Vietnam is an economy known to have many skilled and educated employees who provide services in several industries. Attracting the most suitable employees comes with providing a compensation package in Vietnam that is all-inclusive of mandatory, fringe, and monetary benefits.
Although monetary compensation is crucial for employees in Vietnam, employers commonly provide employee benefits that include 13th-month pay, performance-based incentives, medical and dental insurance, accommodation, and pension plans.
Providing the right kind of benefits and compensation package to match the employee requirements and fit the company’s budget is essential to retaining the right talent for your business, especially in a growing economy like Vietnam. Although hiring in Vietnam is relatively easy, structuring the right kind of employee benefits in Vietnam as a part of employees' compensation also becomes crucial.
What are employee benefits?
The employers provide employee benefits to employees over their salaries. Employee benefits include perks, fringe benefits, or supplementary benefits. These employee benefits packages may include overtime, medical insurance, vacation, profit sharing, and retirement benefits, to name just a few.
Employee benefits are significant in achieving your company's goals and objectives. A well-rounded benefits package for employees can help attract and retain the right talent.
Employee benefits may be required by law (depending on the risk associated with the job or industry and the country's laws where the position is held) or provided voluntarily by the employer. However, the employee benefits can vary depending on the employer, although the Vietnamese government does specify some supplementary benefits.
This article will cover several aspects of benefits and compensation in Vietnam that would prove critical when hiring the perfect employee that matches your business requirements.
Compensation Laws in Vietnam
Like countries worldwide, employees enjoy benefits under employment or compensation laws in Vietnam. The primary law governing employee benefits and compensation in Vietnam is the Labor Code 2019, implemented on 1 January 2021.
The Labor Code 2019 also extends to foreign employees working in Vietnam.
Employers must follow the guidelines laid out by the labor code that includes
- ~The minimum salary levels applicable to employers range from VND3,070,000 to VND4,420,000 per month, depending on the locality. The law sets out four different minimum salary levels in Vietnam.
- ~The employer must show the intention of employment through a written employment agreement.
- ~Vietnamese labor law requires employers to provide severance payments to employees who have been working for an employer for 12 months or more.
- ~Vietnamese employment laws restrict the maximum regular working hours in Vietnam. The employer must pay overtime to employees working beyond the set working hours –
- ~For employees working under normal working conditions - 8 hours per day or 48 hours per week
- ~For employees working in hefty, hazardous, or toxic working conditions - 6 hours per day or 36 hours per week
- ~Overtime pay as stipulated by employment laws as follows:
- ~Regular Working Days = 1.5x standard hourly rate of pay
- ~Weekend Pay = 2x standard hourly rate of pay.
- ~Public and paid annual leave days = 3x standard hourly rate of pay
As per the labor law, the above-stated regulations help employers create an ideal compensation structure in Vietnam that safeguards the interests of both - the employee and the employer.
How to Design An Employee Benefits Program For Employees in Vietnam?
Benefits planning is a challenge for most employers as it forms a critical component in calculating total compensation costs. While the employee benefits program largely depends on the type of business and the job, complying with Vietnam's employee benefits and compensation policies is equally important. Compensation and benefits policies in Vietnam, such as working hours, minimum wages, statutory leaves, social security contributions, and type of employee (full-time, part-time, or freelancer) packages, provide a framework for building a suitable compensation and benefits package for your employees.
A key factor to keep in mind is that the employee benefits packages are typically discussed during the final interview or extended offer. A well-defined benefits package can give you a distinct advantage in recruiting situations.
However, an ideal benefits plan is designed to demonstrate a perfect balance between the needs of both the business and the employees while complying with the local labor laws.
Step 1: Identifying the objectives/goals of the benefits
Identifying the objectives is crucial when deciding on the objectives of providing the benefits package in Vietnam. The significant goals for any organization operating in Vietnam can be
- ~To attract and retain talented employees,
- ~Have benefits that are unique to your industry, and
- ~Include those benefits that the law governs like health insurance plans, retirement benefits, etc.
In such cases, finding the objectives reflect both the employer and employee's needs. Hence, considering employee size, location, and industry type to find better benefits would be the right way to decide on a suitable benefits plan for your organization.
