Vietnam Payroll Outsourcing and PEO/GEO Services Leader Publishes Payroll & HR Insights for Vietnam
Mercans, a leading Vietnam payroll outsourcing, PEO/GEO, employee leasing, recruitment and BPO services provider, has published its most recent Payroll & HR Insights for Vietnam. These insights provide an invaluable overview of the information every Payroll & HR specialist should know before setting up their HR and payroll functions in Vietnam or signing up with a payroll outsourcing or PEO/GEO services provider. Mercans’ summary of labor laws, tax and social security regulations in Vietnam allow you to navigate the local complexities and avoid pitfalls.
The subheading Vietnam Economic Miracle in 2020 needs to be corrected
While this summary will serve you as a great guide, you should still get in touch with Mercans’ Vietnam payroll outsourcing, compliance, PEO/GEO and BPO specialists for a free consultation on setting up fully compliant payroll and HR functions. Better yet, outsource your payroll and HR activities in Vietnam to Mercans and our Vietnam payroll outsourcing experts will ensure that your employees will always be paid on time and in accordance with the Vietnam regulations.
Mercans’ Vietnam payroll outsourcing solutions are unique and revolutionary:
- Mercans is not an aggregator – your Vietnam payroll outsourcing services will be delivered by Mercans’ dedicated Vietnam payroll outsourcing team. No middlemen or subcontractors will ever see your confidential data.
- We use our proprietary Vietnam payroll outsourcing software platform, that has been specifically designed to handle the complexities and requirements of Vietnam labor regulations.
- Your data is always be secure with Mercans – Mercans is the only Vietnam payroll outsourcing provider with ISO 9001, 20000 and 27001 certifications; has passed SOC 1 and 2 (both Type 1 and 2) audits; is GDPR compliant and has successfully completed OWASP Type 3.0 penetration tests.
- Mercans’ Vietnam payroll outsourcing software platform can be easily integrated with any global HRMS systems; i.e. Workday, SAP, SuccessFactors, Oracle, Dynamics, etc.
- Mercans’ Vietnam payroll outsourcing fees are transparent and competitive – you will save 30-50% over the service fees of any other comparative Vietnam payroll outsourcing provider.
Mercans’ Vietnam PEO/GEO Services
If you are already too busy to deal with another country or do not have a local legal entity in Vietnam and need to hire staff there, then Mercans’ PEO/GEO services in Vietnam are the right solution for you. We will employ the staff on your behalf in Vietnam and will ensure the full compliance with the local regulations throughout the hire-to-retire cycle in Vietnam. Mercans’ recruitment and immigration specialists will even help you to find the right staff and complete their immigration process in the matter of days.
Mercans does not use any subcontractor’s to deliver Vietnam PEO/GEO Services. This ensures that your employees receive the highest quality support in Vietnam and our service fees are unbeatable.
Despite the success so far in containing the spread of coronavirus due to comprehensive contact tracing, isolation and quarantining, the economic performance is severely impacted by the pandemic. After annual GDP growth rates of about 7% over the past five years, economic growth is expected to slow down to 2.3% in 2020. However, despite this decrease, Vietnams is one of the few economies in the world that is not facing a contraction this year.
Investments and private consumption growth are expected to slow down this year, to 0.4% and about 4% respectively. Due to the global economic slowdown exports are forecast to contract 5.5% in 2020 after robust annual growth rates 2019 and 2018.
In order to sustain the economic performance, the Central Bank has lowered the benchmark interest rate to 4.5%, supporting banks and facilitating loans. Additionally, an increase of more than 7% in government consumption helps the economy. The government has launched tax breaks for businesses, as well as cash transfers to the poorest households.
As a result, the fiscal deficit is expected to increase substantially in 2020, by more than 5%, with public debt rising to 49.5% of GDP in 2019, remaining at a manageable level. In 2021 the fiscal deficit will decrease to below 4.5% of GDP, while public debt will rise slightly before falling in the years to come.
In early 2020 manufacturers with supply chains dependent on China suffered from disruptions. Vietnam’s supply chains are closely tied to its Northern neighbor, with more than 40% of core intermediate goods used as inputs to produce Vietnamese goods coming from China (textile manufacturers even source 60% of garment imports from China).
Due to the global economic slowdown and the sharp economic deterioration in the US, China and Japan (Vietnam´s main trading partners), exports are forecast to contract 5% in 2020 robust annual growth rates in 2019 and 2018. Investments are also forecast to contract, while private consumption growth is expected to slow down to about 4% (up 7.3% in 2019).
