Payroll in Vietnam

Mercans is your trusted partner for premium payroll services in Vietnam. Our dedication to providing outstanding Payroll outsourcing in Vietnam solutions is steadfast. With extensive experience in the payroll sector, Mercans guarantees precise and compliant Payroll services in Vietnam, establishing us as the preferred option for businesses of every scale. Rely on Mercans for punctual and accurate payroll processing, including the convenience of multi-currency transactions within the Vietnamese market. As your dedicated local payroll provider in Vietnam, we feature a team of in-country payroll experts with thorough understanding of local regulations, delivering comprehensive assistance for a seamless payroll process tailored to your business requirements.

Everything you need to know before running payroll in Vietnam

Working Hours and Overtime

On Saturdays and Sundays, government offices, banks, and most workplaces observe their weekly holidays, remaining closed.

Government departments operate from Monday to Friday, with working hours from 7:30 AM to 4:30 PM.

Employees are typically required to work a maximum of forty-eight hours per week across six days. Any additional hours beyond this threshold are considered overtime and are eligible for compensation at a rate of 50% above the regular wage. However, overtime hours worked during weekends and public holidays are subject to higher compensation rates, set at 200% and 300% of the standard wage, respectively.

Minimum Wages

Vietnam’s commitment to ensuring fair wages for its workforce is reflected in the recent adjustments to the minimum wage, slated to take effect from July 2024. These revisions signify the government’s efforts to address economic dynamics, cost of living changes, and industry standards, aiming to provide equitable compensation to workers across various regions. Let’s delve into the details of these updates and their implications for employees and businesses alike.

This table illustrates the recent adjustments to Vietnam’s minimum wage, effective July 2024.

13th Month Salary

In Vietnam, both local and foreign companies commonly provide a 13th month’s salary, often referred to as an “annual bonus,” to employees who have completed at least one year of service with the company. Employees with less than a year of tenure usually receive a prorated bonus based on their actual employment duration.

Payroll Cycle

In Vietnam, the typical payroll cycle is monthly, with salaries typically disbursed on the final working day or as stipulated in the employment agreement.

Company Formation in Vietnam

Establishing a company in Vietnam, despite being an attractive investment destination, entails navigating a complex legal process. In this section, we outline the procedures for companies aiming to commence operations in the country and stress the importance of seeking professional assistance to navigate these steps and comply with applicable laws and regulations.

The process of registering and setting up a Foreign-Invested Enterprise (FIE) in Vietnam typically spans 3 to 4 months. Alternatively, setting up a Representative Office can be accomplished in half that time, albeit with more limited operational activities.

Outlined below are the four main stages involved in setting up an LLC/FIE:

• Pre-Investment Approval: In rare cases, investors may need approval from Vietnamese authorities before initiating establishment procedures. Understanding whether such approval is necessary and preparing the requisite documentation accordingly is crucial.
• Investment Registration Certificate (IRC) Application: The initial step involves applying for an IRC, establishing the foreign enterprise’s right to invest in Vietnam. This process entails the submission of various documents and typically takes 15 days, though exceptions may apply.
• Enterprise Registration Certificate (ERC) Application: Upon obtaining the IRC, companies must apply for an ERC to establish new entities within Vietnam. This step, which includes submitting essential documents, is typically completed within three days.
• Post-Licensing Procedures: Following the issuance of the IRC and ERC, additional steps are required to finalize the procedure and commence business operations. These steps include seal carving, bank account opening, labor registration, business license tax payment, charter capital contribution, and public announcement of company establishment.

While Vietnam generally does not impose minimum capital requirements for most sectors, it is essential to verify whether specific industry sectors necessitate minimum capital investment. Sectors such as finance, banking, insurance, fin-tech, language centers or vocational schools, and medical clinics often have such requirements. Therefore, it is crucial to understand and adhere to these regulations when establishing a business in Vietnam.

Payroll Compliance in Vietnam

In Vietnam, employers are obligated to submit the following statutory filings. Mercans assists you in completing the necessary filings as per the Vietnamese local laws.

Statutory Filings and Contributions

Registration Requirements

Tax Department

Entities and individuals with income subject to personal income tax (PIT) must register for a tax code with the Tax Department. Income-paying entities need to obtain a tax code within 10 working days from receiving their business registration certificate. This tax code is used for declaring and paying various taxes, including Corporate Income Tax, Value Added Tax, and PIT. Individuals subject to direct tax filings must register their individual tax code within 10 working days from when their tax obligations arise.

Social Insurance Department

Vietnam mandates three types of social security: Social Insurance (SI), Health Insurance (HI), and Unemployment Insurance (UI), collectively referred to as “SHUI.” Employers must register a Social Insurance code with their local Social Insurance Department. When hiring new employees, companies need to register them with the Social Insurance Department, obtain a Health Insurance card, and issue a new Social Insurance book if required. Upon termination of employment, companies are required to deregister employees with the Social Insurance Department and close their Social Insurance books.

