Vietnam’s workforce, estimated at 52.9 million people aged 15 and above, is characterized by a “golden population structure”. Effective Human Resources (HR) management requires navigating frequent changes in the Labour Code and ensuring strict compliance with regulations concerning wages, contracts, insurance, and expatriate employment.
Compensation and Wages
Vietnam enforces mandatory minimum wages based on geographical zones:
- Minimum wage (monthly): Ranging from VND 3.45 million to VND 4.96 million (Zone 4 to Zone 1, effective July 1, 2024).
- Working hours: Normal working hours must not exceed 8 hours per day or 48 hours per week. Overtime is restricted to 50% of the normal working hours per day and generally capped at 200 hours per year (though up to 300 hours is possible in specific industries, like garment or electronics manufacturing, with employee consent).
- Overtime pays: Employees working overtime are entitled to additional wages: 150% of the regular rate for weekdays, 200% for weekends, and 300% for public holidays/paid leave days.
Labor Contracts and Termination
The Labor Code recognizes two primary types of labor contracts: an indefinite term and a definite term (maximum of 36 months). A definite-term contract can only be renewed once. Probation periods are permitted, with maximum durations varying based on the job requirements, up to 180 days for enterprise executive positions.
- Termination: An employee can unilaterally terminate an indefinite contract by providing 45 days’ notice. An employer may unilaterally terminate a contract under specific legal grounds, such as repeated failure to perform the job, natural disaster/fire necessitating downsizing, or if the employee is absent without excuse for five consecutive working days.
- Severance allowance: Employers must pay severance to employees who have worked for 12 months or longer. The severance amount is calculated as half a month’s salary for every year worked, minus the period the employee contributed to unemployment insurance.
Expatriate Employment and Permits
A work permit (WP) is necessary for foreign nationals to work legally in Vietnam, unless they qualify for specific exemptions. This permit is issued exclusively to foreign individuals who are sponsored by an organization or entity within Vietnam.
- Work permit validity and renewal: A WP is valid for a maximum of two years and can be extended only once for an additional two-year term. After this extension, a fresh WP application is necessary. Employers must submit a demand for foreign employees to the Department of Home Affairs at least 15 days prior to commencing the WP application.
- WP Exemptions: Certain foreign workers are exempt, including those working less than 30 days/up to three times a year, or an owner/contributing member of an LLC with at least VND 3 billion in capital contribution. Even when exempt, the employer is often required to notify the DOLISA.
- Temporary Residence Cards (TRC): A long-term visa issued by the Vietnam Immigration Department that allows foreigners to stay in Vietnam for an extended period (1 to 5 years) without needing to apply for visa extensions frequeantly. It also serves as an entry-exit document, meaning that holders can enter and exit Vietnam multiple times without needing additional visas.
Mandatory Insurance and Taxation
- Compulsory Insurance (SHUI): Foreigners who sign labor contracts of 12 months or longer are required to contribute to Social and Health Insurance. The contribution ceiling for Social and Health Insurance is 20 times the Common Minimum Wage (2,340,000 VND), which equals a maximum of 46.8 million VND per month as of July 2024. Foreigners are not required to contribute to Unemployment Insurance.
- Personal Income Tax (PIT): Foreign employees are subject to Personal Income Tax (PIT). Non-residents ( less than 183 days in Vietnam) are taxed at a rate of 20%.
Tax residents (more than 183 days in Vietnam) get a personal deduction of VND 11 million/month and VND 4.4 million/month per dependent. Tax residents are required to declare their global income and submit an annual PIT return by the end of April of the year following calendar year.
Reporting and Compliance
The FIE must adhere to various periodic reporting requirements to avoid administrative penalties, including fines ranging from VND 1 million to VND 50 million:
- Audited report: The company must submit its annual audited report within 90 days from the end of its fiscal year.
- Investment Reports: Quarterly and Annual reports on investment project execution must be submitted online through the National Foreign Investment Information System.
- Labor Reports: Semi-annual and annual reports are required concerning the employment situation, unemployment insurance implementation, and occupational accidents, often submitted to the DOLISA.
