Employer of Record (EOR) Vietnam

An Employer of Record takes on the role of the legal employer for workers in Vietnam. Also known as a Global Professional Employer Organization (Global PEO), this function involves overseeing various aspects of employment. Responsibilities include ensuring compliance with local labor laws, managing tasks such as payroll, taxes, benefits mandated by law, and the creation of employment agreements.

Simplify your global expansion with our Global PEO services – a hassle-free solution without entity setup. Our Employer of Record (EOR) in Vietnam ensures legal presence, compliance, and IP protection, enabling your business to concentrate on its core. Facilitate seamless global mobility and work visas while building a diverse and efficient global workforce. Partner with Mercans, your Employer of Record in Vietnam, for a compliant and efficient employment experience for your global workforce.

Employment Contracts in Vietnam

In Vietnam, employment contracts play a crucial role in defining the terms of engagement between employers and employees, outlining key aspects such as wages, working conditions, and the rights and obligations of each party in labor relations. These contracts, as per the Labor Code No. 45/2019/QH14, are legally mandated and must be presented to employees before formal hiring, with specific information such as employer details, employee particulars, job details, duration, wages, and other essential elements.

Types of Employment in Vietnam

In Vietnam, employment arrangements can take various forms to cater to different work scenarios. These types primarily include full-time employment, part-time employment, fixed-term contracts, and seasonal or temporary employment. The nature of employment is often determined by factors such as the duration of work, specific job requirements, and the mutual agreement between employers and employees.

Definition of Employment Contract According to Vietnam Labor Law

Vietnam’s labor laws govern the employment relationship, and an employment contract is a fundamental element in defining the terms and conditions of employment. According to Vietnamese labor law, an employment contract is a legally binding agreement between an employer and an employee, outlining the rights, responsibilities, and obligations of both parties during the course of employment.

Forms of Contract

The employment contracts in Vietnam can take various forms, each serving distinct purposes:

Contents of Employment Contract in Vietnam

The employment contract in Vietnam typically includes key components:

Classification and Transformation of Employment Contract

Employment contracts in Vietnam can be classified based on factors such as the duration of work, the nature of the job, and specific industry requirements. Additionally, the transformation of a contract, for example, from a fixed-term to an indefinite-term contract, may be subject to legal considerations and mutual agreement between the employer and the employee.

• Working Hours: Normal working hours in Vietnam are capped at 8 hours per day or 48 hours per week, with employers having the flexibility to set daily or weekly working hours, not exceeding 10 hours per day or 48 hours per week on a weekly basis, while the state promotes a 40-hour workweek, and employers are required to limit exposure to harmful elements as per National Technical Regulations and laws.
• Probation Period: In Vietnam, the probation period for positions requiring professional and technical qualifications of intermediate vocational level, professional secondary level, or for technical workers and skilled employees does not exceed 30 days. For other types of jobs, the probation period is limited to 6 working days.
• 13th Month Salary: In Vietnam, bonuses are typically granted to employees as a reward for their contributions and to boost overall company morale and performance. An annual bonus, commonly referred to as the 13th-month salary, is commonly provided to employees who have completed at least one year of service. For those with less than a year of tenure, a prorated bonus is usually given. Another notable bonus is the “Lunar New Year” bonus, which is often distributed before the Lunar New Year holiday. The amount of this bonus is contingent on both company and individual achievements, varying from a fraction of a month’s salary to an entire year’s salary based on company performance and objectives.
• Termination and Severance Pay: In Vietnam, a labor contract can end by law if the employee dies, goes missing, loses civil capacity, reaches retirement age, is sentenced to prison, or if the company shuts down. Mutual agreement between the employer and employee can also terminate the contract, often a preferable option due to strong employee protection under Vietnamese labor law, potentially involving severance payment.

When an amicable agreement is challenging, the employer can resort to unilateral termination or dismissal. Unilateral termination is allowed in specific instances, such as failure to perform job duties, prolonged absence due to sickness, company downsizing, approved leave, or structural/technological changes. Pregnant employees, those on maternity leave, annual leave, or those under certain conditions, cannot be terminated unilaterally.

Prior notice is required for unilateral termination, varying from 45 days for an indefinite contract to three days for a seasonal one. Severance payment, applicable to employees with over 12 months of service, is calculated at half a month’s salary for each year worked. If terminated under specific grounds, a full month’s salary per year is mandated, with a minimum of two months’ salary, payable within seven days of termination.

