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Hiring in Vietnam
Vietnam is in Southeast Asia on the Indochina Peninsula and borders the South China Sea. More than 95 million people live in Vietnam. Taking the time to build relationships throughout the country can be very helpful to your business.
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.
Employment contracts in Vietnam
It is legally required to put a written employment contract in place in Vietnam which spells out the following:
- The employer’s name, address, and full name and position of the person who concludes the contract on the employer’s side
- Full name, date of birth, gender, residence, and identity card number or passport number of the person who concludes the contract on the employee’s side
- The job and workplace
- Duration of the employment contract
- Job or position-based salary, a form of salary payment, due date for payment of salary, and allowances and other additional payments
- Regimes for promotion and pay rise
- Working hours and rest periods
- Personal protective equipment for the employee
- Social insurance, health insurance, and unemployment insurance
- Basic training, advanced training, and occupational skill development
An offer letter and employment contract in Vietnam should always state the salary and any compensation amounts in Vietnam dong rather than another currency.
Working hours in Vietnam
The maximum working hours per week are 8 hours per day, 48 hours per week, and 6 days per week, for normal working conditions. It’s legally required that companies provide employees with 1 full day off per week, which is usually Sunday. In practice, normally the working hours are 8 hours per day, 40 hours per week (from Monday – Friday).
Holidays in Vietnam
There are 10 public holidays in Vietnam, 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 paid annual leave.
Public holidays are:
- New Year’s Day – January 1
- Tết (The Lunar New Year) – from last day of the last lunar month to 5th day of the first lunar month
- Hung Kings Commemorations – 10th day of the 3rd lunar month
- Day of Southern Liberation for National Reunification – April 30
- International Labour Day – May 1
- National Day – September 2 (with additional day on either September 1 or 3)
International employees are additionally entitled to a day off with pay each on 1 additional traditional holiday of their country of origin and 1 national day of their country of origin.
Vacation days in Vietnam
Minimal annual leave requirements of 12 days are stipulated by Vietnamese labor law.
- Employees who have worked for 12 months for an employer are entitled to 12 paid annual leave days, with pro rata entitlement for employees with less than 12 months’ service.
- Employees receive 1 additional paid vacation day for every additional 5 years of employment with the same employer.
- Employees are entitled to pay in lieu of annual leave for leave not taken by the end of the year. In practice employers normally allow employees to carry over untaken annual leave to the following year, but no later than March 31 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/paternity leave in Vietnam.
Employees are also entitled to paid personal leave for their wedding (3 days), the wedding of their child (1 day), or the death of a parent, spouse, or child (3 days), as well as 1 day of unpaid leave for the death of the employees’ paternal grandparents, maternal grandparents, as well as the marriage of their father or mother, or the marriage of their sibling, provided that they notify their employer. Employees may also go on additional unpaid leave with the approval of their employer.
Vietnam sick leave
Employees who have an illness and/or disability or take leave in accordance with a doctor’s certificate 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 75% of the insured salary 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)
- 40 days per year (if the employee has contributed to the social insurance fund for between 15 and 30 years)
- 60 days per year (if the employee has contributed to the social insurance fund for more than 30 years)
Maternity/paternity leave in Vietnam
Pregnant 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 1 month for each additional child.
Salary during this period is paid by compulsory social insurance. A female employee who is pregnant, on maternity leave, or has a child younger than 12 months of age can only be dismissed if the company 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.
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.
Health insurance in Vietnam
Basic insurance is provided through the national system.
Employers provide health insurance by law for their employees and must provide regular annual health checks.
Vietnam supplementary benefits
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 employees and are considered a bonus.
Bonuses
Bonuses are 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 it is prorated based on length of employment. Bonuses are often paid prior to the Lunar New Year and may range from 1 month’s to 3 months’ salary.
Various other allowances and bonuses may often be negotiated in Vietnam, and they may or may not be taxable depending on their structure.
Termination/severance in Vietnam
It’s common practice to include a probation period within the employment contract in Vietnam when engaging new employees. A probationary period must not exceed 60 days for work that requires specialized or highly technical skills, 30 days for work that requires intermediate level of skills, or 6 working days for other jobs.
In addition to requiring proper legal grounds to terminate an employment relationship, Vietnam’s labor code requires employers to serve advance notice of 30 working days for termination of a fixed-term labor contract with a duration from 12 to 36 months, or 45 working days for an indefinite labor contract.
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 theft or embezzlement, disclosure of business secrets, infringement of intellectual property rights of the employer, prolonged absence, or organizational restructuring. Employers are required to follow specific 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 2 months of the employee’s salary as a penalty for the wrongful termination.
In practice, a mutual settlement agreement can normally be negotiated with some amount of severance pay provided to the employee.
Employees working for 12 months or more are generally entitled to a severance allowance equal to half month’s salary for each year of employment.
Paying taxes in Vietnam
Statutory social insurance in Vietnam applies to enterprises, entities, and organizations that employ individuals under indefinite-term labor contracts or under definite-term labor contracts with a duration of 3 months or more. The social insurance fund pays allowances for:
- Sick leave
- Maternity leave
- Work-related accidents
- Occupational disease
- Pensions
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 labor contract (capped at 20 times Common Minimum Wage for social insurance and health insurance) and 20 times Minimum Regional Wage for unemployment insurance. Compulsory unemployment insurance only applies to enterprises with 10 or more employees.
- Employers contribute 17.5% of payroll to social insurance; employees contribute 8%.
- Employers contribute 3% of payroll to health insurance; employees contribute 1.5%.
- Employers contribute 1% of payroll to unemployment insurance; employees contribute 1%.
- Union Fee: 1% (not compulsory, only when a professional joins trade union organization).
- Trade Union: 2% (compulsory to the employer).
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