Labor Laws and Regulations

Contract

There are two main types of employment contracts

Common to both Definite-Term Employment and Indefinite-Term Employment contracts

Language

Written in Vietnamese, or in both Vietnamese and another foreign language that is suitable for both the employer and employee.

It is advisable to have a Vietnamese version of the contract, or at least a translation, for submission to authorities if needed. Even if a bilingual contract states that the foreign language version prevails in case of inconsistencies, having a Vietnamese version is recommended.

In case of disputes regarding labor contracts in Vietnam that are written in both Vietnamese and a foreign language, the Vietnamese language version will prevail.

Vietnamese labor law mandates written employment contracts for employment relationships of one month or more. For contracts shorter than one month, verbal agreements are permissible.

Mandatory terms

Essential Information about the Parties:

• Name and address of the employer and the full name, date of birth, gender, place of residence, identity card number or other personal identification paper of the employee. This clearly identifies the parties involved in the contract.

Job Details:

• Job description and workplace. This specifies the work the employee is expected to perform and the location where they will primarily work.
• Term of the labor contract. This indicates whether the contract is for a definite term or an indefinite term.
  Working Conditions and Compensation:
• Job position. This clarifies the employee’s role within the organization.
• Working hours and rest periods. This outlines the employee’s schedule and break times, adhering to legal limits.
• Wages. This must clearly state the salary or wage, the form of wage payment, the payment period, wage increases, and allowances and bonuses (if any). It’s important to specify all components of compensation.
• Place of salary payment. This specifies how the employee will receive their wages.
• Social insurance and health insurance and unemployment insurance. This term must state the employer’s obligation to participate in these mandatory insurance schemes for the employee as per Vietnamese law.
• Personal income tax obligations. While not always explicitly stated as mandatory in every source, understanding and adhering to tax regulations is crucial in employment relationships in Vietnam.

Other Terms (Can be mandatory depending on the context):

• Equipment and tools for work. If the employer is to provide these, it should be specified.
• Conditions for labor safety and hygiene at the workplace. This ensures the employer’s responsibility for a safe working environment.
• Training and fostering, and improving professional qualifications. If there are agreements on training, these should be included.
• Other agreements that are not contrary to law and collective labor agreements. This allows for additional clauses agreed upon by both parties, as long as they are legally compliant.

Probation

• Not exceeding 6 days: For jobs with a contract term of 30 days or less.
• Not exceeding 30 days: For jobs requiring intermediate professional qualifications, technical workers, professional staff, and office staff.
• Not exceeding 60 days: For jobs requiring professional qualifications of university degrees or higher.
• Up to 180 days: For managerial positions of enterprises as stipulated by the Labour Code.

Yes, in Vietnam, there are legal requirements and procedures related to confirming an employee after a probation period.

Here’s a breakdown of the key aspects:

Legal Requirements for Confirmation

• Notification of Probation Results: Vietnamese labor law mandates that at the end of the probation period, the employer must inform the employee of the results of their probation. This notification should be made formally.
• Successful Probation: If the probation is considered successful, the employer must officially confirm the employee. This confirmation signifies that the employee has met the requirements of the probationary period and will continue in their employment under the terms of the agreed-upon employment contract (whether fixed-term or indefinite-term).
• Formal Employment Begins: Upon successful completion of probation and confirmation, the official employment relationship commences as per the signed employment contract. The probation period is considered part of the overall employment, but the confirmation marks the transition to the full terms and conditions of the employment contract.
• Unsatisfactory Probation: If the probation is deemed unsatisfactory by the employer, they have the right to terminate the probation contract or the employment contract (if probation was part of the main contract). In this case, neither party is required to provide advance notice or pay compensation.