Dismissal is an immediate contract termination without severance payment or notice. Grounds for dismissal include serious offenses like theft or violence, prolonged and unexplained absence, or the recurrence of criminal activities for previously convicted employees.

Employees vs Independent Contractors Classification

Social Security in Vietnam

Social Insurance in Vietnam: An In-Depth Overview

Mandatory social insurance contributions are a crucial aspect of employment in Vietnam, applicable to both Vietnamese and foreign employees. This overview delves into the types of mandatory social security, rates, calculation methods, and coverage.

Types of Mandatory Social Security

Social Insurance Rates

Both Vietnamese and foreign employees share the same insurance rates. Employees contribute 8%, while employers contribute 17.5% to the social insurance fund.

Mandatory Contributions for Foreign Employees

Social insurance became mandatory for all foreign workers starting December 1, 2018, under Decree 143/2019/ND-CP. Employers handle the monthly registration and contributions on behalf of their foreign employees at the provincial Department of Labor, Invalids and Social Affairs (DoLISA).

Calculating Social Insurance Contributions

Contributions are based on employees’ monthly salary or wage, subject to a wage ceiling of 20 times the common minimum wage for social and health insurance. The minimum salary for social insurance contributions is determined by regional minimum wages, varying across administrative regions.

Regions and Minimum Salaries (since July 1st, 2022)

Claiming Social Insurance Benefits

Foreign workers can claim a one-time payment upon the expiration of their employment in Vietnam based on specific conditions such as reaching retirement age, suffering from fatal diseases, satisfying pension conditions, or termination of employment contract or work permit expiration without renewal.

Coverage and Benefits

Social insurance encompasses a range of employee benefits, including sick leave, maternity leave, allowances for work-related accidents and occupational diseases, pension allowance, and mortality allowance. Health insurance provides coverage for medical examinations and treatments, while unemployment insurance offers monthly allowances based on the contribution period.

For a comprehensive understanding of Vietnam’s social insurance system, consult our individual income tax guide in Vietnam and explore the intricacies of unemployment insurance, which replaces severance pay.

Payroll in Vietnam

Minimum Wages

Vietnam’s burgeoning economy, coupled with its strategic location as a “China plus one” destination, has made it a magnet for foreign investors. As businesses expand, understanding the intricacies of minimum wages becomes pivotal. Amid Vietnam’s economic growth, wage increases are inevitable, prompting companies to strategize for the impact on HR costs and operational capacity.

What are the Minimum Wage Rates in Vietnam?

Vietnam has two categories of minimum wages:

• Common Minimum Wage: Set at VND 1,800,000 (US$76.6), used for state-owned organizations, enterprises, and social contributions for all entities.
• Regional Minimum Wage: Applicable to non-state enterprises, varying by government-defined zones. The 2023 rates are as follows:

Region I covers urban Hanoi and Ho Chi Minh City, and so forth for other regions.

Additionally, minimum hourly wage rates are specified for each region:

How are Minimum Wage Rates Applied?

The application of minimum wage rates is crucial in employment contracts. Key considerations include:

Salary Components and Considerations

In Vietnam, an employee’s monthly salary package includes gross salary, mandatory insurance contributions, and potential components like overtime pay, allowances, bonuses, and other benefits. Notably:

Overtime Pay

Overtime Compensation

Payroll Cycle

The payroll cycle in Vietnam follows a monthly schedule for full-time employees, with salaries disbursed on the last working day or as specified in the employment contract. Part-time employees, independent contractors, and freelancers receive their salaries according to the terms outlined in their respective employment contracts

Vietnam Employee Hiring Cost

Let’s consider a hypothetical example of employing an individual in Vietnam with the following cost breakdown:

In this scenario, the employee’s gross annual salary is VND 9,999.96. The employer incurs additional costs, bringing the total annual employer costs to VND 2,349.96. These costs encompass various components such as unemployment insurance (VND 99.96), social insurance (VND 1,700.04), health insurance (VND 300.00), accident insurance (VND 50.04), and a control union fee (VND 200.04). Consequently, the overall annual expenditure for employing this individual amounts to VND 12,349.92.

This breakdown illustrates the comprehensive nature of employer costs associated with hiring an employee in Vietnam, encompassing various insurance components and additional fees.

