Fueling Growth, Empowering a Young Workforce

Vietnam has emerged as one of Asia’s fastest-growing economies, attracting businesses with its young workforce, competitive labour costs, and increasing foreign investment. The country’s favourable trade agreements and government support for business make it a strategic choice for regional expansion. However, hiring in Vietnam involves understanding complex labour laws, mandatory insurances like social and health coverage, and strict payroll and tax regulations.

1. Employer’s Obligation to Provide a Healthy and Safe Workplace

Employers in Vietnam are required to provide a safe and healthy workplace, as outlined in the Labor Code and other relevant occupational safety regulations. Key obligations include:

• Providing safe working conditions, equipment, and regular maintenance of workplace facilities.
• Offering occupational safety and hygiene training appropriate to job tasks.
• Conducting regular risk assessments to identify hazards and implement preventive measures.
• Supplying appropriate Personal Protective Equipment (PPE) where necessary.
• Informing employees of occupational risks and health-related instructions.
• Establishing employee consultation mechanisms on health and safety matters.
• Reporting and investigating workplace incidents and implementing corrective actions.
• Creating and maintaining a health and safety management system where required by law.

Penalties for non-compliance include administrative fines, suspension of operations, and, in serious cases, criminal prosecution.

2. Maximum Working Hours

According to Vietnam’s Labor Code:

• The standard working week is not more than 48 hours, typically 8 hours per day over 6 days.
• Employees may not work more than 40 overtime hours per month, and 200–300 overtime hours per year, depending on the industry.
• Employees are entitled to at least one day off (24 consecutive hours) per week.

Special exceptions may apply for seasonal or export-oriented work, with employee consent and proper notification to labor authorities.

3. Annual Leave Entitlement

Employees with 12 months of continuous service are entitled to paid annual leave as follows:

• 12 working days for normal working conditions.
• 14 working days for employees in heavy, toxic, or dangerous jobs or underage employees.
• 16 working days for employees in especially heavy, toxic, or dangerous jobs.

For employees with less than 12 months of service, leave is granted proportionally based on actual working time. Additional leave days may be granted based on seniority (one additional day for every five years of service at the same employer).

4. Sick Leave (Social Insurance-Based)

Employees who participate in the Vietnamese Social Insurance Scheme are eligible for sick leave benefits, provided they present a medical certificate within 48 hours. Benefits are:

• 30 days per year for those with less than 15 years of contributions.
• 40 days per year for those with 15–30 years of contributions.
• 60 days per year for over 30 years of contributions.

For long-term treatment of serious illnesses (as listed by the Ministry of Health), the entitlement may extend to 180 days, with 75% of the salary paid (based on social insurance calculation).

Beyond 180 days, extended leave may be granted with lower benefits (typically 45% to 65% of salary).

5. Maternity and Paternity Leave

Maternity Leave:

• Female employees are entitled to 6 months (180 days) of paid maternity leave.
• In case of multiple births, an additional 30 days per child (from the second onward) is granted.
• The leave includes up to 2 months before childbirth as part of the 6 months.
• Payment is made via the Social Insurance Fund at 100% of the average monthly salary (based on the last 6 months of contributions).

Paternity Leave:

Fathers are entitled to 5 to 14 working days of paternity leave, depending on the number of children born and the delivery method:

• 5 days for a normal birth.
• 7 days for a cesarean or twin birth.
• 10–14 days for complicated births or multiple births via cesarean.

Paternity leave is also covered by the Social Insurance Fund.

Payroll Cycle and Salary Disbursement

In Vietnam, the payroll cycle is typically monthly, with employees receiving their salaries on the last working day of each month. However, some employers may opt for biweekly or semi-monthly pay schedules depending on internal policies. Regardless of frequency, timely and accurate salary payment is essential to comply with local labor laws and maintain employee trust.

Understanding Vietnam’s Minimum Wage Structure

Vietnam’s labor code sets two categories of minimum wages: the common minimum wage and the regional minimum wage. As of 1st July 2024, the common minimum wage is set at VND 2,340,000, primarily used to calculate salaries in state-owned entities. This figure also serves as a benchmark for social insurance contributions, which are capped at 20 times the base wage. For unemployment insurance, contributions are capped at 20 times the regional minimum wage.