All companies operating in Vietnam, must be registered with the Vietnamese authorities, in accordance with the Vietnam’s Companies Law. Depending on the activities of the company, additional registrations may be required; e.g. the incorporation process of each legal entity type is different and takes from 1 to 3 months.
The four most common legal entity form in Vietnam are:
Single investors can take advantage of its simple corporate structure, which requires one founder only. LLC is not permissible to issue public shares and be publicly listed on the Vietnamese stock exchange.
An LLC in Vietnam is independent of any other affiliated entity registered within Vietnam or outside Vietnam and has its own identity for tax and legal purposes.
JSC is recommended for medium and large-sized businesses as its corporate structure is complicated and requires a minimum of three founders.
This kind of a shareholding company allows its owners to issue shares and be listed on the public stock exchange.
A branch serves as an extension of its parent company. Owners of branches in Vietnam can conduct commercial activities and make a profit without incorporating a separate legal entity.
A representative office is a perfect solution for foreign entrepreneurs who want to observe the local market in Vietnam and gain market presence before expanding to the country. RO is not allowed to conduct any business activities that generate income and behave like an ordinary company.
The following documents are typically required for the incorporation of entity in Vietnam:
- Preparation & Submitting application to fill in the information about your company and shareholders.
- International investors are obliged to obtain an Investment Registration Certificate (IRC) from the Department of Planning and Investment (DPI).
- A Business Registration Certificate (BRC), often referred to as an Enterprise Registration Certificate (ERC), is the second mandatory document to be obtained during the registration procedure.
- After receiving both certificates, investors are obliged to proceed with their tax registration, pay business license tax and make their initial capital contribution.
- Company seal, a company seal is used for signing documents on behalf of your company.
- Opening corporate bank account, the bank accounts that are usually opened together with a company registration: a capital account, current account in USD, current account in VND.
- Tax registration and Social Insurance registration.
Vietnam employs a unified set of accounting and bookkeeping standards known as Vietnamese Accounting Standards (VAS). Understanding regulations related to accounting and bookkeeping are important cost considerations for investors. Investors should prepare for the future as Vietnam looks to implement IFRS – the most common accounting language globally – by 2025.
Local and foreign-invested companies doing business in the country are required by law to comply with Vietnam Accounting Standard (VAS) when recording their financial transactions. Foreign companies may choose to manage two accounting records; one based on the VAS and another compiled specifically for the overseas head office.
- All documents must be in Vietnamese language;
- The Vietnamese Dong must be used for accounting books;
- Several accounting reports must be printed on a monthly basis (as specified by relevant VAS regulations).
The above documents must be signed by the General Director of the company and affixed with the company seal prior to submission.
It is not mandatory to make employee salary payments from an in-country bank account. However,
all companies in Vietnam are required to open a bank account with a bank authorized in Vietnam in order to make their payments due to the government authorities.
The payment of the employee personal income tax (PIT) liability and social insurance contribution have to be made electronically in Vietnamese Dong to the benefit of the relevant government authority.
Most Banks opens from Monday to Friday from 08:00 to 11:30, and then again at 13:00 to 16:00. On Saturdays, banks will open only in the morning, from 08:00 to 11:30.
Saturday and Sunday are the weekly holiday when government offices, banks and most offices are closed.
Government departments are open from Monday to Friday with working hours from 7:30 AM until 4:30 PM.
The maximum working hours are forty-eight during a six-day week. Additional hours will be considered as overtime and qualify for compensation of 50% over the regular wage, excluding overtime hours worked during weekends and public holiday, which are subject to an overtime compensation of 200% and 300% of the standard wage, respectively.
In accordance with Vietnam’s Income Tax Law, Vietnamese entities are required, on an annual basis, to prepare and file the financial statements within three months following the fiscal year end.
The current corporate income tax rates in Vietnam are as follows:
Generally, all income earned in, or derived from Vietnam should be reported as taxable in Vietnam, unless specifically exempt.
Companies must file standalone financial statements and tax returns for Vietnamese tax purposes to the tax authorities. In Vietnam there are several tax authorities based on the location of the company.
Vietnamese nationals and foreign nationals employed in Vietnam are subject to personal income tax in Vietnam on their employment income earned in or derived from Vietnam, regardless of their residency status.