Procedures for Confirmation

While the law doesn’t prescribe a highly detailed procedure, best practices and legal interpretations suggest the following steps:

1. Assessment of Probation Performance: The employer should evaluate the employee’s performance during the probation period. This assessment should be based on pre-determined criteria or job requirements that were communicated to the employee at the start of probation.
2. Formal Notification of Results: The employer must formally notify the employee in writing (or another demonstrable format) about the outcome of the probation. This notification should clearly state whether the probation is considered successful or not.
3. Confirmation of Employment (if successful):
   • Written Confirmation: It is highly recommended to provide written confirmation of successful probation. This can be in the form of a letter or an official notice.
   • Content of Confirmation: The confirmation should clearly state that the employee has successfully completed probation and is now confirmed in their position under the terms of the original employment contract. It can also reiterate the effective date of the official employment (which is typically the day after the probation period ends).
   • No New Contract Needed (Usually): Generally, if probation was agreed upon as part of the main employment contract, a separate new contract isn’t needed upon successful confirmation. The original employment contract simply becomes fully effective. However, some employers might issue a formal confirmation letter for clarity and record-keeping.
4. Actions if Probation is Unsatisfactory:
   • Notification of Termination: If the probation is unsatisfactory, the employer must notify the employee of the termination. While no notice period is legally required during or at the end of probation for unsatisfactory performance, it is good practice to inform the employee promptly and clearly.
   • Reason for Unsatisfactory Probation (Good Practice): While not strictly legally required, it’s good practice to briefly explain the reasons why the probation was deemed unsatisfactory. This provides feedback to the employee and can help avoid potential disputes.

Specific for Definite-Term Employment contracts

Minimum contract duration

Not specified

Maximum contract duration

Duration of up to 36 months. These can be renewed once for another definite term. If renewed a second time, it must become an indefinite-term contract.

Automatic to Indefinite Term:
If the first fixed-term contract expires and the employee continues working, the parties can sign a second fixed-term contract.

However, if they fail to sign a second fixed-term contract within 30 days from the date the first one expired, the employment contract automatically converts to an indefinite-term contract.

Similarly, if an employee continues working after two successive fixed-term contracts expire, the employment contract automatically becomes an indefinite-term contract.

Type of work

Labor law does not explicitly list specific types of work that are either eligible or ineligible for fixed-term contracts.

The key principle is that fixed-term contracts must be for specific projects or undertakings where the employment is genuinely for a limited duration.

Minimum wage

Vietnam has regionally-based minimum wages, differentiated into 4 regions, with Region 1 having the highest minimum wage and Region 4 the lowest. Minimum wages are adjusted periodically by the government, typically annually, and are effective from July 1st each year.

As of July 1, 2024, the minimum monthly wages are as follows:

• Region 1: VND 4,960,000 (approximately US$196)
• Region 2: VND 4,410,000 (approximately US$170)
• Region 3: VND 3,860,000 (approximately US$149)
• Region 4: VND 3,450,000 (approximately US$133)

See full list of regional division from https://www.vietnam-briefing.com/doing-business-guide/vietnam/human-resources-and-payroll/minimum-wage

It’s important to note that these minimum wage rates apply to employees working under labor contracts in non-state firms. For state-owned businesses and institutions, a separate common minimum salary is used, which is currently set at 1,800,000 VND (approximately $76.6).

Working hours

Normal working hours

The normal working hours are 8 hours per day and 48 hours per week. The employer can decide to apply for a 6-day or 5-day work week, but the total standard hours should not exceed 48 hours per week.

For employees working in heavy, hazardous, or toxic occupations, the working hours must be reduced to 6 hours per day.

Rest Days

Employees are entitled to at least one day off per week, generally Sunday, or another fixed day as determined by the employer. The interval between two rest days cannot exceed 12 days. Shift workers may have at least 30 consecutive hours off per week in certain conditions.

Overtime

Overtime work is permitted with the employee’s consent, but is strictly regulated:

*In certain sectors (e.g., garments, processing of agricultural and aquatic products), and in specific cases (urgent work, public interests), overtime can be extended to 300 hours per year with notification/registration with authorities.

