a distinction between different categories of workers. The Labour Code, however, makes a distinction between certain classes of employees, such as junior workers, senior workers, disabled workers, and female employees, who are granted certain protections and additional statutory employment rights, such as additional rest breaks or shorter regular working hours.

An individual can also provide services to an enterprise or organisation in Vietnam as an independent contractor. The provision of services as an independent contractor, however, falls under the jurisdiction of the 2015 Civil Code and is generally not considered an employment relationship to which the labour laws apply. Consequently, an independent contractor is not entitled to any statutory employment rights under Vietnam law such as statutory leave (annual leave, sick leave, maternity leave, and unpaid leave), statutory insurance, severance or job-loss allowance upon termination of employment, and so on.

There is no legal provision regulating when an employer can or cannot use an employment contract or a service contract. However, if a contract contains the features more customarily found in an employment relationship (for example, the contract provides that the contractor is subject to the employer’s working hours, or the contractor is subject to disciplinary actions provided under work rules for a breach of the work rules), the contract will be treated by the authorities as an employment contract even if it is referred to as a service contract. As a general rule, the use of a service contract for permanent and long-term work is not encouraged.

If an employee is misclassified and treated as an independent contractor, this act could be viewed by the labour authorities as a circumvention of employment-related requirements, such as contributions to statutorily required insurance for employees. The employer may be subject to a monetary fine and the employee’s entitlements may have to be reinstated and paid.

Vietnam Employment Contract

Types of employment agreements

mployers must implement and comply with a collective labour agreement (CLA). A CLA is binding on the employer when it has been signed by the employer and the representative of the labour collective following a collective bargaining session during which the labour collective has voted in favour of the CLA with a simple majority. The effective date of the CLA is the date it is signed by the employer and the representative of the labour collective, or another date as agreed upon by the parties and recorded in the CLA.

Vietnam’s labour laws acknowledge sector-specific agreements, known as industry collective labour agreements (ICLA). Enterprises in an industry for which there is an ICLA are encouraged (but not required) to implement such an agreement.

Types of employment agreements: 

  • Fixed-term agreements, – any limitations, such as max duration or number of fixed-term agreements

Employees can be classified into the following three types, based on the terms of their contracts:

  • Employees working under indefinite-term employment contracts (that is, open-ended contracts).
  • Employees working under definite-term (fixed-term) employment contracts between 12 months and 36 months in duration.
  • Employees working under seasonal or specific-job employment contracts with terms of less than 12 months.

Vietnam working hours

There is a restriction on the maximum regular working hours in Vietnam and the parties (employee, union and employer) cannot waive this restriction by an individual agreement or collective labour agreement. The regular working hours cannot exceed eight hours per day, 48 hours per week for employees working under normal working conditions or six hours per day for employees working in extremely heavy, hazardous, or toxic working conditions.

Working hours, however, can be set on an hourly, daily or weekly basis, depending on the employer’s needs. If the employer sets working hours on a weekly basis, regular working hours of up to ten hours per day are permitted, provided that the total hours do not exceed 48 hours per week.

Overtime

In the event that a company triggers overtime, they will be obligated to compensate employees beyond the wages that are outlined in their contract. This is applicable to all employees regardless of the wages that are offered. The following are the percentages in excess of standard that are to be applied in the event that certain work related thresholds are crossed. 

There are limitations on the number of overtime hours an employee is allowed to work. Overtime hours cannot exceed 30 hours per month and 200 per year. In special cases regulated by the government, yearly maximum can be increased to 300 hours per year.

Vacation leave in Vietnam

An employee is entitled to a one-day leave without pay on the death of a grandparent or sibling, or to attend a wedding of the employee’s parent or sibling. Any additional unpaid time off is subject to the agreement between the employer and the employee.

Vietnam Maternity Leave

A female employee (working in normal working conditions) is entitled to six months of maternity leave. If she gives birth to more than one child at one time, she is entitled to take an additional one month of leave for every additional child calculated from the second child onwards.

For each month under the maternity leave regime, employees who are Vietnamese nationals are entitled to 100% of their average monthly salary or remuneration on which social insurance premiums were based for the six months preceding their leave (monthly allowance). However, the maximum salary or remuneration during maternity leave is capped at 20 times the base salary, equivalent to VND27.8 million from 1 July 2018.

