Key Takeaways
1. Vietnam has enjoyed great economic growth and attracted much foreign investment in recent years, making it a popular choice for many businesses, investors and employers seeking to hire talent.
2. Vietnam’s labor laws cover a broad range of labor relations within the workplace, providing employees with protection in many areas. The primary legislation regulating employment relationships in Vietnam is the Labor Code 2019 (Labour Code).
3. According to labor law in Vietnam, employers must provide certain mandatory benefits to their employees.
4. Employers seeking to expand their business operations in Vietnam must ensure compliance with all mandatory benefits for their employees.
5.Under the Vietnam social security system employees receive benefits such as sick leave, maternity and paternity leave and health insurance.
The regional minimum wage in Vietnam increased by approximately 6% from 1st July 2022 and ranges from VND 3.25 million to VND 4.68 million per month.
6. Employers can also provide their employees with certain fringe benefits not required by law. These may be subject to personal income tax.
Vietnam has a dynamic and highly-skilled workforce that can help your business to grow its global talent base and expand internationally. In the last ten years, Vietnam has experienced tremendous economic growth and attracted much foreign direct investment as foreign companies have set up business operations there. With its relatively young labor force, low minimum wage and access to a large pool of remote workers, Vietnam has become a top choice for many employers when it comes to hiring talent.
Despite experiencing one of the most severe lockdowns globally due to the COVID-19 pandemic, Vietnam managed to end 2021 with a GDP growth rate of 2.58%. This makes Vietnam one of the few global economies to record two consecutive years of growth since the beginning of the pandemic in 2020. The latest World Bank figures forecast growth to more than double in 2022 from 2.6% to 5.5%.
With its successful vaccination drive and a gradual loosening of restrictions, Vietnam is expected to realize its growth potential and be among the top growing nations in the region as borders reopen and businesses resume economic activity.
To have a successful working relationship in this region of the world, it is important to have a solid understanding of the employment laws here. This article will outline the main areas to be aware of when it comes to employee benefits planning in Vietnam.
Employment Regulation in Vietnam
Vietnam’s employment laws and regulations are well developed and administered and cover most areas of labor relations within the workplace, giving adequate protection to employees. The primary legislation regulating employment relationships in Vietnam is the Labour Code 2019 (Labour Code), implemented on 1 January 2021.
In Vietnam, employment laws and regulations give employees protection in various areas. Vietnam recognizes rights such as the right to work, maximum working hours, minimum wages, and minimum working ages. Under the Labour Code there are three types of labor contracts. These include indefinite-term labor contracts, fixed-term labor contract with duration of 12 to 36 months and labor contracts for a specific or seasonal job of less than 12 months. Vietnam also recognizes collective bargaining agreements. With its membership in the International Labour Organization (ILO) and the World Trade Organization (WTO), Vietnam has strengthened its efforts to create and preserve a safe and fair environment for its employees.
It is important to understand your obligations as an employer before hiring employees in Vietnam. Attracting the best employees for your business means providing an employee benefits package in Vietnam that includes mandatory as well as fringe benefits.
Read our employer’s guide to find out more about Vietnam Labor Law.
Mandatory employee benefits in Vietnam
Employee benefits in Vietnam are governed by Vietnam’s Labour Code and businesses that hire staff in this region must provide a suitable benefit and compensation package when they draft contracts for their new employees.
According to labor law in Vietnam, employers must provide certain mandatory benefits to their employees. These benefits include the following:
- Health insurance
- Employers must provide health insurance and regular annual health checks for employees on indefinite term contracts and those that are longer than three months.
- Minimum wage
- Vietnam has two types of minimum wage which include the common minimum wage for employees in state-owned organizations and regional minimum wages for all non-state-owned organizations. There are four regionally based minimum wage levels in Vietnam ranging from VND 3.25 million to VND 4.68 million per month. These rates apply across all industries.
