Hiring employees in Vietnam

Vietnam is one of Asia's most attractive places to build a team: a young, fast-growing workforce, deep engineering talent, and costs well below the regional average. The question for a foreign company is rarely whether to hire here, but how to do it legally. There are three routes, and they trade off speed, cost, and risk very differently.

Setting up your own entity, a foreign-owned company, gives you full control and makes sense once you have a real local operation, but it runs into months of investment and enterprise registration, charter capital, and an ongoing compliance burden before you can put a single person on payroll. Engaging people as independent contractors is fast, but it carries real misclassification risk: if someone works set hours under your direction, Vietnamese authorities will treat them as an employee, and the back-pay and penalties land on you.

The middle route, and the one most companies start with, is an employer of record. A licensed local company employs your team on your behalf and handles the contracts, payroll, insurance, and tax, while you direct the day-to-day work. You hire compliantly in about a week, with no entity of your own.

Every employee in Vietnam must have a written employment contract, signed before they start, in Vietnamese (a bilingual version is fine alongside it). The Labor Code 2019 recognizes two types, and which one you use shapes how the relationship can end later.

The two contract types

• Indefinite-term contract. No fixed end date. This is the default for ongoing roles and gives the employee the strongest protection.
• Fixed-term contract. Up to 36 months. You can sign one, then renew it once; if the person keeps working after a second fixed term would expire, the contract automatically becomes indefinite. So a fixed term is a genuine bridge, not a way to keep someone permanently on rolling short contracts.

Probation

Probation is agreed separately or written into the contract, and the maximum length depends on the role:

During probation the salary must be at least 85% of the full rate for the job, and either side can end the arrangement without notice or compensation. After it, the full contract terms take over.

The statutory ceiling is 48 hours a week and 8 hours a day, but most professional and office employers in Vietnam run a 40-hour, five-day week, which is what candidates for skilled roles expect. Employees are entitled to at least one full day of rest per week and a 30-minute paid break on a normal shift.

Overtime limits

Overtime is voluntary and capped. An employee may work no more than 40 overtime hours in a month and 200 in a year, rising to 300 a year only in specific industries and with the right notifications. Going over these limits is a violation, not a gray area, so for a team that regularly runs long, the answer is more headcount, not more overtime.

Overtime pay rates

Overtime is paid as a multiple of the normal hourly wage, and the multiple depends on when the work happens:

So an hour worked on a public holiday can cost close to 400% of the normal rate once the day's holiday pay is counted. Night-work and overtime premiums are also exempt from personal income tax, a small detail that the payroll calculation needs to get right.

Vietnam's annual-leave minimum is modest by regional standards, but the public holidays, the long Tet period, and a generous social-insurance-funded sick and maternity system mean the real amount of time off is substantial. Here is how each type works.

Annual leave

An employee who has completed 12 months of service is entitled to paid annual leave of:

• 12 working days a year in normal conditions;
• 14 working days for minors, employees with disabilities, and people in heavy, hazardous, or dangerous work;
• 16 working days for especially heavy, hazardous, or dangerous work.

Leave grows with tenure: one extra day for every five years of continuous service with the same employer. Someone with under a year of service accrues leave pro rata. Carry-over is possible by agreement, but it is limited, so leave is meant to be taken within the year rather than banked indefinitely.

Public holidays

There are 11 paid public holidays a year under Article 112. The Tet (Lunar New Year) holiday is the centrepiece at five days, and the government often adds bridge days by decree, so the practical Tet shutdown is usually longer than the statutory count.

If a holiday falls on an employee's weekly rest day, they get a day off in lieu. An employee who works a public holiday is paid at least 300% for the hours worked, on top of their normal holiday pay.

Sick leave

Sick leave is funded by the Social Insurance fund, not the employer, provided the employee is insured and submits a medical certificate. The annual entitlement depends on how long they have contributed:

The benefit is paid at 75% of the salary on which insurance is calculated. Employees with a serious illness on the official list can receive up to 180 days. Parents can also take social-insurance-paid leave to care for a sick child under seven, up to 20 days a year for a child under three and 15 days for a child aged three to seven.

