How to Hire an Employee in Vietnam
Due to Vietnam’s booming economy, foreign companies are increasingly willing to hire employees in Vietnam. When hiring staff overseas, employers should be familiar with the local labor law, NNRoad has prepared a comprehensive guide for foreign companies and employers hiring employees in Vietnam.
- PEO / Employer of Record in Vietnam
- Types of contracts in Vietnam
- Immigration requirements
- HR and labor in Vietnam
- Payroll options for foreign companies
- Employment taxation
- Termination and severance pay
- Bonuses, benefits, and Leave
- Hire Employees in Vietnam with NNRoad
PEO / Employer of Record in Vietnam
To assist foreign companies, NNRoad provides Employer of Record (EOR) services for clients interested in running payroll and hiring employees in Vietnam without a legal entity.
NNRoad acts as a Professional Employment Organization (PEO) in Vietnam to ensure that all employment liabilities (local contract, payroll, individual income tax, social security contributions) are complied according to the Vietnamese Labor Law. In other words, employees are legally and administratively employed by NNRoad, but they will remain working on your company’s behalf.
This solution enables a quick market entry into the Vietnamese market and avoids the hassle of establishing a subsidiary or branch office in Vietnam.
Type of contracts in Vietnam
According to the Vietnamese Labor Code, there are three different types of labor contracts:
- Indefinite term labor contracts (IDT)
- Definite term labor contracts (DT) (from 12 to 36 months)
- Less-than-12-months term labor contracts (“seasonal contracts”)
Employment Contract Requirements
All three of the above types must be in written form and contain these provisions:
- Employee insurance;
- The work that will be performed;
- Occupational hygiene and safety conditions;
- Work hours and rest hours;
- Contract duration;
- Work location;
If an employer and an employee have a DT contract relationship, but the employee continues working after the contract is up, the two parties must sign a new labor contract within the 30 days of the expiration of the contract. If the parties do not create a new labor contract, the original DT contract will automatically be considered an IDT contract, continuing employee engagement.
However, there is a provision within Vietnam labor law stating that employers may sign and extend one DT contract per all their employees. After the newly extended DT contract has finished, the parties must then finally enter into a DT contract.
Labor contracts created in Vietnam must not only be following Vietnamese law, but also with the collective labor agreement issued by the relevant company (if one such agreement exists). As the standard employment contract template created by the Ministry of Labor, Invalids and Social Affairs (DOLISA) lacks provisions protecting employers’ interests, foreign companies hiring employees in Vietnam should create a set of within-company rules that specifies employee regulations and rules (ILR).
If an employer has more than 10 employees, they must issue and register their ILR with DOLISA within 6 months of operation. If a company in Vietnam does not have a registered ILR, they will likely find difficulty in dismissing and disciplining employees.
In order to work in Vietnam, foreign workers must be in possession of both a work permit and a visa. The process to obtain the work permit is simple. At least one month prior to the employee’s start date, an employer must request a work permit from the local labor authority. On the government’s end, they must issue the permit within seven days after the application from the company is submitted.
Acquiring a visa is considerably more complicated. The Vietnamese company must issue an invitation to the foreign worker. Next, the company will file an application with Vietnam’s Immigration Office and can expect a response to come back in five to seven days. Work visas have a maximum length of two years. After they expire, foreign workers must apply for a temporary residence card.
Requirements and documentation:
- Criminal record (issued within 180 days)
- University degree
- Work permit form
- Working experience confirmed by a document issued by previous employers.
- Health check certificate
- Company’s business license
- Approval document from Committee (allowing companies to hire foreigners in Vietnam)
HR & Labor in Vietnam
Under normal working conditions, employees are permitted to work a maximum of eight hours per day, six days a week. Employers are legally required to let their employees have 1 full day off per week, normally Sunday. In practice, white-collar professionals prefer to work similar hours to what American companies would expect of their employees, Monday to Friday working days.
Vietnam has two types of minimum wages.
The common minimum wage (VND 1,150,000 or US$50) is the first kind. Its purpose is for calculating salaries within state-owned enterprises, and for calculating the social contribution required by the government for all enterprises. The maximum social contribution is 20 times greater than that of the common minimum wage.
Minimum wages in Vietnam only apply to unskilled employees under normal working conditions. Wages are at least seven percentage points higher than minimum wages for employees who have gone through and passed vocational training courses, including company training.
The second type of minimum wage is purposed for employees working in a non-state-owned enterprise and is divided into zones as defined by the Vietnamese government. There are currently four zones:
- Zone 1: Covering the urban areas of Hanoi and Ho Chi Minh City – VND 3.5 million (US$155.8) per month.
- Zone 2: Covering the rural areas of Hanoi and Ho Chi Minh City, along with the urban regions of Can Tho City, Da Nan City, and Hai Phong City – VND 3.1 million (US$137.99) per month.
- Zone 3: Covering the provincial cities and the districts of Bac Ninh Province, Bac Giang Province, Hai Duong Province, and Vinh Phuc Province – VND 2.7 million (US$120.2) per month.
- Zone 4: Covering the remaining localities, including the least developed localities – VND 2.4 million (US$106.83) per month.
Vietnam is still viewed as a competitive market for hiring employees, as surrounding countries are considerably more costly. China’s minimum wage ranges from US$192.91 – 332.66, while Thailand’s is US$266.
Payroll options for foreign companies in Vietnam
There are essentially four options available to foreign companies interested in expanding to the Vietnamese market.
For large companies with a long-term vision in Vietnam, running their own internal payroll is often a great decision. Companies need a larger budget to hire more employees to work in HR if they select this option.
Another way to go about payroll in a new country is by having your parent company handle it, simply adding your Vietnamese employees to your overall payroll. It is important to keep in mind that if your payroll is handled in another country, there will be different regulations regarding Vietnam that your HR specialists must pay attention to.