Overtime Pay Rates: Overtime work must be compensated at premium rates:

Public holidays and annual leaves

Official public holidays

Employees are entitled to fully paid days off for 11 public holidays per year
Working on Public Holidays:

• Working on public holidays is generally optional for employees.
• If employees agree to work on public holidays, they are entitled to overtime pay.

Overtime pay rate for public holidays: At least 300% of the normal daily wage (in addition to the regular day’s wage, effectively totaling 400% pay for holiday work).

Annual paid leave

Employees working under normal conditions are entitled to 12 paid annual leave days after 12 months of service. This increases by 1 day for every 5 additional years of service. Employees in heavy, hazardous, or toxic jobs get 14 days, and those in extremely heavy, hazardous, or toxic jobs get 16 days.

Employees are entitled to payment in cash for any untaken annual leave days if they could not take leave due to work demands or were terminated. This payment is calculated based on the employment contract wage rate at the time of leave settlement.

Carry forward to the next year: While not explicitly stated in the search snippets if carrying forward is mandatory, it’s implied that unused leave is compensated if not taken, suggesting carry-forward is not a common practice or legally required benefit in addition to cash compensation. Company policy may dictate specific carry-forward rules, but legal compliance focuses on compensation for untaken leave.

Sick leave

Sick leave

Entitlement to Paid Sick Leave (Social Insurance Benefit): Employees who are participating in social insurance are entitled to paid sick leave benefits provided by the Social Insurance Fund when they are sick or injured (non-occupational).

Conditions for Paid Sick Leave Benefit:

• Illness or Non-Occupational Injury: The employee must be certified as sick or injured (non-occupational) by a competent health authority.
• Social Insurance Participation: The employee must be participating in Vietnam’s compulsory social insurance scheme.

Duration of Paid Sick Leave Benefit: The duration of paid sick leave benefit depends on the employee’s social insurance contribution history and specific illness. Regulations are complex and depend on factors such as:

• Type of illness: Ordinary illness, work-related illness, or diseases requiring long-term treatment.
• Social insurance contribution duration.
• Specific regulations under the Law on Social Insurance detail the exact number of days. However, based on search results, it’s generally understood to be a limited number of days per year covered by social insurance.

Level of Benefit Payment:

• Employees on approved sick leave (meeting social insurance conditions) receive a sick leave allowance paid by the Social Insurance Fund, not directly by the employer.
• The benefit level is typically calculated as a percentage of the employee’s insured salary (the salary base on which social insurance contributions are paid), not necessarily their full contract wage. The exact percentage varies based on regulations and specific circumstances.

Unpaid Sick Leave (Personal Leave - Unpaid):

• For sick leave days that do not qualify for social insurance benefits (e.g., not meeting contribution conditions, exceeding the duration covered by social insurance, or for illnesses not certified as required), employees may take unpaid personal leave if approved by the employer. This is typically governed by company policy and mutual agreement.

Medical Certification: For sick leave claims, particularly to receive social insurance benefits, medical certification from a recognized health facility is required as proof of illness.

Menstruation leave

Female employees are entitled to 30 minutes break each day during menstruation, for at least 3 working days per month, with full pay.

Maternity / paternity leave

Paid maternity leave

Female employees are entitled to 6 months of maternity leave with full pay from social insurance, with a maximum entitlement of VND 29,800,000 They can take leave up to 60 days before the expected delivery date.

Additional Leave: For multiple births, an additional 30 days is granted for each additional child.For multiple births in Vietnam, the maternity leave policy provides additional time for each child beyond the first:

• For a single birth, the mother is entitled to 6 months (180 days) of maternity leave.
• For twins, the mother receives an additional 30 days, making the total leave 7 months (210 days).
• For triplets, the mother would get an additional 60 days (30 days for the second child and 30 days for the third child), resulting in a total of 8 months (240 days) of maternity leave.

Miscarriage leave

The duration of leave depends on the stage of pregnancy at the time of miscarriage:

• 10 days if the fetus is less than 5 weeks old
• 20 days if the fetus is 5 to less than 13 weeks old
• 40 days if the fetus is 13 to less than 25 weeks old
• 50 days if the fetus is 25 weeks or older

This leave is paid, with employees receiving 100% of their average salary over the past six months, capped at 20 times the minimum wage.

