According to World Bank data, Vietnam’s total labor force exceeded 57 million in 2024. With a young demographic and the government’s extended support for digital education, the country has become a viable and attractive option for global employers to build remote teams of employees and independent contractors.
But with the recent expansion of Vietnam’s Labor Code to align with international standards, misclassification becomes an easy pitfall for many. It is important to avoid these situations, which can lead to fines, contract revisions, and backpay for the employer.
This guide outlines the legal differences between employees and contractors in Vietnam, explains how their payments and benefits vary, and highlights how businesses can mitigate misclassification risks with Multiplier’s Contractor of Record (COR), also known as Agent of Record (AOR).
Worker classification in Vietnam
Let’s take a look at Vietnam’s revised legal understanding of employees and contractors.
Legal understanding of ’employee’
- Governed by the Vietnamese Labor Code 2021
- It is mandatory to work within a written legal agreement or contract
- Falls under employee control and supervision
- Must be paid regularly and provided with statutory benefits
Legal understanding of ‘contractor’
- Governed by Vietnamese Civil Law
- Sets their own working hours and rules
- Responsible for their own taxes and social contributions
- Paid on a contractual or deliverable basis
- Not entitled to statutory benefits
Key legal distinction between employees and contractors in Vietnam
Let’s get a better view of the main distinctions between the legal definition of employees and contractors.
Legal Aspect | Employee | Contractor |
Governing law | Vietnamese Labor Code | Vietnamese Civil Law and Commercial Contract Law |
Control and supervision | High | Low |
Tax deduction | Employer withholds Personal Income Tax (PIT) + social, health, and unemployment insurance | Contractor handles their own taxes without employer interference |
Entitlements | Statutory benefits like minimum wage, overtime, paid leave, sick leave, maternity leave, paternity leave, and severance or job-loss allowance | No entitlements unless specified in their contract |
Termination protection | Only under lawful grounds with a statutory notice period according to contract length and severance pay (or job-loss allowance) | None, other than what is specified in the contract |
Contract type | Labor contract | Service contract |
Worker classification test in Vietnam
According to Vietnamese law and practice, there are some key factors that courts use in cases of worker misclassification. They are used as worker classification tests to determine the actual nature of the working relationship, despite what is written in the contract or agreement.
You can use the tests below to classify your workers accurately.
1. Remuneration
Question: Are they paid in regular intervals?
Interpretation:
- Regularly paid salary → Likely an employee
- Paid on project or deliverable basis → Likely a contractor
2. Control
Question: Do they follow instructions and rules set by the employer?
Interpretation:
- Under direct supervision → Likely an employee
- Works independently → Likely a contractor
3. Stability
Question: Is the working relationship long-term or indefinitely continuous?
Interpretation:
- Consistent work → Likely an employee
- Short-term projects or one-time service → Likely a contractor
4. Exclusivity
Question: Does the worker only work for the employer and depend on them economically?
Interpretation:
- Single and major client → Likely an employee
- Multiple clients → Likely a contractor
5. Delegation
Question: Can the worker hire or assign their work to someone else?
Interpretation:
- Mandatory personal service → Likely an employee
- Freedom to subcontract → Likely a contractor
Worker classification checklist for Vietnam
You can use this quick checklist to help figure out whether your new hire should be classified as an employee or a contractor in Vietnam.
Question | If “Yes” → Likely an employee |
Do you control how, when, or where the worker performs tasks? | Yes |
Do you provide the primary equipment, tools, or resources for the work? | Yes |
Is the relationship ongoing, indefinite, or expected to be long-term? | Yes |
Is the worker financially dependent on your payments as their primary source of income? | Yes |
Do you restrict them from working with other clients? | Yes |
Do you manage their leaves, attendance, and working hours? | Yes |
Do you have the right to supervise and direct their day-to-day activities? | Yes |
Is the worker paid a fixed salary or wage on a regular basis? | Yes |
✔️ If you answered “yes” to most of these, the person is likely an employee, not a contractor.
Employee vs contractor pay in Vietnam
Let’s factor in all the taxes, benefits and contributions to find out your employer cost in case of both employees and contractors. Here is a sample cost comparison for a $1000 monthly payout to both.
