Minimum Wage
Vietnam implements a regional minimum wage system to account for different living costs across the country. As of July 1, 2024, the minimum monthly wages are set to increase by approximately 6% across all regions:
| Region | Current Minimum Wage (VND) | New Minimum Wage from July 1, 2024 (VND) |
|---|---|---|
| I | 4,680,000 | 4,960,000 |
| II | 4,160,000 | 4,410,000 |
| III | 3,640,000 | 3,860,000 |
| IV | 3,250,000 | 3,450,000 |
The minimum hourly wages will also increase accordingly:
| Region | Current Hourly Rate (VND) | New Hourly Rate from July 1, 2024 (VND) |
|---|---|---|
| I | 22,500 | 23,800 |
| II | 20,000 | 21,200 |
| III | 17,500 | 18,600 |
| IV | 15,600 | 16,600 |
Employers must ensure that their employees’ basic salaries meet or exceed these minimum wage requirements.
Income Tax
Vietnam employs a progressive tax system for resident individuals, while non-residents are subject to a flat tax rate. The tax year in Vietnam follows the calendar year.
Resident Tax Rates
For individuals considered tax residents in Vietnam (those present in Vietnam for 183 days or more in a tax year or having a permanent residence in Vietnam), the following progressive tax rates apply:
| Taxable Income per Year (VND) | Tax Rate |
|---|---|
| Up to 60,000,000 | 5% |
| 60,000,001 – 120,000,000 | 10% |
| 120,000,001 – 216,000,000 | 15% |
| 216,000,001 – 384,000,000 | 20% |
| 384,000,001 – 624,000,000 | 25% |
| 624,000,001 – 960,000,000 | 30% |
| Over 960,000,000 | 35% |
Non-Resident Tax Rate
Non-residents are subject to a flat tax rate of 20% on their Vietnam-sourced income.
Payroll Cost
Employers in Vietnam are responsible for various social contributions on behalf of their employees. These contributions are calculated based on the employee’s salary and are capped at certain levels.
| Contribution Type | Employer Rate | Employee Rate | Maximum Salary Cap (VND) |
|---|---|---|---|
| Social Insurance | 17.5% | 8% | 46,800,000 |
| Health Insurance | 3% | 1.5% | 46,800,000 |
| Unemployment Insurance | 1% | 1% | Varies by region |
| Trade Union Fee | 2% | – | 46,800,000 |
The total employer contribution can reach up to 23.5% of an employee’s salary, while employees contribute up to 10.5% of their salary towards these social funds.
Overtime Pay
Overtime work in Vietnam is strictly regulated and must be compensated at higher rates than regular work hours. The Labor Code sets clear guidelines for overtime pay:
| Type of Overtime | Minimum Pay Rate |
|---|---|
| Regular workdays | 150% of normal wage |
| Weekend days | 200% of normal wage |
| Public holidays | 300% of normal wage |
Additionally, night shift work (from 10 PM to 6 AM) must be paid at least 30% higher than the daytime rate.
Key overtime regulations include:
- Maximum overtime: 40 hours per month or 200 hours per year
- In special cases: up to 300 hours per year with approval from the labor authority
- Employees must voluntarily agree to work overtime
Employers must maintain detailed records of overtime work and ensure proper compensation to comply with Vietnamese labor laws. Failure to adhere to these regulations can result in significant penalties and legal issues.
Regular & Maximum Working Hours
In Vietnam, working hours are regulated by the Labor Code. The standard working hours in Vietnam are as follows:
| Type | Maximum Hours |
|---|---|
| Daily | 8 hours |
| Weekly | 48 hours |
| Night Shift (10 PM to 6 AM) | 7 hours |
It’s important to note that:
- The 48-hour workweek can be distributed unevenly across different days, as long as no single day exceeds 10 hours.
- Employers are encouraged to implement a 40-hour workweek.
- Employees working in hazardous or dangerous conditions may have reduced working hours.