A female employee (working in normal working conditions) is entitled to six months of maternity leave. If she gives birth to more than one child at one time, she is entitled to take an additional one month of leave for every additional child calculated from the second child onwards.

For each month under the maternity leave regime, employees who are Vietnamese nationals are entitled to 100% of their average monthly salary or remuneration on which social insurance premiums were based for the six months preceding their leave (monthly allowance). However, the maximum salary or remuneration during maternity leave is capped at 20 times the base salary, equivalent to VND27.8 million from 1 July 2018.

The payment for maternity leave of Vietnamese employees is covered by the social insurance fund. The payment for maternity leave of expatriate employees is subject to the agreement between the employer and the employee.

Vietnam Severance Laws

For unilateral termination (when permitted by law), employers must provide advance notice to the employees within a minimum statutory time limit. Employees who resign are also required to give advance notice to their employers within a minimum statutory time limit. In both cases, the relevant time limits are 45 days in advance for indefinite-term employment contracts, 30 days for definite-term (fixed-term) employment contracts, and three working days for seasonal or specific-job employment contracts with durations of less than 12 months.

Severance payments

Vietnamese labour law requires employers to make severance payments to terminated employees who had been regularly working for the employer for 12 months or more. The severance allowance is equal to one half of one month’s wage for each year of employment. Salary for the purpose of calculating the severance allowance is the average salary under the employment contract for the six months immediately preceding the termination of the employment contract.

No severance allowance is required by law if:

  • At the time of the termination, the employee has worked for the company for less than 12 months.
  • The employee illegally and unilaterally terminates his or her employment contract.
  • The employee is dismissed for breaching the company’s internal labour rules.
  • The employee retires on a pension.

For unilateral termination (when permitted by law), employers must provide advance notice to the employees within a minimum statutory time limit. Employees who resign are also required to give advance notice to their employers within a minimum statutory time limit. In both cases, the relevant time limits are 45 days in advance for indefinite-term employment contracts, 30 days for definite-term (fixed-term) employment contracts, and three working days for seasonal or specific-job employment contracts with durations of less than 12 months.

Vietnam Tax

Tax residents are subject to Vietnamese (PIT) on their worldwide taxable income, wherever it is paid or received. Employment income is taxed on a progressive tax rates basis. Non-employment income is taxed at a variety of different rates.

Non-residents are subject to PIT at a flat tax rate on the income received as a result of working in Vietnam/on Vietnam-related income in the tax year, and at various other rates on their non-employment income. However, this will need to be considered in light of the provisions of any double taxation agreement (DTA) that might apply.

Health Insurance Benefits in Vietnam

Vietnamese employees are entitled to paid sick leave. The maximum number of paid sick leave days within a year, calculated according to working days and excluding public holidays and weekends, is as follows:

For employees working under normal working conditions:

  • 30 days if they have paid social insurance premiums for less than 15 years;
  • 40 days if they have paid social insurance premiums for 15 years to less than 30 years; and
  • 60 days if they have paid social insurance premiums for 30 years or more.

For employees working in heavy, hazardous or toxic occupations or jobs on the list promulgated by the Ministry of Labour and the Ministry of Health, or working regularly in specified regions:

  • 40 days, if they have paid social insurance premiums for less than 15 years;
  • 50 days if they have paid social insurance premiums for 15 years to less than 30 years; and
  • 70 days if they have paid social insurance premiums for 30 years or more.

Sick pay is covered by the social insurance fund, not by the employer (applicable to Vietnamese employees only).

Additional Benefits in Vietnam

Female employees cannot be dismissed for reasons of marriage, pregnancy, maternity leave or nursing a child under 12 months.

If an employer wishes to dismiss an employee who is a part-time trade union officer, the employer must obtain written agreement from the executive committee of the grassroots trade union or from the executive committee of the directly superior trade union. If the parties are unable to reach an agreement, the two parties must report to the competent authority. The employer only has the right to make a decision, and must be legally liable for such a decision, after 30 days have expired from the date of notification to the local state authority for labour.

Female employees cannot be dismissed for reasons of marriage, pregnancy, maternity leave or nursing a child under 12 months.

