When your business grows, you’ll confront new laws and employment processes in different countries. Benefits planning is one of many undertakings. With the right approach, your employee benefits planning in Vietnam can make your company competitive.

Vietnam compensation Laws

The primary law governing employee benefits and compensation is the Labour Code No. 45/2019/QH14, effective 1 January 2021. Related laws, including social insurance and health insurance laws, also apply to some benefits topics.

A decree was issued by the government in 2021 to provide a minimum wage applicable to all employers. Currently, there are 4 regional minimum salary levels applicable to employers, ranging from VND 3,450,000 in Region IV to VND 4,960,000 in Region I per month, depending on the employer’s location. Employers are required to pay a salary to their employees which is not lower than the minimum salary level applicable in their region for untrained workers performing tasks considered simple. For trained workers, the salary must be at least 7% higher than the regional minimum salary.

The monthly minimum wages by region effective until June 30, 2024, are listed below:

  • Region I – VND 4,680,000
  • Region II -VND 4,160,000
  • Region III – VND 3,640,000
  • Region IV – VND 3,250,000

Employees who work more than the standard 8-hour day or 48-hour workweek should get paid for overtime. The overtime pay is at least 150% of the actual hourly wage on a normal working day, at least 200% on a weekly day off, and at least 300% on a public holiday or paid day off. For employees paid by the day, the 300% rate does not include the regular wage for that public holiday or paid leave day. Additional premiums may apply for overtime worked at night.

Guaranteed benefits in Vietnam

Before you consider fringe benefits, you need to ensure you meet the requirements outlined in the labor laws. In Vietnam, employers are required to provide:

  • Paid annual leave
  • Paid time off for public holidays
  • Statutory social insurance contributions for eligible employees
  • Statutory health insurance contributions for eligible employees
  • Statutory unemployment insurance contributions for eligible employees

Vietnam benefits management

Your benefits plan should support your company’s growth. With the proper planning, your benefits can encourage job seekers to apply for your vacancies over those of competitors. Benefits can also improve morale within the workplace and increase retention rates, limiting the need for you to onboard and train new hires.

Fringe benefits, or provisions not required by law, might include:

  • Holiday bonuses
  • Housing allowances
  • Transportation stipends
  • Gym or club memberships
  • Allowances for living costs
  • Supplementary health and life insurance

Designing Vietnam employee benefits plans

When it’s time to start planning, you might feel challenged by the design process. You need to find a balance between your resources and your employees’ needs. With the right research and preparation, a competitive plan is within reach.

1. Review your financial resources.

Without a clear understanding of your financial resources, it’s easy to overextend your business. It’s helpful to build your budget spending into your expected revenue to manage your income. If you’re starting with relatively low revenue, you’ll need to be modest with your fringe benefits.

2. Research the market.

You need to understand the labor market to become competitive within it. Research the companies in your area to find out what types of benefits they offer their employees. The regular occurrences in the market will inform employees’ expectations.

Speaking directly to employees can also help you create competitive benefits plans. Distribute surveys or conduct interviews to learn more about what workers want from their employers.

3. Design a plan.

With your market information and company budget, you can start building a benefits plan. First, allocate funding to any required benefits. You can use your remaining budget to provide fringe benefits, prioritizing the most valuable ones based on your research.

Average cost of benefits

Many characteristics determine how much a company pays for benefits, including location, size, and industry. With the wide variety of potential expenses, an average cost isn’t a useful tool in terms of creating a plan. You should create a benefits budget unique to your revenue and expenses. You might set it as a percentage of your revenue so your spending can grow with your business.

This arrangement simplifies future budget management and makes costs evident earlier in the process. This way, you can build a company that competes with other enterprises in the labor market.

How to calculate benefits

Benefits calculations are often straightforward. For example, you might choose to provide a 13th-month bonus for your teams. Determine the amount you’d like to spend and divide it among your workforce.

For some other benefits, like social insurance contributions, calculations are outlined in the country’s labor laws. Laws require employers to contribute 17.5% of employees’ monthly salary or wages subject to compulsory social insurance contributions. Employees must contribute 8%. These rates cover social insurance only and exclude separate health insurance and unemployment insurance contributions.

How are employee benefits taxed in Vietnam?

Cash and in-kind benefits are generally subject to personal income tax when provided by the employer and connected to employment. Some benefits may be exempt, capped, or treated differently under Vietnamese PIT rules, depending on the benefit type and supporting documentation. Employers must determine the cash value for benefits in kind and factor the cost into employee paychecks. Companies must include these benefits in income calculations for payroll tax deductions.

Employee health benefits

Vietnam’s public healthcare system receives funding from the national health insurance scheme. This setup is still in the developmental stage, but it does support free care for people in the country. Employers are generally required to contribute to the compulsory national health insurance scheme for covered employees. The employer contribution is typically 3% of the salary used for statutory insurance purposes.

Private hospitals in urban centers offer more advanced care, but they come with costs. Employers are not generally required to provide supplemental private health insurance for these facilities. They must participate in Vietnam’s compulsory social insurance system, including mandatory health insurance contributions for eligible employees. Supplemental coverage may be required if promised in a contract, policy, collective agreement, or benefits package. That said, they may choose to do so as a part of their fringe benefits.

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