The Hiring Manager’s Guide to Vietnam's Labor Laws

In recent years, the Asia-Pacific region has become a popular destination for remote talent. Picture a dynamic business ecosystem, a steady investment in infrastructure, and an abundant reservoir of educated and highly skilled workers. And it all starts to make sense.

Across the region, Vietnam particularly stands tall.

Located in Southeast Asia, Vietnam has 54 legally recognized ethnic groups and is the 16th most populous country globally. Its population of 98 million people is expected to hit 100 million in 2023, moving the country to 15th place. And it has a vibrant, young, and dynamic workforce of over 55 million people.

Vietnam has enjoyed consistent economic growth since introducing its 1986 “Doi Moi” policy, which shifted the economy from a controlled one to a more capitalist one. The country’s GDP growth reached an all-time high of 8.02% in 2022, making it the fastest-growing economy in Asia last year.

But ethically harnessing the opportunities Vietnam’s workforce presents requires you to understand the country’s labor laws, including how regulators expect you to treat your Vietnamese employees.

This article provides an overview of Vietnam’s labor laws. You’ll get a sense of what’s expected regarding employment contracts, compensation structure and benefits, work hours, and more as you embark on your journey to build a global team.

Labor Laws in Vietnam — Overview

Labor laws, also known as employment laws or labor regulations, are a set of legal rules and regulations that govern the relationship between employers and employees in the workplace. Vietnam’s labor laws aren’t any different.

As outlined in the Viet Nam Labor Code 2019, Vietnam’s labor laws are designed to protect the rights and interests of employers and employees. And ensure fair and equitable treatment in the workplace.

Here’s an overview of the code’s provisions:

General Provisions: The Labor Code applies to workers, apprentices, trainees, and persons working without an employment relationship. It also applies to foreign workers working in Vietnam. The code defines various terms such as "worker," "employer," "labor relations," and more.
Employment Contracts: The code emphasizes the importance of employment contracts and details the contents, types, and conditions for such contracts. It also provides provisions for probationary periods.
Rights and Obligations: Both workers and employers have specific rights and obligations. For instance, workers have the right to work, receive fair wages, join workers' representative organizations, refuse to work in the face of risks to life or health, and more. Employers have the right to recruit, manage, and supervise labor, among other rights.
Prohibited Acts: The code lists several prohibited acts in the labor sector, including discrimination at work, maltreatment of a worker, exacting forced labor, employing untrained workers or those without national occupational qualifications, and more.
Employment and Recruitment: In this section, the code defines what lawful employment entails. It also emphasizes workers’ right to freely choose employment and employers’ right to recruit workers directly or through employment service agencies.
Labor Management: Employers must maintain a labor management book on paper or in electronic form, report on the employment of workers, and more.
Other Provisions: The code also covers vocational education and training, wages, working hours, rest periods, occupational safety and health, and more.

For a detailed understanding of the VietNam Labor Code 2019, you can refer to the official document provided by Vietnam’s Ministry of Labor, War Invalids, and Social Affairs.

Vietnamese Labor Laws: Employment Contracts

Like anywhere else, an employment contract in Vietnam is an agreement between an employer and employee on the working conditions, salary, rights, and obligations of each party involved.

The Code further states that an employer must enter into a contract with any prospective employee, and an electronic contract is just as valid as a physical one. Oral contracts are also valid for less than a month of employment terms, except in exceptional cases highlighted in the code.

There are two types of employment contracts outlined in Vietnam’s Labor Code:

(a) Indefinite-term employment contract

This is an agreement in which neither party specifies a fixed term nor a predetermined time for the termination of the contract.

(b) Fixed-term employment contract

In this case, the two parties fix the duration of the contract at a maximum of 36 months. If an employee keeps working after the fixed-term contract expires, both parties must agree on another contract within 30 days of the expiration date. If not, the contract becomes an indefinite-term one.

Note that you can only renew a definite-term contract once, after which the third contract would be an indefinite-term agreement except in exceptional cases highlighted in the Labor Code.