Paternity leave

Male employees are entitled to paid paternity leave ranging from 5 to 14 days, depending on the type of birth (e.g., normal, cesarean, multiple births).

1. Natural birth (single child): 5 days
2. Cesarean section (single child): 7 days
3. Natural birth of twins: 10 days
4. Cesarean section of twins: 14 days
5. Multiple births (more than twins): For each additional child beyond twins: 3 extra days

It’s important to note that this paternity leave must be taken within the first 30 days after the child’s birth
Payment: Vietnamese nationals receive 100% of their salary from the month before paternity leave starts, paid by the Social Insurance Authority.

Family leave

Termination

Payroll and Statutory Contributions

Payroll

Payment

Payroll Components: Gross salary, overtime pay, bonuses, allowances, and benefits in kind (some benefits in kind are non-taxable if they meet specific conditions).

Wages are generally paid monthly or bi-weekly, as agreed in the employment contract. Payment must be made within 15 days of the end of the wage period, and overtime must be paid within the same timeframe. Salaries are typically paid in Vietnamese Dong (VND) and must be paid in full, with itemized payslips provided to employees.

Vietnamese labor law operates on gross salary, from which taxes and social insurance contributions are deducted. The basic salary (used for calculating certain benefits) excludes overtime, bonuses, allowances etc.

Advance Pay for Tet Holiday Leave: Employers can choose to pay employees their salaries in advance for annual leave, especially around the Tet holiday (Vietnamese Lunar New Year). This is often done to support employees during the long Tet break.

Payslip

Employers are legally required to provide employees with detailed payslips for each pay period, clearly outlining gross salary, deductions (insurance contributions, taxes, trade union fees), and net pay.

Record Keeping

Records must be retained for a minimum of 10 years from the end of the fiscal year in which the employee was terminated.

Best practice suggests retaining these records for 15 years to cover potential long-term analysis and extended legal situations.

For contracts, time records, and performance records, the minimum retention period is also 10 years, with a recommended retention of 15 years.

Mandatory Deductions (Employee)

Late payment

In Vietnam, if salaries are paid at least 15 days behind schedule, the employer must pay the employee compensation equal to at least the interest on the late amount at the latest 1-month interest rate of the bank where the employee’s salary account is opened. In case of force majeure events, employers have up to 30 days to pay salaries

13th month bonus (Tet bonus)

There is no legal requirement for businesses to pay 13th month salaries to employees in Vietnam. Payment depends on agreements between employees and employers or company policies. Not legally required but is a widespread expectation, particularly around the Lunar New Year (Tet holiday).

Income tax obligations from employers

Personal Income Tax (PIT) Withholding: Employers are responsible for calculating, withholding, and remitting PIT to tax authorities monthly or quarterly, depending on their declaration frequency. Tax rates are progressive, ranging from 5% to 35% based on income brackets.

Progressive Tax Rates: Vietnam uses a progressive PIT rate system for resident individuals. Tax rates range from 5% to 35%, depending on the level of taxable income.

Taxable Income: PIT is calculated on taxable income, which is broadly defined as income from employment after deductions.

Deductions: Taxable income is reduced by several deductions, including:

• Personal Deduction: A standard deduction for the taxpayer themselves (currently VND 11,000,000 per month or VND 132,000,000 per year, but subject to change - verify current amounts).
• Dependant Deductions: Deductions for registered dependents (currently VND 4,400,000 per dependant per month, but subject to change - verify current amounts).
• Mandatory Insurance Contributions: Employee’s contributions to Social Insurance, Health Insurance, and Unemployment Insurance are deductible from taxable income.
• Charitable Donations, etc.: Certain charitable contributions and other specific deductions may be allowed.

