Globalization Partners provides employer of record services for customers that want to hire employees and run payroll without first establishing a branch office or subsidiary in Vietnam. Your candidate is hired via Globalization Partners’ Vietnam PEO in accordance with local labor laws and can be onboarded in days instead of the months it typically takes. The individual is assigned to work on your team, working on your company’s behalf exactly as if he or she were your employee to fulfill your in-country requirements.
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Our comprehensive solution and Global PEO service enable customers to run payroll in Vietnam while HR services, tax, and compliance management matters are lifted from their shoulders onto ours. As a Global PEO expert, we manage employment contract best practices, statutory and market norm benefits, and employee expenses, as well as severance and termination if required. We also keep you apprised of changes to local employment laws in Vietnam.
Your new employee is productive sooner, has a better hiring experience and is 100% dedicated to your team. You’ll have peace of mind knowing you have a team of dedicated employment experts assisting with every hire. Globalization Partners allows you to harness the talent of the brightest people in more than 185 countries around the world, quickly and painlessly.
Vietnam is in Southeast Asia on the Indochina Peninsula and borders the South China Sea. More than 90 million people live in Vietnam. Taking the time to build relationships in Vietnam can be very helpful to your business. Participate in small talk, share information about your family and your hobbies, and ask after you counterpart’s background as well. As in other Asian nations, the concept of ‘face’ is very important, and you should be careful not to damage anyone’s ‘face.’ Finally, the Vietnamese can be reluctant to say “no,” so if you hear “perhaps,” or “no problem,” you should circle back and discuss the issue again for clarity.
When negotiating terms of an employment contract and offer letter with an employee in Vietnam, it may be useful to keep the following standard benefits in mind:
There are 10 public holidays in Vietnam (and it will be 11 public holidays in Vietnam from 01 January 2021 for the additional 01 day in National Day), during which most employees are entitled to the day off work. The Tet Lunar New Year is a week long celebration.
Public holidays are in addition to the vacation days.
Public holidays are:
- New Year’s Day – January 1 – 01 day off
- Tết (The Lunar New Year) – from last day of the last lunar month to 5th day of the first lunar month – 05 days off
- Hung Kings Commemorations – 10th day of the 3rd lunar month – 01 day off
- Day of Southern Liberation for National Reunification – April 30 – 01 day off
- International Labour Day – May 1 – 01 day off
- National Day – September 2 (with added either September 1st or 3rd from 01 Jan 2021) – 01 day off
The foreign employees are additionally entitled to a day off with pay on 01 national day.
A 13 month bonus is not legally required in Vietnam, but most employers provide a 13th month bonus, annual bonus or commission plan. The 13th month bonus is typically offered to employees that have worked for a company for more than 1 year, or is prorated based on length of employment. Bonuses are often paid prior to the Lunar New Year Holiday, and may range from 1 month to 3 months salary.
Various other allowances and bonuses may often be negotiated for in Vietnam, and they may or may not be taxable depending on their structure. When assisting customers through our Global Employer of Record solution, Globalization Partners advises on the total compensation package every step of the way.
Vietnam Working Hours
The maximum working hours per week are eight hours per day, six days per week, for normal working conditions. It’s legally required that employers provide employees with 1 full day off per week, which is usually Sunday. In practice, normally working hours: 8 hours per day, 40 hours per week (from Monday – Friday).
Minimal annual leave requirements of 12 days are stipulated by Vietnamese labor law.
- Employees who have worked for twelve months for an employer are entitled to twelve paid annual leave days, with pro rata entitlement for employees with less than twelve month’s service.
- Employees receive one additional paid vacation day for each additional five years they work for an employer.
- Employees are entitled to pay in lieu of annual leave for leave not taken by the end of the year. In practice normally the Employer agrees to permit the Employee to carry over untaken annual leave to the following year, but no later than March 31st of the following year, instead of payment in lieu of untaken leave.
- Employees working under hazardous conditions may earn more leave, and additional leave is often a negotiated supplementary benefit.
- Annual vacation leave is held separately from sick leave or maternity leave in Vietnam.
Employees are also entitled to paid personal leave for their wedding, the wedding of their child, or the death of a parent, spouse, or child, as well as unpaid leave with the approval of their employer.
Employees who suffer from illness and/or disability or take leave in accordance with a doctor’s order receive an allowance paid by Vietnam’s social insurance fund, provided that they submit the required documentation supporting their leave (normally only doctors at the public hospitals can issue this certificate). The sick leave allowance is based on the employee’s salary used to calculate the social insurance premium. The maximum entitlement is:
- 30 days per year (if the employee has contributed to the social insurance fund for less than 15 years) or
- 40 days per year (if the employee has contributed to the social insurance fund for between 15 and 30 years) or
- 60 days per year (if the employee has contributed to the social insurance fund for more than 30 years).