Overtime Regulations
Overtime work in Vietnam is strictly regulated:
- Maximum overtime: 40 hours per month or 200 hours per year (300 hours in special cases with approval)
- Overtime rates:
- Regular days: 150% of normal hourly rate
- Weekends: 200% of normal hourly rate
- Public holidays and paid leave: 300% of normal hourly rate
- Night shift overtime (10 PM to 6 AM): Additional 30% of daytime rate
Leave
Vietnam’s labor laws provide for various types of leave to ensure employee well-being and work-life balance. Here are the main types of leave available to employees in Vietnam:
Annual Leave
The entitlement for annual leave is based on the length of service:
| Length of Service | Annual Leave Entitlement |
|---|---|
| Regular conditions | 12 working days |
| Hazardous/dangerous conditions | 14 working days |
| Every 5 years of service | +1 additional day |
Sick Leave
Paid sick leave entitlement varies based on the employee’s social insurance contributions:
| Social Insurance Contributions | Sick Leave Entitlement per Year |
|---|---|
| Under 15 years | 30 days |
| 15-30 years | 40 days |
| Over 30 years | 60 days |
Maternity Leave
Female employees are entitled to 6 months of paid maternity leave. This can be extended by an additional month for multiple births.
Paternity Leave
Male employees are entitled to 5-14 days of paid paternity leave, depending on the circumstances (e.g., type of birth, number of children).
Other Types of Leave
- Marriage Leave: 3 days
- Bereavement Leave:
- 3 days for death of immediate family member
- 1 day for death of grandparent or sibling
- Unpaid Leave: By mutual agreement between employer and employee
Holidays
Vietnam observes several public holidays throughout the year. Here are the main public holidays for 2024:
| Date | Holiday |
|---|---|
| January 1 | New Year’s Day |
| February 8-14 | Lunar New Year (Tet) |
| April 18 | Hung Kings Commemoration Day |
| April 30 | Reunification Day |
| May 1 | International Labor Day |
| September 2 | National Day |
It’s important to note that if a public holiday falls on a weekend, employees are typically given the following Monday off. Additionally, the Lunar New Year (Tet) holiday is the most significant celebration in Vietnam and can last up to seven days.
Understanding these working hour regulations, leave entitlements, and public holidays is crucial for both employers and employees in Vietnam. It ensures compliance with labor laws and contributes to a balanced and productive work environment. Employers should also be aware that collective bargaining agreements may provide for additional benefits or different arrangements in specific industries or companies.
Termination Requirements
In Vietnam, employment termination is governed by the Labor Code and must adhere to specific legal requirements. Employers must have valid reasons for termination, which can include:
- Repeated failure to perform work duties
- Disciplinary violations
- Prolonged illness or injury
- Force majeure events
- Company restructuring or economic reasons
It’s crucial to note that arbitrary dismissal is prohibited in Vietnam. Employers must follow proper procedures, including:
- Providing written notice of termination
- Conducting disciplinary meetings (if applicable)
- Allowing the employee to defend themselves
- Documenting all steps of the termination process
Notice Period
The notice period in Vietnam varies based on the type of employment contract. Both employers and employees must adhere to these notice periods:
| Contract Type | Notice Period |
|---|---|
| Indefinite term | 45 days |
| Definite term (1-3 years) | 30 days |
| Seasonal or specific job (less than 12 months) | 3 working days |
| During probation | No notice required |
During the notice period, employees are entitled to their full salary and benefits. Employers may opt for payment in lieu of notice if they wish for the employee to leave immediately.
Severance Pay
Severance pay is mandatory in Vietnam for employees who have worked for a company for 12 months or more. The calculation of severance pay is as follows:
Severance Pay = 0.5 × Monthly Salary × Years of Service
Key points about severance pay:
- The monthly salary used for calculation is the average of the last 6 months’ salary.
- Years of service exclude periods covered by unemployment insurance.
- There is no cap on the number of years used for calculation.
| Years of Service | Severance Pay (in months of salary) |
|---|---|
| 1 | 0.5 |
| 2 | 1 |
| 5 | 2.5 |
| 10 | 5 |
| 20 | 10 |
Additional severance may be required in specific circumstances:
- Pregnant employees: 13 months’ additional salary
- Recently married employees: 13 months’ additional salary
- Employees close to retirement: Up to 1 year’s salary
Probation Periods
Probation periods in Vietnam allow employers to assess new employees’ suitability for their roles. The Labor Code provides specific guidelines for probation periods:
| Job Complexity | Maximum Probation Period |
|---|---|
| Managerial positions | 180 days |
| College graduate or higher | 60 days |
| Vocational training or technical workers | 30 days |
| Other jobs | 6 working days |
Key points about probation periods:
- The probation period must be agreed upon in writing.