Ongoing Compliance Requirements

• Employer’s Tax Filing and Payment: PIT must be filed and paid monthly or quarterly, with the employer responsible for withholding tax from employee income and remitting it to the state budget. Monthly or quarterly PIT payments must be reconciled annually. The deadline for monthly filing and payment is the 20th day of the following month, while for quarterly filing and payment, it’s the last day of the first month of the following quarter.
• Employer’s Annual Reporting and Finalization: Income-paying entities must submit an annual finalization return summarizing taxable income paid and PIT withheld during the calendar year. They are also responsible for finalizing tax on behalf of employees upon receiving their authorization letter. The annual tax filing and payment deadline is the last day of the third month from the calendar year-end.
• Monthly Filing and Payment of SHUI: SHUI filing and payment to the Social Insurance Department are required monthly and must be completed by the end of the relevant month. Employers must also submit documents relating to social insurance benefit claims on behalf of their employees when necessary.
• Pension Requirements: Vietnam’s pension scheme falls under the retirement and death gratuity fund of the SI scheme.

Payroll Taxes in Vietnam

Social Security in Vietnam

Minimum Salary Base and Caps

Effective from January 1, 2020, the minimum basic salary as stipulated by law serves as the social security base for calculation. The minimum wage for Social Insurance (SI), Health Insurance (HI), and Trade Union (TU) is currently set at 1,490,000, capped at 20 times the minimum wage. Unemployment Insurance (UI) has a minimum wage of 4,420,000, also capped at 20 times.

Percentage Rates for Each SSC Element

Below is a breakdown of the percentages for each social security category:

These percentages apply to the respective social security categories based on the minimum salary and salary cap specified by the labor law.

Personal Income Taxes in Vietnam

Resident taxpayers in Vietnam are liable for Personal Income Tax (PIT) on their global employment earnings, regardless of where the income is sourced or received. The tax rates are progressive, ranging from five percent to a maximum of 35 percent. Employment income encompasses various forms of compensation, including salaries, wages, allowances, bonuses, and benefits earned from participation in business entities or organizational boards.

Personal Income Tax Rates

Below are the tax brackets and corresponding rates for monthly taxable income in Vietnam:

Non-Resident Taxpayers

Non-resident taxpayers are subject to a flat Personal Income Tax rate of 20 percent on their income sourced from Vietnam.

Tax-Exempt Incomes

Certain types of income are exempt from taxation in Vietnam, including:

• Real estate transfers between family members
• Transfer of residential houses by individuals owning only one property
• Inheritances or gifts within the family
• Interest earned from bank deposits or life insurance contracts
• Overseas remittances, retirement payments, and scholarships
• Compensation from insurance or charity funds
• Income from agricultural activities and land use rights
• Wages for night shift or overtime work
• Incomes from approved foreign aid for charitable purposes

Employee Benefits in Vietnam

Attracting top talent in Vietnam’s IT industry requires more than just a competitive salary. Crafting the right package of employee benefits is crucial for businesses entering this market. Whether setting up remote teams or full-scale production facilities, understanding the landscape of employee benefits is essential. Here’s our comprehensive guide to navigating employee benefits in Vietnam’s IT sector.

• Competing for Talent
  • In Vietnam’s competitive IT labor market, offering attractive employee benefits is crucial for talent acquisition and retention.
  • Surveys indicate dissatisfaction with current benefits among developers, highlighting the need for more compelling offerings.
• Traditional vs. Evolving Benefits
  • Traditional benefits in Vietnam’s IT sector include fixed monthly salaries and Lunar New Year bonuses.
  • As competition increases, employees are seeking more comprehensive benefits like flexible work arrangements, additional leave days, and health insurance.
  • Companies are investing in team-building activities, career development programs, and premium office environments to attract talent.
• Tailoring Benefits to Your Company
  • Some benefits, like flexible work arrangements, are easy to implement, while others, such as team-building exercises and career development initiatives, require strategic planning.
  • Aligning benefits with company culture and business objectives can strengthen the employer brand and attract top talent.
• Employee Perspectives
  • Employees value competitive salaries, consistent bonuses, work-life balance, and opportunities for career advancement.
  • A supportive work environment, convenient office location, and clear opportunities for additional bonuses are also highly appreciated.
  • Addressing these aspects can enhance the employee value proposition and strengthen talent acquisition and retention strategies.

Leave Benefits in Vietnam

Labor regulations in Vietnam are governed by Labor Law No. 8 of 1996, which applies to all workers, regardless of nationality.

The terms and conditions of employment are primarily determined by the employment contract. When drafting such a contract, employers must adhere to the requirements outlined in the Labor Law, ensuring the protection of employee rights and entitlements. Any provision in a contract that contradicts the Labor Law is considered invalid.