Tax filing and payment are due not later than the 20th of the following month (for monthly filing) or not later than the 30th day following the reporting quarter (for quarterly filing).
The following monthly personal income tax exemptions applies from 1-July-2020:
*The dependent allowance is not automatically granted, and the taxpayer needs to register qualifying dependents and provide supporting documents to the tax authority to register the dependent under the employee name.
Mandatory employee SI, HI, and UI contributions are deductible for PIT purposes. (subject to CAP).
The current personal income tax rates in Vietnam, based on the annual taxable income tax brackets, are as follows:
For payments made by Resident Taxpayers to Non-Residents for taxable activities in Vietnam, taxpayers must withhold 20% of gross payments and remit this withholding tax to the tax authorities within 30 days after the due date or payment date, whichever is earlier. This tax is final.
Social security base to calculate is minimum basic salary listed in the law effected from 1-Jan-2020:
A) Social insurance (SI), Health insurance (HI) & Trade Union (TU) has currently minimum wage of 1,490,000 capped to 20 times.
B) Unemployment insurance (UI) has currently minimum wage of 4,420,000 capped to 20 times.
C) Percentages of each SS element
The tax year is the calendar year i.e., 1 January to 31 December. Annual Tax returns must be filed in Vietnamese within three months after the end of each fiscal year. The total amount of tax due must be paid at that time (if any).
When a new employee is hired, the employer should submit to the Social Insurance (SI) portal within the same month maximum by 29-30th of the month.
The documents required to register the new hires are as follows:
- Passport (Expatriates)
- Residency card (Vietnameses)
- Contract agreement fully signed.
All leavers must be reported to the Social Insurance (SI) portal within the same month maximum
by 29-30th of the month.
Every employer who pays salaries, wages, allowances or bonuses to employees must deduct from such payments the tax due and forward it to the Tax Authorities on a monthly basis.
There are no procedures regarding the provision of online payslips. A sample standard payslip is provided below:
Vietnam’s labor regulations are governed by Labor Law No. 8 of 1996. The provisions of this law apply to all workers (Vietnamese and non-Vietnamese).
The contract of employment largely determines the terms and conditions of employment. When drafting an employment contract, an employer must comply with the requirements set out in the Labor Law, guaranteeing certain employee rights and benefits. The Labor Law includes a number of requirements to which an employer must adhere when dealing with its employees, which means that any contract or any term in any contract between both parties that contradicts the labour law is considered invalid.
Employees working in normal working conditions are entitled to a minimum of 12 days of paid annual leave, exclusive of public holidays. Employees working in heavy, hazardous or toxic working conditions are entitled to a minimum of 14 annual leave days. Employees working in extremely heavy, hazardous or toxic working conditions are entitled to a minimum of 16 annual leave days. An employee must be given one additional annual leave day for every five years of consecutive service for an employer.
A female employee is entitled to six months of maternity leave. If she gives birth to more than one child at one time, she is entitled to take an additional one month of leave for every additional child. Employees who are Vietnamese nationals are entitled to 100% of their average monthly salary on which social insurance premiums were based for the six months preceding their leave. However, the maximum salary during maternity leave has been capped at 20 times the minimum base salary selected by law. The payment for maternity leave of Vietnamese employees is covered by the social insurance fund. The payment for maternity leave of expatriate employees is subject to the agreement between the employer and the employee.
A male employee whose wife gives birth are entitled to paternity leave as follows:
If the wife gives birth to more than two children at one time, he is entitled to take an additional three days of leave for every additional child calculated from the third child onwards. The employee must be paid a pro-rated amount of the monthly allowance by the social insurance fund (applicable to Vietnamese employees only). The payment for paternity leave of expatriate employees is subject to the agreement between the employer and the employee.
Vietnamese employees are entitled to paid sick leave. The maximum number of paid sick leave days within a year, calculated according to working days and excluding public holidays and weekends, is as follows:
- For employees working under normal working conditions:
- 30 days if they have paid social insurance premiums for less than 15 years;
- 40 days if they have paid social insurance premiums for 15 years to less than 30 years;
- 60 days if they have paid social insurance premiums for 30 years or more.
- For employees working in heavy, hazardous or toxic occupations or jobs on the list promulgated by the Ministry of Labour and the Ministry of Health, or working regularly in specified regions:
- 40 days, if they have paid social insurance premiums for less than 15 years;
- 50 days if they have paid social insurance premiums for 15 years to less than 30 years;
- 70 days if they have paid social insurance premiums for 30 years or more.