Vietnam payroll processing company
Many companies choose to work with a Vietnamese payroll processing company located in the country. It requires to set-up an entity in Vietnam. Although using this method your payroll will be successfully outsourced, you will still be held compliant for all payroll items by the Vietnamese government.
By using NNRoad’s payroll outsourcing services in Vietnam (EOR), companies receive a huge competitive edge as they expand into Vietnam. Not only does NNRoad take care of all employment liabilities and payroll, but we also shoulder compliance matters, leaving you to focus on developing your business in Vietnam.
Individual/income tax (paid by employee)
Employee individual income tax in Vietnam ranges from 5% of their income to 35%. Taxable income includes wages, bonuses, allowances, and monetary and non-monetary benefits.
Social security (paid by employee and employer)
The Vietnamese government requires employers to pay part of an employee’s salary into three social security programs. The first, known as social insurance, expects employers to pay 18% and employees 8% of the employee’s income. Second is health insurance, employers must pay 3% while employees pay 1.5%. Finally, for unemployment insurance, both employers and employees contribute 1%.
Bonuses, Benefits, and Leave
Bonuses are commonly used across the world to incentivize employees, but in East Asian, they are especially important. This is largely due to the Lunar Holiday tradition. Vietnam does not legally require a 13-month bonus, but most employers provide one, or some sort of commission-plan. 13 month bonuses are typically reserved for employees that have been at the company for longer than one year or is calculated based on the employment length. They typically range anywhere from one year to one month’s salary. Allowances and bonuses may or may not be taxable depending on their structure, and are often negotiated for in Vietnam.
Supplementary life and health insurance are often provided by employers to employees as an optional benefit. Smaller companies in Vietnam often chose to provide an allowance instead of arranging the insurance themselves. Additional optional benefits, such as vacation time, can be negotiated between the employee and employer.
Maternity / Paternity Leave
Within a Vietnamese company, female employees should receive 6 months of 100% salaried paid maternity leave, plus an additional 30 days per each additional child.
Depending on whether their child is born by a C-section or naturally, and whether it is a multiple or single birth, fathers in Vietnam can receive between 5 to 14 days of fully paid paternity leave.
Employees in Vietnam who have an illness, take leave with a doctor’s order, or suffer from a disability are eligible to receive an allowance paid through the social insurance fund. For an employee to receive the payment from the government, they must provide documentation proving their condition. For an employee to receive the payment from the government, they must provide documentation proving their condition. The maximum time of entitlement is:
- 30 days per year (If years of contributing to the social insurance fund is less than 15 years)
- 40 days per year (If years of contributing are between 15 and 30 years)
- 60 days per year (If years of contributing are more than 30)
Public Holidays and Annual leaves
Vietnam’s calendar has nine public holidays, during which most employees may have the day off. The Lunar New Year, known as the Tet, is a week-long celebration. Public holidays are counted in addition to vacation days.
As for the annual leaves, Vietnam’s labor law entitles employees to have a minimum of 12 days of annual leave.
Termination and severance pay
Although it is usually challenging for an employer to unilaterally terminate its employees, there are several circumstances when it may do so:
- The employee consistently does not fulfill their duties as defined by the labor contract;
- The employee is sick with no foreseeable recovery, after they have received treatment for a specific period (half the term for a labor contract with a time period of less than 12 months or a labor contract of a seasonal job; six months in a row for a labor contract with a 12 to 36 month term; and a full, consecutive year for a labor contract with an indefinite term);
- The employer must cut the workforce and production due to major events such as a natural disaster or fire;
- The company ceases to operate.
Employees may only be dismissed by the company if they have committed one of the following acts:
- Stealing, embezzling, using drugs at workplace, gambling, infringes employer intellectual property rights, discloses trade or technological secrets, or commits other acts which cause serious damage to the interests of the employer;
- Employee has been disciplined in the past, then recommits the same offense within their trial period, or recommits the offense after they have been demoted;
- Without any legitimate reason, the employee has been absent for 20 days per year or 5 days per month.
Before they can be dismissed, the employer must send a written notice to the offending employee, notifying them exactly when they have committed the afore mentioned acts. It is recommended to issue two warning letters in practice, setting a deadline to correct their mistakes in the first letter.
It a country with an economy largely built around manufacturing, it is common for companies in Vietnam to change the technology they use, and for jobs to disappear and be created within the organization. Organizational changes can also cause positions to disappear and appear.
When this happens, Vietnamese companies are expected by Vietnam labor law to retrain affected employees and assign them to a new job that might come available. If there is no new employment available, employers must publish, either internally or externally, a list of employees to be laid off. Although notice to individual employees is not required, employers must first consult with the employee’s trade union’s executive committee and notify local authorities at least 30 days prior to the layoff.
In the case of any termination disputes, employees or a class of employees may initiate Labor Court proceedings with the government.
Hire Employees in Vietnam with NNRoad
As described in this article, Vietnamese labor law contains strong worker protections, requiring paying close attention to detail and having a strong grasp of local labor practices. This makes establishing a subsidiary or branch office in Vietnam time-consuming, complex, and costly. To make the process simple and straightforward, NNRoad can help you handle HR matters and payroll in Vietnam, hire your candidate of choice, and all the while ensure you’re in compliance with local labor laws.
We save you the burden of creating your own branch office or subsidiary to hire employees in Vietnam. Our Vietnam PEO platform gives you peace of mind, and lets you pay full attention to the actual running of your business.
If you are excited by the prospects of hiring employees in Vietnam, NNRoad is ready to help you every step of the way. We can provide a PEO Solutions or Employer of Record in Vietnam for hiring an employee, payroll outsourcing, an employee leasing solution, provide recruiting services in Vietnam, and more.