Working Hours

The labor code prescribes a maximum weekly working limit of 48 hours. It stipulates that regular daily working hours should not surpass eight hours, with a weekly limit of 48 hours. But, should the employer and employee come to a mutual arrangement regarding overtime, such arrangements must be at most 12 hours in a single day, 40 hours within a month, or 200 hours annually.

However, employers have the leeway to arrange overtime work exceeding 200 hours but capped at 300 hours annually (the 300-hour upper limit is for specific industries), except when the employees involved are:

(a) Aged between 15 and 18

(b) Those with mild, severe, or extremely severe disabilities

(d) Female employees who are seven or more months pregnant (or 6+ months pregnant for those working in highlands, remote areas, bordering areas, or islands)

(3) Female employees nursing children under the age of 12 months

On leave, the labor code states that an employee who has completed one year of service is entitled to annual leave with full pay. The leave duration ranges from 12 to 16 days, depending on the job description. For employees who have worked for less than a year, annual leave days will be the number of months they have worked.

Compensation Structure

There are two types of minimum wage in Vietnam. There’s the standard minimum wage, which employers use to calculate workers' pay in state-owned organizations, and the regional minimum wage, which applies to workers in the private sector and is based on regions outlined by the government.

On June 12, 2022, the Vietnamese government issued Decree No. 38/2022/ND-CP concerning the regional minimum wage (similar decrees are regularly issued, usually annually). This decree establishes a fresh set of minimum wage rates that apply universally to all employers, including businesses, cooperatives, agricultural enterprises, households, individuals, and other entities engaging in periodic employment contracts.

There are four regional minimum salary tiers, ranging from VND3,250,000 (the lowest tier) to VND4,680,000 (the highest tier) per month, depending on the region. Employers are to pay salaries in line with the minimum wage of the region they are hiring from.

Allowances and Benefits

Beyond mandatory benefits such as salary, paid leave, maternity, and paternity leave, employers can provide employees with additional benefits and allowances. These benefits can range from a 13-month bonus and a holiday bonus to housing allowance and life insurance.

Typically, monetary and non-monetary benefits are subject to taxation except these:

Expenditures on housing rent, electricity, water, and related services for employees that exceed 15 percent of their overall taxable income.
Life insurance and optional insurance coverage.
Compensation for a membership card, unmarked with the user's name, granting access to golf clubs, tennis courts, and other exclusive clubs.
Compensation for a membership card, unmarked with the user's name, granting access to healthcare, entertainment, and other services.
Telephone stipends.
Allowances for stationery.
Uniform allowances, either in kind or cash, not surpassing 5 million VND.
Lunch allowances, not exceeding 730,000 VND.
Funeral expenses are limited to the actual monthly salary for the year.
Wedding expenses are capped at the actual monthly salary for the year.
Transportation allowances.
Training stipends.
Employer assistance for employees facing a fatal disease or illness.
Employer-provided funding for the annual round-trip air tickets for foreign employees working in Vietnam or Vietnamese employees stationed abroad to visit their home country.
Employer-sponsored coverage of tuition fees for the education of foreign employees' children in Vietnam or Vietnamese employees' children studying abroad, from preschool to high school level.
Funding received from sponsors when the beneficiary of the sponsorship is a member of the sponsoring entity. The sponsorship is funded through government budget allocations or adheres to the State's stipulated regulations.
Compensation paid by the employer for deploying or reassigning foreign employees in Vietnam, in line with labor contracts and international work schedules of industries such as mining and oil and gas.

Hire in Vietnam Seamlessly with Remofirst

Navigating the intricacies of hiring and managing employees in foreign countries, particularly those with complex labor laws, can be daunting. However, the services offered by an Employer of Record (EOR) like Remofirst can simplify this process. With Remofirst, you gain a trusted partner well-versed in the nuances of international employment, ensuring compliance with local regulations, tax requirements, and more.

If you’re considering expanding your operations to Vietnam or seeking to hire talent from this vibrant country, our dedicated country guide provides invaluable insights. It's your go-to resource for understanding employment specifics in Vietnam, including labor laws, cultural nuances, and essential local information.

We invite you to take the next step towards seamless global workforce management. Sign up with Remofirst today, and let us empower your international expansion efforts while ensuring the well-being of your employees, no matter where they are.