Tax Calculation: PIT is calculated on a monthly basis. There are two primary methods for calculating PIT on employment income in Vietnam:

1. Progressive Tax Rates on Taxable Income: Tax is calculated directly on taxable income using the progressive tax bands.
2. Simplified Method (for non-residents or those meeting certain conditions): A flat tax rate may apply to gross income in some specific cases.

Employer’s Role as Withholding Agent: Employers are responsible for calculating, withholding, and remitting PIT from employees’ monthly salaries to the tax authorities.

Payment date
Employers must submit monthly and annual tax reports to the General Department of Taxation (GDT), and declarations to social insurance agencies.

Monthly PIT declarations are due by the 20th of the following month, and annual PIT reports by March 30th of the following year.

Personal Income Tax (PIT) Payment and Reporting: Pay PIT and submit monthly/quarterly (depending on tax regulations and business size) PIT returns to the Tax Department. Forms and reporting methods are specified by the Tax Department. Monthly/Quarterly deadlines apply (typically around the 20th of the following month/quarter, but confirm current deadlines with tax authorities). Payment methods include bank transfer, tax authority offices, or potentially online.

Recommended Record Retention Period: Generally, it’s recommended to retain payroll and tax records for at least 10 years in Vietnam for tax audit and compliance purposes.

Mandatory benefits and social security

Social Insurance (SI)

Vietnam’s social insurance framework ensures comprehensive protection for workers through mandatory and voluntary schemes, with significant updates under the Social Insurance Law 2024 effective July 1, 2025.

Mandatory for employees with labor contracts of 1 month or more (with some exceptions for certain foreign employees). Covers:

• Sickness and maternity benefits
• Occupational accidents and diseases
• Retirement and death gratuity
• Pension

Contribution Rates (2024)

Mandatory Social Insurance for Vietnamese Employees.

The total mandatory contribution rate is 25.5% of the employee’s monthly salary, shared between employers and employees:

Employers contribute 17.5%:

• 14% to retirement and death benefits.
• 3% to sickness and maternity benefits.
• 0.5% to occupational accident and disease insurance.

Employees contribute 8%:

• 8% to retirement.

Salary Caps

Maximum Contribution Base

The salary subject to SI contributions is capped at 20× the basic salary. As of July 2024:

• Basic salary: 2.34 million VND/month (up 30% from 1.8 million VND).
• Maximum cap: 46.8 million VND/month (20 × 2.34 million VND).

Minimum Contribution Base

• Regional minimum wages (July 2024):
• Region I: 4.96 million VND/month.
• Region IV: 3.45 million VND/month.
  Jobs requiring training or hazardous conditions mandate bases 5-7% higher than regional minimum.

Payment Deadlines

Pre-July 2025 Rules

• Employers remitted SI contributions by the last day of each month.

Post-July 2025 Changes (Social Insurance Law 2024)

• Monthly payments: Due by the last day of the following month (e.g., July contributions due by August 31).
• Quarterly/Semi-annual payments: Due by the end of the month after the payment cycle.

Penalties for Non-Compliance

• Interest: 0.03% daily on overdue amounts.
• Administrative fines: Up to 5% of unpaid contributions.

Voluntary Social Insurance

Effective July 2025, voluntary participants contribute 22% of their chosen income base, covering retirement, death, maternity, and occupational accident benefits

• Eligibility: Vietnamese citizens aged ≥15 not covered by mandatory SI.
• Benefits: Retirement, death, maternity, and occupational accident coverage.
• Contribution flexibility: Monthly, quarterly, semi-annual, or lump-sum payments.

Health Insurance (HI)

Mandatory for both Vietnamese and foreign employees under Vietnamese labor contracts. Provides access to healthcare. Covered under the employer and employee SI contributions.