Maternity and paternity

Maternity leave is among the most generous in the region: six months (180 days) at 100% of the average salary of the preceding six months, paid by Social Insurance rather than the employer, with an extra month for each additional child in a multiple birth. Up to two of the six months may be taken before the birth. To qualify, the employee must have contributed to social insurance for at least six of the 12 months before giving birth. Fathers who contribute get 5 to 14 days of paternity leave depending on the circumstances of the birth, taken within 30 days.

Other paid leave

• Marriage: 3 paid days for the employee's own marriage, 1 day for a child's marriage.
• Bereavement: 3 paid days on the death of a parent, parent-in-law, spouse, or child.
• Menstrual leave: female employees may take 30 minutes off a day, for at least three days a month, on full pay.
• Unpaid leave is available by agreement; the Code sets no maximum, and social-insurance contributions pause during it.

Salaries are paid monthly, in Vietnamese dong, and must meet the regional minimum wage for where the employee works. Vietnam sets four regional minimums, with the highest in the major cities. The figures below took effect on 1 January 2026 under Decree 293/2025.

For skilled and professional roles the market pays well above the minimum, and the figure that really matters for retention is the bonus.

The 13th month and the Tet bonus

Vietnam has no statutory 13th-month pay, but the Tet bonus, paid before the Lunar New Year, is near-universal practice and typically runs from one to three months of salary. Employees expect it, and skipping it is a real attrition risk just as people are deciding whether to return after the holiday. Treat it as a budgeting reality rather than an optional extra, even though the amount is your decision.

Two things come out of every payroll in Vietnam: the social-insurance contributions, split between employer and employee, and personal income tax, withheld from the employee. The employer also pays a trade-union contribution.

Social, health, and unemployment insurance

Three compulsory funds, plus the trade-union fee, make up the contribution structure for a Vietnamese employee:

So the employer's mandatory on-cost is roughly 23.5% on top of gross salary. Social and health insurance are capped at salary up to 20 times the Region I monthly minimum wage (VND 5,310,000 from 1 Jan 2026, so the ceiling is VND 106.2 million per month), and unemployment insurance is capped on the same wage base. Foreign employees with a work permit and a contract of a year or more contribute to social and health insurance but are exempt from unemployment insurance.

Personal income tax

PIT is progressive, withheld monthly by the employer and reconciled annually. The 2026 reform of the PIT Law cuts the number of brackets from seven to five, raises the personal deduction to VND 15.5 million per month (from VND 11M) and the dependent deduction to VND 6.2 million per month (from VND 4.4M), and keeps the top marginal rate at 35% but applies it only to monthly incomes above VND 100M. The net effect is a meaningful cut at lower and middle incomes. Non-residents are taxed at a flat 20% on Vietnam-sourced income. Through an EOR, the withholding and the annual finalisation are handled for you.

Vietnam is not an at-will country. An employer can only end a contract on grounds the Labor Code allows, such as the employee repeatedly failing to perform, a genuine restructuring or redundancy, or the contract reaching its term. Dismiss someone outside those grounds or without the right process, and you are exposed to a reinstatement order and back pay.

Notice periods

When a contract is ended lawfully by either side, statutory notice applies:

Severance and job-loss allowances

An employee who leaves after at least 12 months of regular service is generally entitled to severance pay equal to half a month of salary for each year of service, less any period covered by unemployment insurance. Where the termination is due to a restructuring, technology change, or economic difficulty, a higher "job-loss" allowance applies instead: at least one month of salary per year of service, with a two-month minimum. The salary used is the average of the six months before the end. Severance does not apply on termination for serious misconduct, and the calculation is run through final payroll alongside any outstanding leave.

Final settlement and documents

On the last working day, the employer settles the final salary, accrued and unused leave, any 13th-month or bonus owed, and severance. The employer also returns the social-insurance book, deregisters the employee from the three insurance funds, and issues a labor-contract termination decision. Social insurance entitlements (including any pending unemployment benefit) follow the employee to their next employer.