Annual Leave

Employees in standard working conditions are entitled to a minimum of 12 days of paid annual leave, excluding public holidays. Those in heavy, hazardous, or toxic working conditions receive a minimum of 14 days, while those in extremely adverse conditions are entitled to 16 days. Additionally, employees earn one extra leave day for every five years of continuous service.

Maternity Leave

Female employees are granted six months of maternity leave, with additional leave provided for multiple births. Vietnamese nationals receive 100% of their average monthly salary for the preceding six months, capped at 20 times the minimum base salary mandated by law. Payment for maternity leave is covered by the social insurance fund for Vietnamese employees, with terms negotiated for expatriate employees.

Paternity Leave

Male employees whose wives give birth are entitled to paternity leave, ranging from 5 to 14 days based on childbirth circumstances. Additional leave is granted for multiple births. Vietnamese employees receive a pro-rated allowance from the social insurance fund, while terms for expatriate employees are negotiated.

Sick Leave

Vietnamese employees are entitled to paid sick leave, with the number of days determined by years of social insurance premium payments and working conditions. Sick pay is covered by the social insurance fund, providing 75% of the employee’s salary or remuneration from the previous month.

Benefits of Payroll Outsourcing in Vietnam

• Guaranteeing Compliance with Intricate Regulations: Through the outsourcing of payroll services in Vietnam, meticulous adherence to complex labor laws and regulations is assured. Our skilled professionals adeptly navigate these intricacies, mitigating the risk of errors or penalties stemming from non-compliance, providing businesses with peace of mind.
• Unmatched Scalability and Adaptability: Payroll outsourcing offers unparalleled scalability and adaptability to meet the evolving needs of businesses in Vietnam. Whether scaling up the workforce or adjusting to changes in employment regulations, outsourcing providers seamlessly tailor their services to meet these requirements.
• Access to Cutting-Edge Technologies and Expertise: By harnessing state-of-the-art software solutions, outsourcing providers streamline processes, enhance data security, and boost efficiency in payroll management in Vietnam. Moreover, our professionals possess extensive knowledge of tax regulations, deductions, and reporting requirements, ensuring precise and timely processing.
• Cost-Efficiency and Competitive Pricing: Outsourcing payroll leads to significant cost savings by eliminating the necessity to recruit and train in-house staff. Furthermore, providers often offer competitive pricing models customized to the specific needs of businesses, optimizing cost-effectiveness while upholding quality service.
• Fostering Business Expansion: Overall, outsourcing payroll services in Vietnam empowers businesses to concentrate on core objectives while benefiting from accurate, compliant, and cost-effective management. With specialized expertise, advanced technologies, and scalability, providers play a pivotal role in supporting the growth and prosperity of businesses.
• Emphasizing Rigorous Safety Standards: Incorporating industry-leading security measures to protect sensitive data, along with ISO 27001 and ISAE3402 certifications, ensures strict adherence to information security protocols.
• Ensuring Consistent and Sustainable Performance: Our commitment extends to ensuring unwavering and sustainable performance that aligns with the dynamic demands of payroll services in Vietnam.
• Tailored Flexibility and Scalability: We provide tailored flexibility and scalability to accommodate evolving client needs and adjust to shifting business landscapes in Vietnam.
• Leveraging Collaborative Cloud Tools: Our collaborative Cloud-based platform promotes efficiency and accessibility across teams, facilitating seamless collaboration and communication. These certifications underscore our dedication to the highest standards of information security and operational integrity.

Payroll Solutions in Vietnam

Streamline Payroll Processing in Portugal with Mercans’ Global Solutions. Our adaptable models ensure local compliance, facilitate multi-currency transactions, and seamlessly integrate with HCM and ERP systems for accurate payments.

Explore Our Flexible Solutions:

• SaaS (Software as a Service): Tailored for enterprise businesses managing payroll across multiple countries with diverse complexities. Our SaaS model optimizes operations for maximum efficiency.
• Managed Services: Customized for mid-sized and large enterprises handling multi-country payroll, delivering on-demand HR expertise for security, reliability, and compliance.
• HRMS (Human Resource Management System): Ideal for expanding mid to large businesses, offering a comprehensive suite of functionalities, including payroll and benefits, with personalized features for effective solutions.

Streamline Payroll with Mercans’ Technology and Integrations

• Technology: Explore the forefront of innovation with Mercans’ cutting-edge technology that powers our global payroll solutions. Learn more about our technological prowess here
• Integrations: Seamlessly integrate your Human Capital Management (HCM) systems with Mercans’ solutions, enhancing efficiency and connectivity. Discover the power of integration here.
• Recognitions: Join a partner recognized for excellence. Mercans has earned accolades for its commitment to delivering exceptional payroll services. Explore our awards and recognitions here.