Component | Employee | Contractor |
Gross salary | $1000 | $1000 |
Employer contributions (Social, health, and unemployment insurance) | $215 | — |
Taxes withheld (PIT + Employee contributions) | $143.25 (Approx.) | – |
Net payout | $856.75 | $1000 |
Total employer cost | $1215 | $1000 |
Note: Actual cost can vary depending on local tax laws and statutory requirements.
How Multiplier can help
Use our free employee cost calculator to estimate your total cost of hiring in Vietnam, including salary, employer-employee contributions, and tax deductions.
Employees vs contractors in Vietnam: Benefits and protections
Employees in Vietnam enjoy a number of statutory benefits and protections that are not applicable to contractors. As seen in the sample cost comparison above, it can vastly alter their cost to companies.
While independent contractors are void of these, they can charge higher rates for their services. Let’s have a look at the benefits and protection so you can make an informed decision.
Benefit/Protection | Employee | Contractor |
Paid leave | ✅ | ❌ |
Maternity and paternity leave | ✅ | ❌ |
Social insurance | ✅ | ❌ |
Health insurance | ✅ | ❌ |
Unemployment insurance | ✅ | ❌ |
Severance/Job-loss allowance | ✅ | ❌ |
Termination protection | ✅ | ❌ |
When to hire a contractor vs an employee in Vietnam
Learn how to make the correct hiring choice for your business.
You need an employee for:
- Long-term and regular work
- Work that requires direct control and supervision
- Internal business affairs
You need a contractor for:
- Short-term project or one-time service
- Specialized services that need expertise
- Work that can be done independently without supervision
Here are some examples that will help clear up any confusion.
Situation | Recommended hire |
Full-time operations role | Employee |
3-month audit process | Contractor |
Regular personnel training | Employee |
Short marketing campaign | Contractor |
Legal risks of misclassification in Vietnam
While misclassification cases are rarely publicized in Vietnam, the labor department and legal firms make their presence very much known. Service contracts are regularly disputed due to the unawareness of local laws, while they could have been easily avoided.
Here are some liabilities faced by global employers in cases of misclassification of workers:
- Backpay of employer contributions along with late-payment interest
- Tax audit for failed PIT obligations
- Administrative penalties or fines
- Employee claims for missing statutory entitlements
Vietnam’s gig drivers protest: VND 60,000 daily tax exposes misclassification
In August 2019, hundreds of app-based drivers in Ho Chi Minh city staged a strike after being classified as independent contractors under a new tax policy. The rule imposed an extra VND 60,000 (≈ US $2.60) per day on drivers earning over VND 100 million (≈ US $4,310) annually.
Consequences:
- Exposed misclassification issues faced by gig drivers
- Triggered negotiations between drivers, platforms, and city authorities
- Highlighted regulatory gaps in Vietnam’s gig economy
How Multiplier helps you hire compliantly in Vietnam
Hiring contractors and employees in Vietnam can be challenging, as you need to adapt to local laws — especially with recent revisions in the Labor Code. You can simply avoid the legal risks of misclassification with Multiplier’s Employer of Record (EOR) services for hiring Employees and COR services for hiring contractors compliantly
With Multiplier’s support, you can:
- Manage end-to-end payroll in complete compliance to local laws.
- Handle all changes in taxes or benefits with help from local experts.
- Manage compliant contracts that adhere to the country’s labor code or civil law perfectly.
- Access our automated classification engine to minimize the risk of worker misclassification.
Take advantage of Vietnam’s youthful population and leave the compliance stress to us. Multiplier takes care of accurate classification, seamless onboarding, and legally compliant payments.
Book a demo today.
FAQs
What laws cover independent contractors in Vietnam?
Independent contractors fall under Vietnamese civil law, mainly commercial contract law.
Are written contracts mandatory for employees in Vietnam?
Yes, written contracts are mandatory to solidify an employer-employee relationship.
Who is responsible for taxes, the employer or the contractor themselves?
In the case of independent contractors, taxes are handled by the contractors and not employers.
What are the major misclassification risks in Vietnam?
Fines, retroactive payments of employer contributions, back taxes, and statutory benefit claims are the major misclassification risks for employers in Vietnam.