The regional minimum wage applies to employees in non-state enterprises and varies by geographic region. Effective July 2024, the hourly rates are:

• Region I: VND 22,500
• Region II: VND 20,000
• Region III: VND 17,500
• Region IV: VND 15,600

Region I includes central urban districts of Hanoi and Ho Chi Minh City, while Region II covers surrounding suburban areas and cities like Da Nang. Regions III and IV encompass provincial cities and more rural areas. Additionally, the monthly regional minimum wage has increased from VND 4,680,000 to VND 4,960,000.

Overtime Pay and Night Shift Compensation

Vietnamese labor law mandates specific compensation for overtime and night work. On regular workdays, employees must receive at least 150% of their standard hourly wage for overtime. If the work falls on a weekly rest day, this rises to 200%, and on public holidays or paid leave days, it increases to 300%, not including the base holiday pay for daily wage earners.

Employees working night shifts (typically between 10:00 PM and 6:00 AM) are entitled to an additional 30% of their regular wage. If overtime is performed during these night hours, an extra 20% is added on top of the applicable overtime rate, ensuring fair compensation for work during unsociable hours.

Legal Limits on Overtime Hours

Vietnamese law also imposes limits on overtime to protect employee welfare. Overtime must not exceed 50% of the normal daily working hours, 12 hours in any given day, 40 hours per month, or 300 hours per year. Employers must track these hours carefully to ensure compliance and avoid legal penalties.

Bonuses and Incentive Payments

There is no legal requirement for employers in Vietnam to provide bonuses. However, many companies choose to offer performance-based incentives or annual bonuses as part of their employee retention and motivation strategies. While not mandatory, these practices are common, especially in competitive sectors.

Vietnam’s social insurance scheme is mandatory for both employers and employees. Employees contribute 8% of their monthly wage, while employers contribute 17.5%. These contributions fund essential programs including sick leave, maternity leave, allowances for work-related accidents and occupational diseases, pension benefits, and death allowances.

Employers are responsible for ensuring these contributions are paid accurately and on time. Non-compliance may result in penalties, including administrative fines and potential restrictions on business operations.

Health Insurance

Health insurance contributions are equally shared between the employee and employer, each contributing 3% of the employee’s monthly wage. These contributions support the national health insurance scheme, administered by the Vietnam Social Security (VSS).

Registered employees enjoy access to a range of medical benefits, such as outpatient and inpatient treatment, maternity care, and coverage for prescription medications at approved public and private healthcare facilities. While the national scheme provides broad coverage, employees may also opt for supplementary health insurance offered by private insurers to enhance their protection.

Employers must register their employees with the VSS and handle the health insurance contributions accordingly. While supplementary coverage is optional, offering it can be a valuable employee retention tool.

Trade Union Contributions

Trade union fees are a legal obligation under Vietnam’s Labor Code. All employees covered by social insurance are required to contribute 2% of their monthly income to the trade union fund. This fee is shared—half goes to higher-level trade union bodies, and the other half supports activities at the enterprise level.

Although not every business is required to have a trade union, enterprises with ten or more employees are expected to establish one. Where no trade union exists, employers must ensure alternative mechanisms are in place to safeguard employee rights and benefits in compliance with labor regulations.

Unemployment Insurance

Unemployment insurance (UI) applies only to Vietnamese nationals and excludes foreign workers. Both employer and employee must contribute 1% each of the employee’s monthly income subject to UI. This includes salary, regular payments, and fixed allowances, up to a maximum of 20 times the minimum regional wage.

The UI program provides financial support for eligible unemployed workers and also covers vocational training support and job placement services, helping ensure labor market stability and worker protection.

Foreigners intending to work in Vietnam are required to obtain a work permit, a legal document issued by Vietnamese authorities that certifies a foreign national’s eligibility for employment in the country. Possessing a valid work permit ensures that foreign employees can work legally and enjoy protection under Vietnamese labor laws.

Conditions for Foreign Workers (as per Labor Code 2019, Article 151.1)

To qualify for employment in Vietnam, foreign nationals must meet the following criteria:

• Be at least 18 years of age and possess full civil capacity.
• Have professional, technical, or occupational qualifications and relevant experience.
• Be in good health as certified by a medical facility (in accordance with Ministry of Health regulations).
• Have no criminal record or current criminal prosecution under either Vietnamese or foreign law.
• Hold a valid work permit, except in cases of exemption specified under Article 154 of the Labor Code.

Foreign employees must comply with the Vietnamese Labor Code and are protected by Vietnamese law unless otherwise specified in an international treaty to which Vietnam is a signatory.

