Employment Law

Employment Contract in Vietnam

Vietnamese law requires employers to draw up a written labor contract when hiring employees. The contract should be concise, strongly worded, and outline the employee's pay, benefits, job responsibilities, and any rules regarding termination.

The offer letter and employment contract should be drafted in Vietnamese and English. Any currency references to wages and benefits should be expressed in Vietnamese Dong (VND) and not in foreign currencies.

Working with our Vietnam PEO, Remoly's team of local experts can provide assistance in drafting strong employment contracts that comply with local regulations.

Fixed Term

Indefinite

Vietnam Working Hours

In Vietnam, employees usually work 8 hours a day and 48 hours a week. Employers are required by law to provide employees with one day off per week. In most work arrangements, Sunday is the day off.

The standard working week in Vietnam is Monday to Friday, eight hours a day.

The conditions for allowing overtime are strict: generally each employee cannot exceed 40 hours per month and 200 hours per year. Under special circumstances, you can apply to the government for an extension of the period.

Vietnam Tax

Entities, businesses and organizations in Vietnam may be required to pay statutory social insurance. This depends on whether the employee is employed under an open-ended employment contract or a fixed-term employment contract lasting more than three months. The Vietnam Social Security Fund pays the following allowances:

• maternity leave
• sick leave
• occupational diseases
• work accident
• pension

Vietnam also has mandatory social, health and unemployment insurance schemes. Both employees and employers must contribute to the plan. Contributions are determined based on the employee's monthly salary stipulated in the relevant labor contract (SI/HI is capped at 20 times the general minimum wage), and UI is capped at 20 times the regional minimum wage.

Compulsory unemployment insurance is only applicable to enterprises with 10 or more employees.

• Local: Employers pay 21.5% of wages into social insurance; local employees pay 10.5%
• Foreigners: Employers pay 6.5% of wages to social insurance; foreign employees pay 1.5%
• Union dues: 1% (compulsory only if the professional joins a TU organization).
• Unions: 2% (employer must contribute).

Health Benefits

In Vietnam, standard insurance is provided through the national system. By law, employers are required to provide health insurance to their employees. Additionally, employers must provide employees with regular annual health exams.

Holiday Policy

Take a Vacation

Vietnamese labor law stipulates that employees are entitled to 12 days of annual leave. The conditions for leave are as follows:

• For employees who have worked for the employer for more than 12 months, they are entitled to 12 days of paid annual leave. Employees who have been with the company for less than 12 months are entitled to prorated leave.
• Employees are entitled to additional paid vacation time for every five years they work with the company.
• For untaken vacation at the end of the year, employees are entitled to wages in lieu of annual leave. Employers generally allow employees to carry forward unused annual leave to the next year, but no later than March 31 of the following year. This will be payment in lieu of unused vacation time.
• As a supplementary benefit, employees working in hazardous conditions may receive additional time off (this is negotiated between employee and employer).
• In Vietnam, holidays are separate from sick leave or maternity leave.

Employees in Vietnam are also entitled to paid leave for weddings or children’s weddings. In addition, employees are often eligible for paid or unpaid personal leave following the death of a parent, spouse, or child.  

Sick Leave

Employees suffering from illness or injury may be eligible for benefits paid by the Vietnam Social Security Fund. To receive this benefit, employees must submit the necessary medical documentation to support their leave. In Vietnam, sick leave benefits are calculated based on the employee's salary, which is then used to calculate social insurance premiums. The greatest rights are:

• 30 days per year – if the employee has paid into social security funds for less than 15 years
• 40 days per year – if the employee has contributed to social insurance funds for between 15 and 30 years
• 60 days per year – if the employee has paid into social security funds for more than 30 years

Maternity and Paternity Leave

Female employees in Vietnam are eligible for six months of paid maternity leave with full pay (basic salary with social security contributions). An employee's maternity leave is covered by compulsory social insurance.

Female employees who are pregnant, on maternity leave or have a baby under 12 months of age can only be dismissed if the employer ceases operations. In this case, there is no other reason to dismiss the employee.

Employers in Vietnam are not required to pay wages to employees taking maternity leave. However, social insurance premiums for employees’ maternity leave are calculated based on their wages. The maximum limit is VND 29,800,000.

Fathers in Vietnam are eligible for 5 to 14 days of paid paternity leave. This depends on whether the child was born naturally or by caesarean section; and whether it was a singleton or multiples.

Termination and Severance

In Vietnam, an employee's rights regarding dismissal depend on their employment contract and the reason for dismissal. This affects the notice period and any severance package. When hiring new employees in Vietnam, employers usually arrange a probation period. For jobs with high professional and technical requirements, the probation period shall not exceed 60 days. For all other types of employment, the probation period shall not exceed 30 days. The employer may terminate the fixed-term labor contract with 30 working days' notice in advance. For indefinite labor contracts, 45 working days' notice is required. In both cases, the employer must have sufficient legal basis to terminate the contract. In order to legally terminate an employment contract, sufficient reasons may include performance issues, long-term illness, force majeure events or company dissolution.

Termination may be declared unlawful if the employer fails to demonstrate legal grounds or fails to follow due statutory procedures. If the dismissal proves to be wrongful, the employer may be required to reinstate the employee and/or pay the employee wages for the period during which he or she was not allowed to work. In addition, the employer may be forced to pay the employee two months' salary as a penalty for wrongful dismissal. In most cases, settlements and resignations can be negotiated by offering employees an agreed-upon severance package. For companies expanding overseas for the first time, dealing with employee layoffs and dealing with severance packages can be complicated. Remoly's Vietnam PEOs can reduce risk for foreign companies and provide guidance during the process.

Salary and Benefits

Vietnam Compensation Law

Minimum wage laws in Vietnam are determined by the region where the business operates. This is because wages are adjusted for factor depreciation and the socioeconomic conditions of workers and their families.

Vietnam has four regions with minimum wages. The minimum wages range from 3.07 million VND to 4.42 million VND per month. The minimum wages for workers in big cities are higher.

Welfare in Vietnam is Guaranteed

Employers need to be aware of all statutory benefits required by Vietnamese law. This includes holidays and vacation time.

Employees in Vietnam are entitled to take time off during the country's nine public holidays. Chinese New Year is a week-long celebration, which means employees get a full week off.

Vietnam's nine public holidays are separate from the country's minimum holiday requirements. Paid time off is determined based on the length of time an employee has been with the company. For example, employees who have worked for the company for 12 months are entitled to 12 days of paid annual leave. Thereafter, employees will receive an additional day of paid vacation for every five years they have worked with the company.

Vietnam Welfare Management

Employers in Vietnam should also consider providing supplementary benefits to their employees. This can have a significant impact on employee retention. While these benefits are not mandatory, many employees want them as part of their compensation.

Employers typically offer a 13-month bonus to employees who have been with the company for more than a year. This bonus can range from one month to one year's salary and is usually paid before the Lunar New Year holiday.

Although Vietnam offers standard health insurance through its national system, many employers choose to provide supplementary health and life insurance to their employees. Alternatively, insurance benefits may be paid to employees.

Benefits and Compensation Limitations

One of the major limitations to benefits and compensation for expanding your business is setting up a local entity. Employers are generally prohibited from hiring and paying employees without first establishing a subsidiary in Vietnam. This process can take months to complete, causing significant business delays.

With Remoly's Vietnam Employer of Record and PEO, businesses can start doing business in Vietnam in as little as 48 hours. Remoly is the employer of record for your employees, which means there is no need to set up a subsidiary in Vietnam. We can help you find, hire and engage top local and international talent.