- The probationary salary must be at least 85% of the regular salary for the position.
- Either party can terminate the probationary contract without notice or compensation.
- Upon successful completion of the probation period, the employer must enter into the agreed labor contract.
Employers should clearly define the probation period terms in the employment contract, including duration, evaluation criteria, and any differences in benefits compared to regular employees.
By understanding these key aspects of termination in Vietnam, employers can ensure compliance with local labor laws and maintain positive relationships with their workforce. It’s always advisable to consult with legal experts or the Ministry of Labor, Invalids and Social Affairs for specific cases or updates to the labor laws, as regulations may change over time.
Contractor Classification in Vietnam
In Vietnam, the distinction between employees and independent contractors is crucial for businesses to understand. Proper classification ensures compliance with local labor laws and helps avoid potential legal and financial risks.
Characteristics of Contractors
Independent contractors in Vietnam typically have the following characteristics:
- Operational freedom
- Ability to work with multiple clients
- Control over their working hours
- Use of their own tools and equipment
- Issuance of invoices for completed projects
Unlike employees, contractors are not subject to direct supervision or control by the hiring company.
Misclassification Risks
Misclassifying employees as independent contractors can lead to severe consequences for businesses operating in Vietnam. The Ministry of Labor, Invalids and Social Affairs (MOLISA) takes such violations seriously, and companies found guilty of misclassification may face significant penalties.
Consequences of Misclassification
| Consequence | Description |
|---|---|
| Fines | Monetary penalties imposed by the government |
| Back Payments | Retroactive payment of social insurance contributions |
| Legal Action | Potential lawsuits from misclassified workers |
| Reputational Damage | Negative impact on company image and credibility |
To avoid these risks, companies must carefully evaluate their working relationships and ensure proper classification of their workforce.
Contractor Hiring Process
When hiring independent contractors in Vietnam, companies should follow these key steps:
- Conduct appropriate interviews
- Create a comprehensive service agreement
- Provide only necessary introductions and resources
Service Agreement Components
A well-drafted service agreement should include:
- Project scope and deadlines
- Payment terms and rates
- Termination clauses
- Intellectual property rights
- Confidentiality provisions
Contractor Payment in Vietnam
Payment processes for contractors in Vietnam differ from those for employees. Key considerations include:
- Contractors typically provide their own invoices
- No income tax withholding is required
- Employers are not obligated to make social insurance contributions
Payment Methods
| Method | Advantages | Considerations |
|---|---|---|
| Bank Transfer | Secure and traceable | May involve fees |
| Digital Wallets | Fast and convenient | Limited acceptance |
| Cash | Traditional option | Less secure, documentation needed |
Contractor Permits and Visas
Independent contractors in Vietnam often require specific permits and visas to work legally. The requirements may vary depending on the contractor’s nationality and the nature of their work.
Common Permit Types
- Business Visa
- Work Permit
- Temporary Residence Card
Contractors working in specific economic zones or high-tech parks may have different permit requirements.
Termination of Contractor Agreements
Terminating a contractor agreement in Vietnam requires adherence to the terms outlined in the service agreement. Key considerations include:
- Providing proper notice as specified in the contract
- Ensuring all deliverables are completed
- Settling any outstanding payments
Compliance Considerations
To maintain compliance when working with contractors in Vietnam, companies should:
- Regularly review contractor relationships
- Keep detailed records of contracts and payments
- Stay informed about changes in Vietnamese labor laws
- Consult with local legal experts when necessary
Contractor vs. Employee Comparison
| Aspect | Contractor | Employee |
|---|---|---|
| Work Schedule | Flexible | Set by employer |
| Equipment | Provides own | Provided by employer |
| Payment | Per project/task | Regular salary |
| Benefits | Not provided | Statutory benefits |
| Taxes | Self-reported | Withheld by employer |
| Termination | As per contract | Labor law protections |
Tax Implications for Contractors
Independent contractors in Vietnam are responsible for their own tax obligations. They are typically subject to:
- Personal Income Tax (PIT): Progressive rates up to 35%
- Value Added Tax (VAT): Generally 10% for most services
Contractors must register for tax purposes and file their own tax returns. Foreign contractors may be subject to different tax rates and regulations.
