Hiring in Vietnam often looks cost-efficient at first glance. Salaries are competitive, and the talent pool is strong. But many companies overlook one key detail — salary is not the full cost of employment.

In reality, employers in Vietnam are required to contribute an additional 23.5% on top of an employee’s salary. This is not optional, and it applies across most local hires.

What Makes Up the 23.5%?

The employer contribution is made up of several mandatory components:

1. Social insurance: 17.5%
2. Health insurance: 3%
3. Unemployment insurance: 1% (not applicable to foreign employees)
4. Union fees: 2% (not applicable to foreign employees)

While each percentage may seem manageable on its own, together they create a noticeable increase in total hiring cost.

What This Means in Practice

Let’s take a simple example.

If an employee’s monthly salary is VND 20,000,000, the employer is required to contribute an additional VND 4,700,000.

This brings the total monthly cost to VND 24,700,000.

For companies hiring multiple employees, this difference can significantly impact overall budgeting.

Why This Matters

For many businesses, especially those expanding into Vietnam for the first time, this cost structure is often underestimated.

Common challenges include:

1. Budget miscalculations
2. Underestimating cost per hire
3. Difficulty scaling teams efficiently
   

Understanding these additional costs early helps avoid unexpected financial pressure later on.

A Note for International Employers

Vietnam’s employment regulations are structured and strictly enforced. Employer contributions are mandatory, and non-compliance can lead to penalties.

For companies unfamiliar with local labor rules, navigating these requirements can be complex.

Working with a local partner or an Employer of Record (EOR) can help ensure compliance while keeping hiring processes straightforward and predictable.