- Working hours
- Under the amended Labour Code working hours are limited to eight hours per day and 48 hours per week. Overtime must be mutually agreed to and cannot exceed 12 hours per day, 60 hours per month or 300 hours per year.
- Paid leave
- the Labour Code stipulates that employees working under normal conditions receive a minimum of 12 days paid leave per year, exclusive of public holidays. Employees working in hazardous, dangerous, or toxic conditions are entitled to between 14 and 16 days of paid leave, depending on the hazards involved. Paid leave is allowed pro-rata for less than 12 months of employment and increases by one day for every five years of consecutive service with an employer. Employees are also paid for national holidays.
- Maternity leave
- Female employees are entitled to six months of paid maternity leave. After the birth, mothers are entitled to a lump-sum allowance equivalent to two months’ average salary. In cases of multiple births, a mother is entitled to 30 days additional leave for each child.
- Paternity leave
- New fathers are entitled to paid paternity leave of between 5 and 14 days.
- Parental leave
- Employees in Vietnam are entitled to up to a maximum of 15 to 20 days of parental leave per year depending on the child’s age.
- Termination and severance
- Both the employer and the employee can unilaterally terminate the employment contract, provided at least 45 days notice is given for an indefinite-term contract; at least 30 days for a fixed term contract and at least three working days for a fixed term employment contract under 12 months. An employer cannot terminate an employee’s contract during pregnancy or maternity leave. Employees who have been regularly working for their employer for 12 months or more are entitled to severance pay amounting to half a month’s wages for each year of employment.
- Protection against discrimination
- Vietnam’s amended Labour Code has introduced safeguards that protect employees against workplace discrimination. This includes protection from sexual harassment, on the grounds of race, nationality, ethnic group, gender, marital status, HIV infection, pregnancy, political views, disability, religion or membership of a trade group.
- Sick pay
- In Vietnam, sick pay is paid by the social insurance fund, not by the employer. Employees are entitled to paid sick leave of between 30 to 70 days per year depending on how long they have paid social insurance premiums as well as on their working conditions.
Discretionary employment benefits in Vietnam
Aside from the mandatory benefits above, employers may also choose to offer their employees a benefits plan which includes fringe benefits designed to retain staff and boost morale.
Examples of employee benefits not required by law include the following:
- Housing allowances
- Transportation allowances
- Gym or club memberships
- Holiday bonuses
- School fees
- Healthcare and life insurance
Some monetary and non-monetary fringe benefits will be subject to personal income tax.
Hire employees and manage benefits in Vietnam
If you are looking to expand your business presence in Vietnam, or hire employees there, our Vietnam PEO service helps you ensure compliance with all applicable employment regulations, and ensures your staff receive all the employee benefits they are entitled to. Contact us today to find out more.
Frequently asked questions
Vietnam has two types of minimum wage. The common minimum wage applies to employees in state-owned organizations and the regional minimum wage to employees in non-state-owned organizations.
The regional minimum wage in Vietnam increased by approximately 6% from 1st July 2022, as follows:
- Region 1: VND 4,680,000 per month – covers urban Hanoi and Ho Chi Minh City
- Region 2: VND 4,160,000 per month – covers rural Hanoi and Ho Chi Minh City along with Da Nang
- Region 3: VND 3,640,000 per month – covers provincial cities and districts of Bac Ninh, Bac Giang, and Hai Duong and Vinh Phuc provinces
- Region 4 VND: 3,250,000 per month – covers remaining localities
Employers are required to pay trained employees a salary that is at least 7% above the regional minimum salary.
From 1st April 2022 until the end of the year, the maximum number of overtime hours an employee may work increased from 40 hours to 60 hours per month. This is capped at 300 hours per year, previously 200 hours.
This maximum applies to all occupations and must be agreed by mutual consent.
The following types of employees are not eligible to work more overtime:
- Employees under 18 years old
- Employees with disabilities
- Employees who do heavy, toxic or dangerous work
- Pregnant women from the 6th or 7th month of pregnancy, depending on their location.
- Mothers raising children under 12 months old.