By following these guidelines and understanding the nuances of contractor classification in Vietnam, businesses can effectively engage with independent contractors while minimizing legal and financial risks. It’s essential to stay updated on local regulations and seek professional advice when dealing with complex contractor arrangements in Vietnam.
Visa Requirements
When hiring in Vietnam, understanding the visa process is crucial. Vietnam offers various types of work visas for foreign nationals, depending on their employment situation and duration of stay.
| Visa Type | Duration | Key Features |
|---|---|---|
| Temporary Residence (23A) | 1 year (renewable) | For most salaried activities |
| Intra-company Transfer (23E) | 1 year (renewable) | For employees transferred from overseas branches |
| Business Visa (DN) | Up to 12 months | For business-related activities |
| Working Visa (LD) | Up to 2 years | For foreign workers with work permits |
To obtain a work visa, employers must first secure approval from the Ministry of Labor, Invalids and Social Affairs (MOLISA). The process typically involves the following steps:
- Obtain work permit or work permit exemption certificate
- Apply for visa approval letter
- Receive visa approval letter
- Apply for entry visa (if required)
- Enter Vietnam and complete final visa procedures
It’s important to note that visa regulations can change, so employers should regularly check with MOLISA for the most up-to-date information.
Cultural Considerations in the Workplace
Vietnam’s business culture is deeply influenced by its rich history and social traditions. Understanding and respecting these cultural nuances is essential for successful business relationships and employee management.
Business Etiquette
| Aspect | Description |
|---|---|
| Greetings | Handshakes and slight bows are common |
| Dress Code | Conservative business attire is preferred |
| Communication | Indirect and polite, avoiding confrontation |
| Hierarchy | Respect for authority and seniority is important |
Communication Style
Vietnamese communication is characterized by politeness and indirectness. Direct criticism or disagreement may be seen as disrespectful. Instead, use diplomatic language and avoid confrontational approaches.
Religious Considerations
While Vietnam is officially an atheist state, it respects religious diversity in the workplace. Employers should be aware of and accommodate various religious observances:
| Religion | Percentage of Population | Key Considerations |
|---|---|---|
| Buddhism | 50% | Buddhist festivals and practices |
| Catholicism | 26% | Christmas, Holy Week |
| Protestantism | 9% | Various denominations |
| Islam | 6% | Ramadan observances |
| Others | 9% | Cultural festivals |
Accommodating Religious Practices
- Be aware of major religious holidays when scheduling important meetings or events
- Respect dietary restrictions (e.g., vegetarian options during Buddhist festivals)
- Be flexible with time off for religious observances
Public Holidays and Work Week
Vietnam observes several public holidays based on various cultural, historical, and religious celebrations. The standard work week is Monday to Friday, with some businesses operating on Saturday mornings.
| Holiday Type | Examples |
|---|---|
| National | Lunar New Year (Tet), Independence Day |
| Religious | Buddha’s Birthday, Christmas Day |
| Cultural | Hung Kings Commemoration Day |
Networking and Relationship Building
Building personal relationships is crucial in Vietnamese business culture. Allocate time for social interactions and small talk before discussing business matters. Invitations to social events or meals should be accepted as they are important for relationship building.
Work-Life Balance
Vietnamese people value their personal time and family life. It’s common for employees to take extended lunch breaks and socialize with colleagues. Respecting work-life balance is important for maintaining employee satisfaction and productivity.
| Aspect | Description |
|---|---|
| Working Hours | Typically 8 hours per day, 40 hours per week |
| Lunch Break | Often 1-2 hours, may include siesta |
| Overtime | Should be compensated as per labor laws |
| Annual Leave | Minimum 12 working days annually |
By understanding these additional aspects of Vietnamese culture and business practices, employers can create a more inclusive and respectful work environment, fostering better relationships with both local and expatriate employees. This cultural awareness is key to successful hiring and management of a diverse workforce in Vietnam.