Female employees are eligible for 6 months of paid maternity leave at 100% of salary (the base salary of the social insurance contribution), and an additional 30 days for each additional child.
Salary during this period is paid by the compulsory social insurance. Maternity leave is 6 months. A female employee who is pregnant, on maternity leave or has a child below 12 months of age can only be dismissed if the enter- prise ceases operation; no other causes for dismissal are recognized.
An employer is not required to pay salary to an employee who is on maternity leave, however the maternity leave allowance is based on the employee’s salary used to calculate the social insurance premium. The maximum entitlement is: VND29.800.000, the employer normally will pay for the difference in case of the employee’s actual gross salary base is higher than the amount above.
Fathers are eligible to receive 5 to 14 days of paid paternity leave, depending on whether the child is born naturally or by C-section and whether it is a single or multiple birth.
The rights employees have when their employment contract is terminated depend upon the reason of dismissal and the employment contract. This has effects on the notice period and possible severance payments.
It’s common practice to arrange a “probation period” in Vietnam when engaging new employees. A probationary period must not exceed 60 days for work that requires specialized or highly technical skills or 30 days for other types of work.
Vietnam labor code states that an employer may terminate a labor contract by serving advance notice of 30 working days for termination of a fixed term labor contract or 45 working days for an indefinite labor contract. However, employers must have proper legal grounds for termination.
Terminating an employee in Vietnam is not a simple matter. Proper legal grounds must exist in order for an employer to terminate a labor contract with an employee, such as performance issues, prolonged illness, a force majeure event, or dissolution of the company. Employers are required to perform various procedures prior to terminating an employee.
If an employer fails to prove that there are legal grounds for the termination or fails to follow the proper statutory procedure, a termination may be declared wrongful. In the event of a wrongful termination, employers may be required to reinstate the employee, pay their salary for the period that they were not allowed to work, and pay two months of the employee’s salary as a penalty for the wrongful termination.
In practice, a settlement or resignation can normally be negotiated with some amount of severance pay provided to the employee.
Statutory Social Insurance in Vietnam applies to enterprises, entities, and organizations that employ employees under indefinite-term labor contracts or under definite-term labor contracts with a duration of three months or more. The social insurance fund pays allowances for:
- sick leave
- maternity leave
- work-related accidents
- occupational disease
Vietnam has a compulsory social, health and unemployment insurance scheme. Contributions are to be borne by both the employer and the employee. The basis for calculating the contributions is the monthly salary as stipulated in the labour contract (capped at 20 times Common Minimum Wage for SI / HI) and 20 times Minimum Regional Wage for UI. Compulsory unemployment insurance only applies to enterprises with 10 or more employees.
- Local: Employers contribute 21.5 of payroll to social insurance; Local Employees contribute 10.5%
- Expat: Employers contribute 6,5% of payroll to social insurance; Expat Employees contribute 1.5%
- Union Fee: 1% (not compulsory, only when professional joins TU organization).
- Trade Union: 2% (compulsory to the employer).
Vietnam Health Insurance Law
Basic insurance is provided through the national system.
Employers provide health insurance by law for their employees and must provide regular annual health checks.
Supplementary health and life insurance is often provided to employees as a benefit in order to cover the employee better than the compulsory health insurance. Small companies may provide an allowance in lieu of arranging insurance.
Additional vacation time is often negotiated. Team outings and company trips are commonly expected by the employees and are considered a bonus. In a country with high staff fluctuation, such team events shall be considered important.
Bottom Line on Benefits
Generally, we recommend budgeting 12% for benefits on top of the gross salary to calculate the total employee cost including benefits in Vietnam.
It is legally required to put a written employment contract in place in Vietnam which spells out the terms of the employee’s compensation, benefits, and termination requirements. An offer letter and employment contract in Vietnam should always state the salary and any compensation amounts in Vietnam dong rather than a foreign currency.
This information is provided as generally accepted information and is not intended as advisory services.
Why Globalization Partners
Establishing a branch office or subsidiary in Vietnam to engage a small team is time-consuming, expensive and complex. Vietnamese labor law has strong worker protections, requiring great attention to detail and an understanding of local best practices. Globalization Partners makes it painless and easy to expand into Vietnam. We can help you hire your candidate of choice, handle HR matters and payroll, and ensure that you’re in compliance with local laws, without the burden of setting up a foreign branch office or subsidiary. Our Vietnam PEO and Global Employer of Record solution provide you peace of mind so that you can focus on running your company.
If you would like to discuss how Globalization Partners can provide an employee leasing solution, a PEO solution for hiring an employee, payroll services, or recruiting services in Vietnam, please contact us.