Who Is Eligible for a Work Permit in Vietnam

Eligibility for applying for a work permit is defined in Decree 152/2020/ND-CP, which governs work permits for foreign employees in Vietnam. Eligible individuals include foreigners entering Vietnam for various purposes, such as executing labor contracts, participating in intra-company transfer programs, engaging in business agreements, and more. Work permits are also issued to those working in managerial, executive, expert, or technical roles, or participating in bidding contracts and projects in Vietnam.

Entities that can sponsor a work permit for foreign employees include:

• Enterprises operating under the Enterprise Law, Investment Law, or relevant international treaties
• Contractors involved in bids and contract performance
• Representative offices, branches of enterprises, and licensed agencies and organizations
• State agencies, political organizations, and socio-political-professional organizations
  Foreign non-governmental organizations licensed in Vietnam
• Non-business organizations and educational institutions established under Vietnamese law
• International organizations, foreign project offices in Vietnam, and other agencies approved by the Vietnamese government
• Operating offices of foreign investors under business cooperation contracts or foreign contractors under Vietnamese law
• Organizations operating in the legal sector in Vietnam
• Cooperatives, cooperative unions, and business households and individuals operating according to Vietnamese law

Documents Required for a Work Permit Application:

• Employer’s application form (Form No.11/PL1, as specified in Decree No.152/2020/ND-CP)
• A fitness-to-work certificate issued within 12 months by a competent foreign or Vietnamese health facility
• A criminal record or certificate confirming the absence of a criminal record, issued within six months by a competent foreign authority
• Supporting documents for managers, executives, experts, and technicians, such as diplomas, certificates, and proof of work experience
• Other position-specific documents (e.g., sports achievements, pilot licenses, aviation maintenance certificates, or ship/vessel crew member certifications)
• Notarised copies of a valid passport
• Other relevant documents depending on the job position or situation

Work Permit Fees

Obtaining a work permit may involve additional costs, which can vary depending on the specific case. Common fees include:

• Fee for obtaining a criminal record certificate
• Work permit processing fee
• Fee for obtaining a temporary residence card

An employer in Vietnam can unilaterally terminate a labor contract under the following circumstances:

Performance Failures

If the employee consistently fails to fulfill job duties as stated in the labor contract, based on performance criteria established by the employer. These criteria must be developed in consultation with the employee’s representative organization at the workplace, where applicable.

Medical Condition

For indefinite-term contracts: If the employee undergoes continuous treatment for illness or injury for 12 months without recovery.

For fixed-term contracts (12–36 months): If treatment continues for 6 consecutive months.

For contracts shorter than 12 months: If the treatment period exceeds half the contract’s duration.

If the employee recovers, the employer may consider continuing the contract.

Forced Employment Reduction

When external factors such as natural disasters, fires, epidemics, calamities, or business relocation/restructuring—mandated by competent authorities—require downsizing despite the employer having taken all necessary remedial measures.

Absence Without Reason

If the employee fails to return to work after the deadline specified in Article 31 of the Labor Code without a legitimate reason.

Retirement Age

If the employee reaches retirement age as defined in Article 169 of the Labor Code, unless otherwise agreed by both parties.

Voluntary Resignation

If the employee voluntarily resigns without valid reasons for five or more consecutive working days.

Dishonest Information

If the employee provides false information as defined in Article 16(2) of the Labor Code, which affects the hiring process.

Notice Period Requirements

When terminating a labor contract under the above circumstances, the employer must provide advance notice as follows:

• Indefinite-term contracts: At least 45 days’ notice
• Fixed-term contracts (12 to 36 months): At least 30 days’ notice
• Fixed-term contracts (under 12 months): At least 3 working days’ notice
• Specific sectors or specialized roles: As regulated by the Government (refer to Article 7 of Decree 145/2020/ND-CP, effective from February 1, 2021)

* Includes Reunification Day (April 30) and International Labor Day (May 1), with the weekend compensation extending through May 4.

Notes for Employers

• Holiday rollover: If a holiday falls on a weekend, a compensatory day off follows.
• Tết Flexibility: Employers can choose one of three Tết holiday windows, though January 25–February 2 is a common selection.
• Planning Advice: Companies are required to notify employees of holiday schedules at least 30 days in advance to facilitate accurate payroll and leave planning.

Please find our Vietnam office address below:

Lot C8, Tan Thuan Nam Residential Area,
Phu Thuan Street, Phu Thuan Ward,
District 7, Ho Chi Minh City, Vietnam

Email: info@linkcompliance.com