Step 2: Determining the budget or employee benefit expenses
Providing benefits programs to retain your employees can be costly. Therefore, the first step is to assign a budget for providing benefits to your employees.
Analyzing the benefits costs for the programs you wish to offer your employees would be essential. If there are existing benefits for your organization, analyzing the annual cost and projected cost and design would be ideal. Have a spreadsheet for the set budget accordingly.
Perks such as employer-employee insurance can significantly impact the budget as insurance is one of Vietnam's most sought-after employee benefits.
Step 3: Surveying industry standards and employee needs
It is always an excellent way to design a benefits program based on employee needs. You can do this by assessing or researching an employee benefits survey to understand your employee's perspectives.
- ~Including all questions related to the benefits program, you want to offer your workforce would direct you to the employees' current needs. Answering questions such as
- ~What benefits do you need to add to your employees' compensation to make a lucrative offer that stands out from your competitors?
- ~What are the other benefits your employees need compared to those you already offer?
Survey data for questions would help you determine your employees' expectations from the workplace benefits program. This benefits program for employees you offer is essential to achieve the organization's goals in the times to come. It can help you get the right mix for your employee benefits program beneficial to your employees.
Step 4: Choosing the right benefits plan
When choosing the right benefits plan, you must consider the mandatory benefits employment laws and the country's supplementary benefits (also known as fringe benefits).
The benefits plan must ideally fit the business requirements, employees' needs, the set budget, and the local labor laws for employee benefits compensation.
For example, employee benefits in Vietnam would ideally be a combination of mandatory benefits laid out by the labor laws, fringe benefits per market standards, and benefits that fit into the company's policies.
Step 5: Periodically evaluating the benefits plan
To ensure that you can manage your employee benefits program efficiently, periodic evaluation of the program is essential. Employers must periodically assess employee benefits programs as it would help ensure answers to crucial areas such as employee satisfaction, alignment with organizational objectives, etc.
Through this periodic evaluation, you can measure the extent of success of your employee benefits program.
What are the Mandatory Benefits Employers offer in Vietnam?
As per the labor law, a few mandatory benefits must be provided to employees as a part of their compensation and benefits structure in Vietnam. These benefits include
Work Hours in Vietnam:
Employees can work for
- a maximum of 8 hours per day and 40 hours per week under normal working conditions
- a maximum of 6 hours per day and 36 hours per week under extremely heavy, hazardous, or toxic working conditions.
Leave Benefits in Vietnam:
Employees are entitled to the following leave benefits in Vietnam:
- ~Annual leave - 12 paid working days exclusive of public holidays
- ~Public holidays - 12 days
- ~Sick leave - a maximum of 180 days per year with sick pay paid by social security
- ~Maternity benefits in Vietnam - 6 months of paid maternity leave; in case of multiple births, an employee is entitled to one month for each child.
- ~Unpaid Leaves - 1 day without pay on
- ~~The death of a grandparent or sibling
- ~~To attend a wedding of the employee's sibling or parent. However, any additional unpaid time off is subject to an agreement between the employer and the employee.
- ~Lunar New Year or Tet is a week-long celebration, so employees get the entire week off.
Insurance in Vietnam:
Insurance is the responsibility of every enterprise using labor and employees. There are three types of insurance benefits in Vietnam:
- ~Social insurance – covers employees’ benefits such as sick leave, maternity leave, benefits for work-related accidents and occupational diseases, pension allowance, and mortality allowance.
- ~Health insurance – covers benefits for employees to undergo medical examinations and inpatient and outpatient treatments at authorized medical facilities.
- ~Unemployment insurance (in replacement of severance pay) - unemployment insurance amounts will be paid to employees/workers depending on the time they and their previous employers contribute. The monthly unemployment allowance is 60% of the average salary in the last six months of work.
Insurance for resident employees is as below:
Insurance for foreign employees is as below:
However, businesses must pay attention to
- ~Social insurance and unemployment insurance only apply to Vietnamese employees.
- ~Health insurance applies to Vietnamese and foreign employees working under Vietnamese Labor Law.
- ~For employees whose contract is valid for more than three months or an indefinite period, it is mandatory for the employer will pay insurance.
Workers’ Compensation in Vietnam:
Workers’ compensation for employees in Vietnam is administered by the social insurance fund as laid out by the Vietnamese labor laws. Employees and employers must contribute to the social insurance fund.
