Hiring employees in Vietnam: A Comprehensive Guide

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Vietnam, a dynamic country in Southeast Asia, has emerged as a compelling destination for foreign businesses seeking new opportunities. With its rapidly growing economy, favorable investment climate, and a talented and skilled workforce, Vietnam has become an attractive choice for companies looking to expand their operations and tap into its vast potential.

However, as with any foreign market, understanding the local nuances and regulations is crucial to a successful venture. Hiring employees in Vietnam requires a thorough grasp of the country’s labor laws, visa requirements, and cultural dynamics. This blog aims to provide an in-depth exploration of the essential aspects involved in the process of employing local and foreign individuals in Vietnam.

In the following sections, we will delve into the legal framework for employment, discussing the various labor laws, employment contracts, minimum wage, and working hours. We will also shed light on the intricacies of work permits and visas, outlining the procedures for foreign employees to legally work in Vietnam. So, let’s embark on this insightful journey, discovering the ins and outs of employing individuals in Vietnam, and gain the expertise needed to make informed decisions that will drive your business forward in this dynamic and evolving landscape.

Legal Framework for Employment

Overview of labor laws and regulations in Vietnam

Vietnam’s labor laws and regulations form the foundation of its employment framework, governing the rights and obligations of both employers and employees. The primary legal documents guiding labor practices in Vietnam are:

  • Labor Code: The Labor Code of Vietnam, last amended in 2019, serves as the principal legislation for employment matters. It outlines the rights and responsibilities of employees, the procedures for labor contracts, working hours, and overtime, among other key aspects.
  • Collective Labor Agreement (CLA): A CLA is a written agreement negotiated and signed between the employer and the employee representative organization. It aims to regulate employment conditions, benefits, and dispute resolution in specific enterprises.
  • Decrees and Circulars: In addition to the Labor Code, the Vietnamese government issues various decrees and circulars that provide further details and specific guidelines on labor-related issues, such as wages, occupational safety, and social insurance.

Types of employment contracts and their key features

In Vietnam, employers can establish different types of employment contracts based on their business needs and the nature of the work. The main types of contracts include:

  • Indefinite-term Contracts: These contracts have no specified end date and provide long-term job security to the employees. They can be terminated under certain conditions specified in the Labor Code.
  • Fixed-term Contracts: These contracts have a specific duration and automatically terminate upon its expiry, without the need for further notice.
  • Seasonal or Specific-Task Contracts: Suitable for work with a defined duration, specific projects, or seasonal jobs. They end when the task or season is completed.
  • Part-Time Contracts: Designed for employees who work fewer hours than regular full-time employees. They enjoy proportional benefits based on their working hours.

Minimum wage and working hours

  • Minimum Wage: The minimum wage in Vietnam varies depending on the region, with four distinct wage regions. The government reviews and adjusts the minimum wage annually. Employers must adhere to the minimum wage rates applicable to their region and industry.
Vietnam minimum wage 2023
RegionMonthly minimum wage
IVND 4,680,000 (US$202)
IIVND 4,160,000 (US$179)
IIIVND 3,640,000 (US$157)
IVVND 3,250,000 (US$140)

*Region I covers urban Hanoi and Ho Chi Minh City

*Region II covers rural Hanoi and Ho Chi Minh City along with Da Nang

*Region III includes provincial cities and districts of Bac Ninh, Bac Giang, Hai Duong, Phu Tho, Binh Phuc and other provinces not listed in Region I and Region II

*Region IV covers remaining localities

  • Working Hours: The standard working hours in Vietnam are 8 hours per day and 48 hours per week. Employees may work overtime under specific conditions, but the total working hours (regular and overtime combined) should not exceed 12 hours per day.

Work Visas And Permits

Requirements and procedures for obtaining work permits for foreign employees

  • Work Permit Eligibility: Foreign nationals who wish to work in Vietnam must meet certain criteria to be eligible for a work permit. Generally, the following requirements apply:
  • Having a valid employment contract or an assignment letter from a company in Vietnam.
  • Being over 18 years old and in good health.
  • Possessing the necessary qualifications, expertise, or skills required for the job.
  • No criminal record in their home country and in Vietnam.
  • Application Process: The process of obtaining a work permit typically involves the following steps:
  • Work Permit Application: The employer must submit an application for a work permit on behalf of the foreign employee to the Department of Labor, Invalids, and Social Affairs (DoLISA) in the province where the employee will work.
  • Supporting Documents: The application must be accompanied by various documents, including the employee’s passport, medical certificate, criminal record certificate, and certified copies of educational and professional qualifications.
  • Work Permit Duration: Work permits are usually issued for a maximum of two years and can be extended upon application.

Types of work visas available for expatriates

  • Temporary Residence Card (TRC): After obtaining a work permit, foreign employees are required to apply for a TRC, which serves as their legal identification in Vietnam and allows them to stay in the country for the duration of their work permit.
  • Business Visa (DN): Foreigners visiting Vietnam for business purposes, including attending meetings, signing contracts, or conducting market research, can apply for a business visa (DN visa). However, it does not grant them the right to work in the country.
  • Investor Visa (DT): Foreign investors who establish a company in Vietnam can apply for an investor visa (DT visa) to oversee their business operations.