If an employer wishes to dismiss an employee who is a part-time trade union officer, the employer must obtain written agreement from the executive committee of the grassroots trade union or from the executive committee of the directly superior trade union. If the parties are unable to reach an agreement, the two parties must report to the competent authority. The employer only has the right to make a decision, and must be legally liable for such a decision, after 30 days have expired from the date of notification to the local state authority for labour.

If there is a disagreement with the employer’s decision, the executive committee of the grassroots trade union and the employee have the right to request the resolution of the labour dispute in accordance with the sequence and procedures stipulated by law.

General market practice benefits/additional allowances

The easiest way to invest in Vietnam is by using exchange-traded funds (ETFs), which provide instant diversification in a single U.S.-traded security. With $387.7 million in assets under management and a modest net expense ratio of 0.7%, the Market Vectors Vietnam ETF (NYSE: VNM) is the most popular fund for investors looking for exposure to the country.

The Market Vectors Vietnam ETF offers exposure to publicly traded companies that are primarily domiciled and listed in Vietnam and/or generate at least 50% of its revenues from the country. As of December 2015, the fund held approximately 30 different companies consisting of 44% financials, 15% energy, and 14% consumer staples, among other sectors.

The easiest way to invest in Vietnam is by using exchange-traded funds (ETFs), which provide instant diversification in a single U.S.-traded security. With $387.7 million in assets under management and a modest net expense ratio of 0.7%, the Market Vectors Vietnam ETF (NYSE: VNM) is the most popular fund for investors looking for exposure to the country.

The Market Vectors Vietnam ETF offers exposure to publicly traded companies that are primarily domiciled and listed in Vietnam and/or generate at least 50% of its revenues from the country. As of December 2015, the fund held approximately 30 different companies consisting of 44% financials, 15% energy, and 14% consumer staples, among other sectors.

While this is one of the only ETFs offering exposure to Vietnam, investors should be aware that the fund is heavily weighted in financials (44%) and small-cap stocks (68%). These factors may make investors in the fund overexposed to financial concerns – such as interest rate changes – while experiencing greater volatility than larger blue-chip equities.

Vietnam Holidays

At present, there are a total of ten public holidays with full salary payment for employees in Vietnam. If any of the public holidays falls on a weekend, the employees are entitled to take the next weekday off. In addition to these public holidays, an expatriate employee is also entitled to one day off for the traditional new year and another day for the national day of his or her country.

  • New Year Day (1st January of each Year): 01 day
  • Five days for the Lunar New Year festival which shall include the last day of the lunar year and the first four days of the new lunar year. The dates of these holidays may vary from year to year;
  • One day for Hung King Anniversary Day – March 10 of the Lunar Year
  • One day on the occasion of Victory day – April 30
  • One day on the occasion of Labor day – May 1st
  • One day on the occasion of National Day – September 2

Why Choose WeHireGlobally

WeHG takes care of all the onboarding hurdles, payroll, compensation and benefits, tax filing, and termination of employment. Our Employer of Record solution allows you to manage your overseas teams efficiently while minimizing cost and risk.

FAQ Vietnam

  • Working hours in Vietnam

    The regular working hours cannot exceed eight hours per day, 48 hours per week for employees working under normal working conditions or six hours per day for employees working in extremely heavy, hazardous, or toxic working conditions.

  • What are the main holidays in Vietnam?

    • New Year Day (1st January of each Year): 01 day
    • Five days for the Lunar New Year festival which shall include the last day of the lunar year and the first four days of the new lunar year. The dates of these holidays may vary from year to year;
    • One day for Hung King Anniversary Day – March 10 of the Lunar Year
    • One day on the occasion of Victory day – April 30
    • One day on the occasion of Labor day – May 1st
    • One day on the occasion of National Day – September 2
  • What are payroll taxes in Vietnam?

    Tax residents are subject to Vietnamese (PIT) on their worldwide taxable income, wherever it is paid or received. Employment income is taxed on a progressive tax rates basis. Non-employment income is taxed at a variety of different rates.

    Non-residents are subject to PIT at a flat tax rate on the income received as a result of working in Vietnam/on Vietnam-related income in the tax year, and at various other rates on their non-employment income. However, this will need to be considered in light of the provisions of any double taxation agreement (DTA) that might apply.

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