Employees’ contribution – 8%
Employers’ contribution – 17.5%
Social Insurance premiums are based on is equal to 20 x Base Salary, which is 29,800,000 VND. The Base Salary applied in 2021 is 1,490,000 VND/month, and the authorities release no prescribed change for 2022.
Employee Benefits for Expatriates
With a "flat" world and a rapid increase in foreign investment in Vietnam, more and more expats enter Vietnam for work. However, not all enterprises and expats can correctly understand the regulations of Vietnam law on the employment of expats.
The following employee benefits shall form a part of expats' compensation package in Vietnam.
- ~Expats shall not enter the indefinite-term labor contract with employers. This is because the work permit has a term of 2 years.
- ~In cases of unilateral termination of the employment contract when working in Vietnam, the ex-pat is entitled to
- ~~Severance allowance (if applicable)
- ~~Contribution of compulsory social insurance ("SI"), health insurance ("HI"), and unemployment insurance ("UI") premiums into such insurance funds paid by the employer
- ~~Salary includes working days salary which has not been paid, salary for annual leaves that expats have not used, and other allowances.
- ~The Labor Code 2019 allows employees to enter some labor contracts with multiple employers. Still, they must fully perform all terms and conditions contained in the labor contracts. Therefore, an ex-pat must have WPs respectively for each employer.
All the other benefits remain the same for expatriates provided to the resident individuals in Vietnam.
How Are Employee Benefits Taxed in Vietnam?
All employee benefits in Vietnam, whether in-kind or in cash, all employee benefits in Vietnam are subject to personal income tax. Employers must determine the cash value for benefits-in-kind and factor the cost into employee compensation. Companies also must include these benefits in income calculations for payroll tax deductions.
Personal income tax deductions must be made monthly by the employer as a part of the payroll process and must submit it to the tax authorities in Vietnam.
Restrictions for Vietnamese Benefits and Compensation
One of the most significant restrictions for providing benefits and compensation in Vietnam is to have an established entity to process payroll or offer benefits. Rather than setting up an entity that could take weeks or months, partnering with a PEO and EOR entity such as Multiplier to hire employees, pay them, file payroll taxes, and efficiently offer your employees compensation and benefits in Vietnam.
Supplemental Benefits For Employees in Vietnam
It's crucial to provide allowances that include monetary or non-monetary benefits that could make a difference in your retention rates. While these benefits are not required by law, employees may expect them. For example, employers typically give employees who have worked for a company for more than a year a 13th-month bonus. You should typically pay this bonus before the Lunar New Year Holiday and give employees one month to a year's salary.
While Vietnam provides basic health insurance through its social security system, many employers will choose to provide supplementary health and life insurance. If you have a smaller company, you can always provide an allowance instead of arranging a health insurance plan.
Other supplemental benefits that are commonly provided as a part of the compensation structure in Vietnam include
- ~Meal vouchers
- ~Medical insurance (private insurance plans or group insurance plans)
- ~Accident & dental insurance
- ~Training programs
- ~Office set up
- ~Transport vouchers for regular employees
- ~Company vehicles for senior executives
A 13-month bonus, also known as the 'Tet bonus,' is not legally required in Vietnam. Still, most employers provide a 13th-month bonus, annual bonus, or commission plan. The 13th-month bonus is typically offered to employees who have worked for an employer for more than 1 year.
How Multiplier Can Help with Benefits Management in Vietnam
When your business grows, you will confront labor laws and employment processes in different countries, especially Vietnam. Therefore planning benefit packages for employees is one of many undertakings. Keeping the right approach in mind, your employee benefits planning in Vietnam can make your company stand out and make you more competitive.
While this benefits planning may sound daunting, working with a third-party service provider might assist you with benefits management in Vietnam. A global employment solution partner like Multiplier, can help you, and it could be your best approach to provide employee benefits in Vietnam while expanding your business compliantly. We understand that providing the right kind of benefits package in numerous countries is time-consuming for many companies.
Multiplier provides versatile benefits solutions to employers by utilizing culture-first technology. Our purpose is to make Vietnam's employee benefits and compensation packages accessible through a seamless and dynamic employee communications and benefits portal.