Employee Benefits in Vietnam

In Vietnam, employees are entitled to various types of leave, each serving specific purposes. Here’s a breakdown of key leave categories:

Annual Leave

Maternity Leave

Paternity Leave

Sick Leave

It’s important to note that specific regulations and entitlements may vary, and it is advisable for both employers and employees to refer to the latest labor laws and regulations in Vietnam for accurate and up-to-date information on leave policies

Public Holidays in Vietnam

Foreign staff working remotely in Vietnam are entitled to two holidays, including their traditional national public celebration and Vietnam’s National Day.

If a public holiday falls on an employee’s scheduled day off, they receive an additional rest day. Those working during holidays receive increased compensation.

Personal Income Tax in Vietnam

In Vietnam, a tax resident is an individual residing in the country for 183 days or more within a calendar year or a continuous 12-month period, and they are subjected to Personal Income Tax (PIT) on their worldwide employment income at progressive rates from 5% to a maximum of 35%. Non-resident taxpayers, however, face a flat rate of 20% on their income sourced from Vietnam. The scope of taxable income includes various categories like business activities, wages, capital investment, property and capital transfers, prizes, royalties, commercial franchising, inheritances, and gifts. Recent regulations, as per Circular 59/2015/TT-BLDTBXH, have broadened the allowances used to compute employee wages. In the case of taxable income received in foreign currency, it must be converted to Vietnamese dong at the average trading exchange rate on the inter-bank foreign currency market published by the State Bank of Vietnam as of the income accrual date. The PIT rates for resident taxpayers are progressive, featuring seven brackets based on monthly taxable income, ranging from 5% for incomes up to 5 million VND to 35% for incomes exceeding 80 million VND.

Top Skills in Demand in Vietnam

In Vietnam’s dynamic tech landscape, individuals seeking a career in the industry should align their choices with personal interests, skills, and aspirations. Here are five high-demand tech jobs, along with the requisite skills and qualifications sought by employers in tech companies and other sectors requiring tech expertise.

Work Permit in Vietnam

Foreign nationals aiming for legal employment in Vietnam must secure both a Vietnam Work Visa and a Work Permit. The eligibility criteria for a Vietnam Work Visa include being at least 18 years old, holding a managerial, executive, or expert position, maintaining good health, having no criminal charges, possessing required qualifications, having a minimum of 3 years of executive-level experience, and having a work contract with a Vietnamese company. Work Permit exemptions apply to those with employment shorter than three months, specific company members, internal transferees, and others designated by the Ministry of Labor. The employer, submitting the Work Permit application, must provide necessary documents, including the Vietnam Work Permit application form, Work Contract, approval from the Committee, and Business Registration Certificate. Notarized and legalized documents from the employee’s country are mandatory, translated into Vietnamese. The employee can apply for a Vietnam Work Visa at an Embassy/Consulate or opt for Visa on Arrival, with the employer sponsoring the application and providing a Letter of Sponsorship or Entry Clearance. Required documents include a valid passport, recent passport-size photos, and additional documents as specified by the Embassy/Consulate.

EOR Solutions in Vietnam

• EOR for Prospective Employees: Mercans offers seamless Employer of Record (EOR) solutions for businesses that have already identified their ideal candidates in Vietnam. Our services encompass every aspect of the employee lifecycle, ensuring compliance with Vietnam labor laws and regulations.
• EOR + Recruitment: For those seeking assistance in talent acquisition, our EOR and recruitment services provide a holistic solution. We tap into our extensive network and expertise to help you find, onboard, and retain top talent, streamlining your expansion into the Vietnam market.
• Visa Sponsorship and Global Mobility: Navigating the intricacies of expatriate employment is simplified through our visa sponsorship and global mobility services. We facilitate the relocation of your international workforce, ensuring compliance with Vietnam immigration and employment laws.
• AOR for Contractor Payments: Businesses grappling with contractor payments can leverage our Assistance on Record (AOR) services. We handle the complexities of contractor payments, guaranteeing accuracy and compliance.
• Converting Freelancers to Employees: Mercans supports the transition from independent contractors to permanent employees in Vietnam. Our expertise ensures smooth conversions while adhering to legal requirements.
• HCM Integration: Integrate Mercans’ EOR services seamlessly with your HCM system in Vietnam for real-time data exchange, enhanced compliance, and cost-efficiency. Trust our expertise for a unified, compliant, and efficient approach, elevating your workforce management and payroll operations.