Sick pay is covered by the social insurance fund, not by the employer (applicable to Vietnamese employees only). Vietnamese employees entitled to sick pay are entitled to 75% of their salary or remuneration on which social insurance premiums were based in the month preceding their leave.
All the non-Vietnam nationalities must apply for a working permit if they want to work in Vietnam;
a visa/resident card is also required for foreign nationals entering Vietnam to work.
An invitation letter is needed by a Vietnamese sponsor (Vietnam-based entity) inviting the foreign employee for working purposes in Vietnam.
In general, the following information/paperwork must be filed with the Immigration Office:
- Visa application (in standard form).
- Copy of passport, which must have at least six months of validity remaining, and photos of the foreign national.
- Copies of documents certifying the legal status of the Vietnamese sponsor.
Visas cannot be renewed once expired, only new visas can be applied for if needed and requires the employee to physically leave the country in order to obtain a new visa.
The cost for a visa to work in Vietnam depends on the type and term of the visa. Mainly it ranges from USD25 to USD155.
The timeframe of obtaining a working visa to Vietnam varies depending on the type of work visa, it ranges from 6 to 12 working days.
Permits usually costs between VND400,000 to VND600,000, depending on the province/city. And the maximum term of work permits for foreign employees is two years.
The employer applies for the work permit through the submission of an application file to the local labour authority. The application file must include the following:
- A written request for a work permit in the prescribed form.
- A health certificates.
- A clean criminal record.
- Documents certifying that the foreign employee qualifies as a manager, executive expert or technician under Vietnamese law (for example, a transcript of academic records).
- Two colour photos of the employee.
- A copy of the employee’s passport.
- Other documents related to the employee on a case-by-case basis.
- Approval for employment of foreign workers issued by the chairman of the provincial People’s Committee.
The application file for a work permit must be submitted by the employer to the local labour authority at least 15 business days prior to the working date of the foreign employee in Vietnam. The labour authority must issue the work permit within 7 to 14 business days on receipt of a complete application file.
Employers must submit an explanation on the use of foreign employees to the provincial labour authority for approval at least 30 days before the proposed date of using the foreign employees,
Employers must send a copy of the signed contract to the labour authority which issues the work permit Within five working days from the date of signing of the labour contract.
The employer must make quarterly reports declaring the use of expatriate employees to the labour authority.
From 1 January 2021, contractors recruiting and employing expatriate employees for projects in Vietnam will be required to declare in detail the job positions, professional requirements and working time of the expatriate employees and obtain written approval from the relevant state agency concerning such recruitment and employment.
Vietnam PEO/GEO Services
React quickly to the market demands and deploy staff anywhere in the world in just days: this is Mercans’ global employee outsourcing and employee leasing services. Mercans PEO/GEO and employee leasing services in Vietnam provide you agility, increase your competitiveness and are easy to implement. There is no need for you to worry about setting up a local company, recruiting and payrolling staff. Enjoy the security of Mercans’ guaranteed compliance with the regulations in Vietnam. Mobilize any number of resources quickly— and focus on building your business while we take care of the rest.
Vietnam Talent Acquisition & Recruitment
Get access to a large pool of global and local talent in Vietnam, reduce time-to-hire, and improve hire quality all in one. Our Mesaar recruitment suite uses innovative matching and psychometric assessment tools to identify the best candidates for your business at record speed. Our consultants have extensive experience placing candidates across industries and organizational levels, and we have led executive searches and outsourcing mobilization projects for large multinationals involving thousands of candidates in Vietnam and other parts of the world.
Vietnam HR Advisory
Tap into the experience of our seasoned HR advisory team in Vietnam. Their expertise ranges from HR policies and procedures, salary benchmark studies, and HR due diligence to sophisticated HR transformation projects. Get a speedy and precise needs analysis, and have us design, implement, and monitor the execution of any project—carried out by subject-matter experts who understand your needs, and who know what it takes for your business to stay ahead of the competition.
Vietnam BPO Services
Make your business thrive and concentrate on the essentials and let Mercans’ business process outsourcing services minimize your administrative and overhead costs. Fully outsource your back-office functions to a team of HR, finance, accounting, immigration, and administration specialists. Our BPO team will take care of it all while you have the time and freedom you need to nurture your business.
Download PDF: Vietnam Payroll & HR Country Guide 2020