Vietnam, situated at the eastern tip of the Indochina Peninsula is a member of the WTO and the APEC group. It has witnessed tremendous growth in industrial, manufacturing and service sectors in past decades. One of the most important sectors that have contributed to the rapidly growing Vietnamese economy is focused on manufacturing and Information Technology. Vietnam’s government has helped many companies and businesses with many tax incentives schemes so that they can setup in Vietnam. The Country also has highly educated and skilled population making it top places to expand and hire the candidates. Below are some of the reasons for business to come and invest in Vietnam.
· Economic growth: Vietnam is the world’s fastest growing economy with many efforts from the government to help companies invest in Vietnam. These policies are attracting many companies from abroad to come and set up in Vietnam which is one of the major factors contributing to the economic growth.
· Favorable labor force: Vietnam is very favorable to business as the literacy rate is very high and the maximum of the population is young making it an ideal place for hiring talent.
· Supportive Government: Vietnam’s government constantly makes efforts and policies to make the country favorable in business investment.
· Geographic location: Vietnam is located at the center of the global trade market having access to markets in Asia including Japan, China and Malaysia along with the road and rail links connecting to commercial hubs across the continent.
· Low costs: The Wage rates are low in Vietnam along with the cheap cost of manufacturing attracts the international organizations to come and invest in the country
Every country has their own individual set of employment & labor laws. Vietnam is not different from any other country and has its individual labor code which can make it a very complicated and difficult process for companies to follow for their expansion. It is very important for a business to have a payroll that is setup as per all the labor rules and in full compliance with the relevant laws and regulations in Vietnam.
Labor laws in Vietnam
Companies who are willing to expand and grow in Vietnam must follow and comply with the provisions of the Vietnamese Labor Code containing all the rights and obligations that should be followed by the employees and the employer such as the working hours, agreements for labor, overtime, social insurance and termination regulations of employment contracts.
Also, in January 2021 an amended Labor code approved by the government came into effect which aligned as per the international labor standards. In general, most of the code remains the same except for some of the changes that were introduced to work rules, probationary employment, notice periods requirements suited to the employees.
Any company who is looking for expansion needs to have thorough knowledge about all the labor laws and the amendments that have been made to the labor code and all this can get really time consuming and complicated.
Managing Payroll in Vietnam
There are some withholding obligations that each employer needs to deduct from the employees’ salary before the payment. If payroll is concerned, then both the employees and the employers are required to contribute to social insurance, health insurance, and unemployment benefit funds which is a part of their mandatory social security contributions.
Payslips should have all the details related to the deductions made and the tax payments. When managing the payroll, each employer is bound to consider all these deductions, contributions, bonuses and allowance etc.
Personal Income Tax (PIT)
In Vietnam, local individuals are taxed on the total income worldwide. The category of taxpayers includes either Resident individuals who are taxed on the worldwide income or Non-Residents; who are taxed on the income source in Vietnam.
Social Security deductions in Vietnam
Following types of insurance to the employee are there in Vietnam:
- Health insurance
- Social insurance
- Unemployment insurance
The above is for both locals and expats in Vietnam.
Payroll management in Vietnam is even more complicated than it seems especially when it comes to the knowledge of the above as per the Vietnamese regulations and labor laws. Therefore, the most appropriate option for the business looking for successful expansion in Vietnam is to have payroll outsourcing service. This will streamline the whole process and they can focus more on the strategies to help their businesses grow and succeed and thus focus on profitability.
Reasons to Outsource Payroll in Vietnam
· Full Compliance to Vietnamese Payroll Regulations: It is difficult for any company who is new to market in Vietnam to understand and work as per the local regulations on labor and payroll. It is also important to stay updated with the changing market trends as the labor regulations tend to change from time to time because of the growth in the economy. Outsourcing will help you stay compliant to the labor regulations in Vietnam.
· As Saving the Cost: Since a lot of time and effort is involved in computing the salaries of the employees as per the labor laws, a company can save and use the same amount of time and focus on handling the tasks related to the core business activities and help generate revenue. If the time spent on payroll activities is compared with the outsourcing cost, then you will realize the amount of money that will be saved.
· Effective Payroll Management: Payroll outsourcing service will help provide any company with all that is required on the effective payroll reports for efficient payroll management.
· Shift Focus on Business generating activities: Payroll Outsourcing will help companies shift their focus and time on activities that will generate business and revenue since all the payroll burden will be taken off from their shoulders giving them the flexibility to use time and resources wisely
Establishing a payroll in Vietnam can be a very complicated and tough process as there are a lot of government-abiding regulations and procedures that must be followed by any organization. This can result in delays and require a lot of effort to be put into the system for a successful expansion. The best way to avoid all the hassle is outsourcing the payroll management to a service provider who can reduce your workload and efforts involved in computing the salary of the employees as per the Vietnamese labor code. NNRoad will help in setting up and running your Vietnam payroll outsourcing smoothly in full compliance with the labor laws in Vietnam.