Employer of Record (EOR) Vietnam
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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.
The Employer of Record (EOR) is accountable for:
- Ensuring adherence to the country’s employment laws.
- Managing the local payroll process.
- Handling the filing of employment-related taxes and necessary paperwork.
- Providing employees with payslips.
- Distributing salary payments to employees.
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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.
- Full-Time Employment Contract: This is the conventional form where an employee works a standard number of hours per week and enjoys the benefits entitled to full-time employees.
- Part-Time Employment Contract: Part-time contracts are suitable for individuals working fewer hours than full-time employees. These arrangements offer flexibility for both employers and employees.
- Fixed-Term Contract: A fixed-term contract specifies a predetermined period for employment. This type of contract is often used for project-based work or when the employer anticipates a temporary need for additional workforce.
- Seasonal or Temporary Employment Contract: Designed for specific seasons or temporary demands, these contracts are applicable when additional labor is required for a defined period.
- Personal Information: Details of both the employer and the employee.
- Job Description: Clearly outlines the duties and responsibilities of the employee.
- Working Hours: Specifies the standard working hours per day or week.
- Salary and Benefits: Clearly states the agreed-upon salary, benefits, and any allowances.
- Duration of Contract: Explicitly mentions whether the contract is indefinite or for a fixed term.
- Probation Period: If applicable, the contract may specify a probationary period for the employee.
- Termination Conditions: Outlines conditions under which either party can terminate the contract.
- 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
Factor | Employee | Independent Contractor |
---|---|---|
Instructions | Follows employer's instructions on work details. | Exercises a higher degree of independence. |
Training | Typically receives training from the employer. | Minimal training, relies on own expertise. |
Integration | Services are integrated into business operations. | Works independently with less integration. |
Services Rendered Personally | Must render services personally. | Emphasizes result rather than the method. |
Hiring, Supervising, and Paying Assistants | Employer handles hiring, supervising, and payment of assistants. | Responsible for hiring, supervising, and paying assistants. |
Continuing Relationship | Maintains a continuous relationship with the employer. | May work with multiple clients simultaneously. |
Set Hours of Work | Bound by employer-established work hours. | Not bound by set hours, offers flexibility. |
Full-Time Required | Must dedicate full-time to the employer. | Has the freedom to work for multiple clients. |
Doing Work on Employer's Premises | Works on the employer's premises. | Works off-site, demonstrating autonomy. |
Order or Sequence Set | Employer sets the order or sequence of tasks. | Determines the order or sequence independently. |
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: Applicable to Vietnamese and foreign employees under labor contracts with definite terms exceeding one month or indefinite terms.
- Health Insurance: Mandatory for Vietnamese and foreign employees under labor contracts with definite terms exceeding three months or indefinite terms.
- Unemployment Insurance: Compulsory for Vietnamese employees under labor contracts with definite terms exceeding three months or indefinite terms.
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).
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.
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.
- Region I: VND 4,680,000
- Region II: VND 4,160,000
- Region III: VND 3,640,000
- Region IV: VND 3,250,000
Payroll in Vietnam
Payroll Essentials for Vietnam
To run payroll in Vietnam, businesses must adhere to a variety of legal and regulatory requirements to ensure compliance with local labor laws, tax regulations, and social security obligations. Employers need to be familiar with specific guidelines around employee classification, minimum wage, statutory benefits, and reporting obligations. Additionally, compliance with the Vietnamese Social Insurance Law and personal income tax (PIT) regulations is essential for maintaining smooth payroll operations. Understanding these key requirements is critical for businesses looking to effectively manage payroll in Vietnam and avoid potential legal penalties.
Government requirements
Ongoing compliance requirements
Employment Obligations
Employers must comply with various labor regulations, including:
Employment Contracts
Written contracts must be provided to all employees, outlining terms of employment and key conditions.
Minimum Wage Compliance
Employees must be paid at least the regional minimum wage, which is set annually by the government and varies by location.
Working Hours and Overtime
Normal working hours should not exceed 48 hours per week, with compensation for overtime.
Employee Benefits
Statutory benefits must be provided, including social insurance, health insurance, and paid leave.
Failure to meet these obligations can lead to legal disputes and penalties, so maintaining detailed records of employment contracts and compliance is crucial.
Increase in Retirement Age
Reforms in Vietnam have gradually increased the retirement age for employees to ensure sustainability within the social insurance system. The retirement age is increasing incrementally, reaching 62 for men by 2028 and 60 for women by 2035. As of 2024, the retirement age stands at 61 years and 3 months for men and 59 years and 3 months for women. Employers must consider these changes when calculating pension contributions and planning for retirements.