Mandatory Health Insurance Contributions

Health insurance contributions follow a shared responsibility model:

• Total contribution rate: 4.5% of the employee’s monthly salary.
• Employers: 3%
• Employees: 1.5%

Salary Base and Caps

Maximum Contribution Base

The salary subject to HI contributions is capped at 20× the basic salary, which increased to 2.34 million VND/month in July 2024. Consequently:

• Maximum monthly base: 46.8 million VND/month (20 × 2.34 million VND)

Minimum Contribution Base

The minimum base aligns with regional minimum wages, which vary across four zones as of July 2024:

• Region I: 4.96 million VND/month.
• Region IV: 3.45 million VND/month.
  Jobs requiring technical training or involving hazardous conditions mandate bases 5–7% higher than regional minimum.

Payment Deadlines and Penalties

Pre-July 2025 Rules:

• Employers remitted HI contributions by the last day of each month.

Post-July 2025 Changes:

Under Decree No. 64/2024/ND-CP, deadlines are extended:

• Monthly payments: Due by the end of the following month (e.g., July contributions due by August 31).
• Quarterly/Semi-annual payments: Due by the end of the month after the payment cycle.

Penalties for Non-Compliance

• Late payments: Accrue 0.03% daily interest on overdue amounts.
• Administrative fines: Up to 5% of unpaid contributions

Unemployment Insurance (UI)

Mandatory for Vietnamese employees. Provides financial support in case of job loss. Covered under the employer and employee SI contributions.

Contribution Structure

Total rate: 2% of the employee’s monthly salary.

• Employer contribution: 1%.
• Employee contribution: 1%

Salary Base and Caps

Maximum Contribution Base

The salary subject to UI contributions is capped at 20× the regional minimum wage, which varies across four zones.

Minimum Contribution Base

The minimum salary subject to UI contributions equals the regional minimum wage (e.g., 4,960,000 VND/month in Region I)

Payment Deadlines and Penalties

Remittance Requirements:

• Employers must submit UI contributions by the last day of the following month (e.g., July contributions due by August 31).
• Late payments incur 0.03% daily interest on overdue amounts.
  Penalties for Non-Compliance
• Administrative fines: Up to 5% of unpaid contributions.
• Legal repercussions: Employers may face audits or labor inspections for persistent non-payment

Trade Union Fee (TU)

Employers are required to contribute 2% of the employee’s gross salary to the Trade Union fund to support trade union activities, regardless of whether a trade union exists in the company. This is part of the employer’s mandatory contributions.

For Unionized Companies: If a company has a trade union, a trade union fee is usually mandatory for union members.

Rate: Typically, the trade union fee is 1% of the employee’s monthly salary.

Management: Employers deduct this fee from the salaries of union members and remit it to the trade union. This is managed through payroll but is not a government tax or social security contribution.

Salary Base and Caps

Employer Contribution Base

• Calculation: Based on the total salary fund subject to SI contributions, which includes:
• Basic wages, allowances, and bonuses.
• Overtime pay and hazardous duty premiums.
• Maximum cap: 20× the basic salary

Employee Contribution Base

• Calculation: 1% of the employee’s actual salary, subject to SI contributions.
• Cap: Cannot exceed 10% of the regional minimum wage

Payment Deadlines and Penalties

Remittance Schedule

• Monthly payments: Due by the last day of the following month, aligned with SI payment deadlines.
• Quarterly payments: Available for seasonal industries, due by the month following each quarter.

Penalties for Non-Compliance

• Late payments: Accrue 0.03% daily interest on overdue amounts.
• Fines: Up to 75 million VND for persistent non-compliance.
• Additional liabilities: Repayment of unpaid fees + interest

Social Insurance, Health Insurance, and Unemployment Insurance Payment and Reporting

Pay contributions and submit monthly reports to the Social Insurance Agency (VSS). Forms and reporting methods are specified by VSS. Deadlines are typically at the end of the following month (e.g., contributions for January are due by the end of February). Payment methods include bank transfer, cash at VSS offices, or potentially online channels.

Trade Union Fee Remittance: Remit Trade Union fees to the relevant Trade Union organization according to their guidelines.

Recommended Record Retention Period: Generally, it’s recommended to retain payroll and tax records for at least 10 years in Vietnam for tax audit and compliance purposes.