Responsibilities of employers in sponsoring work permits and visas

  • Sponsorship Obligations: Employers in Vietnam are responsible for sponsoring work permits for their foreign employees. This involves initiating the work permit application process and providing all necessary documentation.
  • Compliance with Regulations: Employers must ensure that all work permits and visas are obtained and renewed in a timely manner, adhering to the applicable laws and regulations.
  • Reporting Requirements: Employers are obliged to report to the immigration authorities any changes to the employee’s work status or personal information, such as job position, workplace, or marital status.

Employment Benefits and Social Security

Mandatory benefits required by law for employees

Vietnam’s labor laws mandate certain benefits that employers must provide to their employees. These mandatory benefits aim to protect workers’ rights and ensure a decent standard of living. The key mandatory benefits include:

  • Social Insurance: Employers are required to contribute to the social insurance fund, which provides coverage for employees in case of sickness, maternity, workplace accidents, and retirement.
  • Health Insurance: Employers must contribute to the health insurance fund, which provides access to medical services and treatment for employees and their dependents.
  • Unemployment Insurance: Employers must pay into the unemployment insurance fund, providing financial assistance to employees who lose their jobs involuntarily.
  • Annual Leave: Employees are entitled to annual leave based on their length of service, typically ranging from 12 to 18 days per year.
  • Public Holidays: Employees are granted paid leave on national holidays and other designated public holidays.
  • Maternity Leave: Female employees are entitled to maternity leave with full pay and benefits, typically lasting for six months.

Handling Payroll and Taxes

Overview of the Vietnamese tax system related to employment

Vietnam’s tax system is an important aspect to consider when handling payroll for employees. The key components of the tax system related to employment are as follows:

  • Personal Income Tax (PIT): All employed individuals in Vietnam are subject to personal income tax on their earnings. The tax rates are progressive, meaning the more an individual earns, the higher the tax rate they will pay. The latest income tax rate please refer to the Link.
  • Health Insurance Contribution: Similar to social insurance, both employees and employers must contribute to the health insurance fund. The contribution rates are determined by the government.
  • Personal Contributions to Retirement Fund: Employees also contribute to their retirement funds, with a portion deducted from their salary each month.

Outsourcing payroll services vs. handling it in-house

Managing payroll and tax obligations in Vietnam can be complex, especially for foreign businesses unfamiliar with the local regulations. Companies have two main options for handling payroll:

  • In-House Payroll Management: Employers can choose to manage payroll internally, either using manual calculations or payroll software. This option gives the company more control over the process but requires a thorough understanding of the Vietnamese tax and labor laws.
  • Outsourcing Payroll Services: Many businesses, especially those new to Vietnam, opt to outsource their payroll to specialized agencies or payroll service providers. These experts are well-versed in the local regulations and can handle payroll calculations, tax withholdings, and reporting on behalf of the company. NNRoad is a global Employer of Record & PEO provider with a base in Vietnam. We are able to advise you and your dispatched or payroll employees in Vietnam on their individual income taxes. For more information on our HR and payroll related services in Vietnam, please visit our Vietnam county services page or contact us directly.

Challenges and Best Practices for Hiring in Vietnam

Navigating bureaucratic procedures and legal complexities

Challenges:

  • Complex Regulations: The Vietnamese labor laws and bureaucratic procedures can be intricate and time-consuming to navigate, especially for foreign businesses.
  • Work Permit Process: Obtaining work permits and visas for foreign employees requires adherence to specific requirements and documentation.

Best Practices:

  • Seek Legal Assistance: Employers should consider consulting with legal experts or specialized agencies familiar with Vietnamese labor laws to ensure compliance.
  • Start Early: Initiating the work permit application process well in advance can help avoid delays and ensure that foreign employees can start work on schedule.

Tips for building a strong employer brand in Vietnam

Challenges:

  • Competition for Talent: Attracting and retaining skilled employees in a competitive job market can be challenging.
  • Employer Reputation: Establishing a positive employer brand is crucial for attracting top talent and building a talented workforce.

Best Practices:

  • Competitive Compensation: Offering competitive salaries and benefits can help attract and retain high-quality employees.
  • Employee Engagement: Creating a positive and inclusive work environment can contribute to employee satisfaction and strengthen the employer brand.
  • Showcase Corporate Values: Emphasizing corporate social responsibility and ethical business practices can appeal to socially conscious job seekers.

Conclusion

Hiring employees in Vietnam can be a rewarding yet complex endeavor for foreign businesses. As the country’s economy continues to grow and its business landscape evolves, tapping into Vietnam’s talent pool has become increasingly attractive. However, to successfully navigate the hiring process and build a strong workforce, employers must understand and comply with the local legal framework, cultural nuances, and bureaucratic procedures.

Throughout this blog, we explored the crucial aspects of hiring in Vietnam. We discussed the legal framework for employment, including labor laws, types of employment contracts, and minimum wage requirements. Understanding these regulations is vital to ensure compliance and establish a solid foundation for employer-employee relationships.

In conclusion, hiring employees in Vietnam is a multifaceted process that demands attention to detail, compliance with regulations, and a deep understanding of the local context. By approaching the hiring process with diligence, adaptability, and a commitment to fostering a positive work environment, foreign businesses can seize the abundant opportunities that Vietnam offers. As businesses successfully navigate the challenges and embrace the potential of hiring in Vietnam, they position themselves to thrive in this dynamic and growing economy, contributing to their own success and the prosperity of the Vietnamese workforce as a whole.

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