Banking Requirements Related to Payroll
Vietnamese labor laws mandate that employee salaries be paid through bank transfers to registered accounts. Employers must ensure the accuracy of employees’ bank details and timely salary payments, typically conducted in Vietnamese Dong (VND). To streamline payroll management, many employers establish direct deposit arrangements with local banks. Moreover, detailed pay slips outlining salary breakdowns, tax deductions, and social insurance contributions must be provided to employees.
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 | 2022 Monthly Minimum Wage | Hike | 2020 Monthly Minimum Wage |
---|---|---|---|
I | VND 4,680,000 (US$202) | VND 260,000 | VND 4,420,000 (US$190) |
II | VND 4,160,000 (US$179) | VND 240,000 | VND 3,920,000 (US$169) |
III | VND 3,640,000 (US$157) | VND 210,000 | VND 3,430,000 (US$148) |
IV | VND 3,250,000 (US$140) | VND 180,000 | VND 3,070,000 (US$132) |
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:
- Region I: VND 22,500 (US$0.97)
- Region II: VND 20,000 (US$0.86)
- Region III: VND 17,500 (US$0.75)
- Region IV: VND 15,600 (US$0.67)
How are Minimum Wage Rates Applied?
The application of minimum wage rates is crucial in employment contracts. Key considerations include:
- Branches or Affiliates: If a company has branches in different subregions, the region-based minimum wage applies to all employees.
- Industrial Parks or Export Processing Zones: For entities spanning multiple regions, the highest minimum wage rate is applicable.
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:
- Vietnamese employees must receive compensation in Vietnamese Dong.
- Foreign employers may base salaries in Dong or US Dollars, with conversions for mandatory contributions.
Overtime Pay
Overtime Compensation
- Overtime hours are limited to 40 per month under the labor code.
- Overtime beyond 200 hours requires employee consent, and up to 300 hours if agreed upon.
- Special provisions apply to pregnant women and minor employees.
Overtime Type | Compensation Rate |
---|---|
Weekday, day time | 150% |
Weekend, day time | 200% |
Public holiday, paid leave days | 300% |
Weekday, night time | 30% extra, above aforementioned rates |
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:
Vietnam Employee Hiring Cost | |
---|---|
Gross Annual Salary | VND 9,999.96 |
Total Annual Employer Costs | VND 2,349.96 |
Unemployment Insurance | VND 99.96 |
Social Insurance | VND 1,700.04 |
Health Insurance | VND 300.00 |
Accident Insurance | VND 50.04 |
Control Union Fee | VND 200.04 |
Total Annual Cost | VND 12,349.92 |
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
- Employees in Vietnam are typically entitled to annual leave based on their length of service with a company.
- The duration of annual leave varies, with longer service resulting in more days off.
- Employers must plan and schedule annual leave in coordination with employees.
Maternity Leave
- Female employees in Vietnam are entitled to maternity leave as part of their reproductive rights.
- The duration of maternity leave is specified by law, providing mothers with the necessary time for childbirth and postnatal recovery.
- Employers are generally required to continue paying part of the employee’s salary during maternity leave.
Paternity Leave
- Paternity leave, while not as extensively regulated as maternity leave, is recognized in Vietnam.
- Fathers may be entitled to a short period of paternity leave to support their partner during childbirth and early childcare.
Sick Leave
- Employees facing illness or injury are eligible for sick leave in Vietnam.
- The duration of sick leave may vary depending on the severity of the illness or injury.
- Employers may require a medical certificate for extended sick leave periods.
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
Employees in Vietnam enjoy 11 paid holiday days in 2023, including:
- International New Year’s Day
- Tet holiday
- Hung Kings Festival
- Liberation Day/Reunification Day
- International Labor Day
- Independence Day
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.
Tax Bracket | Monthly Taxable Income (million VND) | Monthly Taxable Income (US$) | Tax Rate |
---|---|---|---|
1 | Up to 5 | Up to 215 | 5% |
2 | Over 5 to 10 | Over 215 to 430 | 10% |
3 | Over 10 to 18 | Over 430 to 774 | 15% |
4 | Over 18 to 32 | Over 774 to 1,377 | 20% |
5 | Over 32 to 52 | Over 1,377 to 2,237 | 25% |
6 | Over 52 to 80 | Over 2,237 to 3,442 | 30% |
7 | Over 80 | Over 3,442 | 35% |
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.
- #1: DevOps Engineer
- #2: Data Scientist/Data Analyst
- #3: IT Project Manager
- #4: Full-stack Web Developer
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
Best Employer of Record in Vietnam
Conclusion
Embark on a confident entry into the Vietnamese market with Mercans’ efficient Employer of Record (EOR) solution, ensuring strict compliance with the nation’s labor regulations. Seamlessly navigate the intricacies of business expansion, fostering a successful global footprint. Count on Mercans’ local experts in Vietnam for comprehensive guidance on every aspect of expanding your business in the country.