Doing Business with a Vietnam PEO/EOR
Vietnam is a developing country and is one of the fastest-growing economies of the 21st century. As per reports from the General Statistics Office of Vietnam (GSO), the Vietnamese economic growth remained strong even after a global recession of 2008, holding at 6.8% in 2010, making Vietnam Asia’s fastest-growing economy.
Throughout the economic history of Vietnam, the economy has been mainly based on agriculture — primarily wet rice cultivation. Bauxite, an essential material in aluminum production, is mined in central Vietnam. This led to the agricultural and the mining sectors as the major contributing sectors towards the Vietnamese GDP, creating significant employment opportunities in these sectors.
Since reunification, the country’s economy has been shaped primarily by the CPV and Five Year Plans.
Due to such government reforms, the Vietnamese government encouraged private ownership, including industry, commerce, agriculture, and state enterprises. These areas were restructured to operate under market constraints. This led to the socialist-oriented market mechanism being replaced by five-year economic plans. Vietnam achieved approximately an 8% annual GDP growth due to these reforms.
While the Vietnamese government is working towards developing in several sectors, the country is part of international and intergovernmental institutions that include the United Nations, the ASEAN, the APEC, the CPTPP, the World Trade Organizations, to name a few.
Vietnamese government recognizes education as a national priority. Since 2008, the government has been spending 20% of its budget on education. This has led to an increase in well-educated and skilled populations contributing to several industries, especially the services sector. Considering Vietnam is a part of international institutions, this has also ensured a rise in employees that contribute to consulting and finance domain.
An increase in skilled employees in Vietnam is where Vietnamese PEO or an Employer of Record can help. Multiplier’s PEO solution acts as your co-employers. Our team of professionals assumes responsibility for all your HR operations in Vietnam PEO that including Vietnam PEO – onboarding, payroll, compliance management, employment contracts – while focusing on business matters in the country.
Why use a Vietnam PEO?
The Vietnamese Labor Law applies to all individuals working for Vietnam-based organizations or Vietnamese individuals, regardless of their nationality.
Also, the basic contractual law and enterprise (i.e., corporate) law provisions may govern certain matters. Typically, Vietnamese employment laws’ scope is also extended to Vietnamese companies when they send their employees to work overseas. Employers must comply with the law in such situations as the Law on Sending Vietnamese Laborers to Work Overseas.
Though understanding the labor laws are relatively straightforward, compliance is an area that requires assistance when looking for international talent, especially in Vietnam.
Suppose you are starting your business or are looking to hire talent to expand your business. In that case, there is a need to understand all the details of taxes, employment contracts, compliance, and matters related to the labor code.
This is where Vietnam PEO or Vietnam EOR can help. Platforms such as Multiplier efficiently ensure labor laws and taxation in Vietnam are complied with.
Vietnam PEO Costs
Usually, PEOs charge based on two pricing models – fixed and variable. A PEO based on the fixed pricing model charges a transparent fee ranging between $200 – $1000 per employee per month.
Multiplier is one such PEO solution. Our costs for Vietnam start from $200 per employee per month. However, the final cost depends on the complexity of employment laws of the employee’s jurisdiction.
Our prices are designed to ensure that you get the most out of your employee spending. Every employee hired through our Vietnamese PEO also receives HR support, benefits management, and a live dashboard to track workforce spending in real-time.
How to hire in Vietnam
Due to innovation, skilled and educated talent, and the growth of the services industry in Vietnam, there has been an influx of new jobs, especially in the fields of finance, audit, and services industries (a majority of Vietnamese employees are highly skilled and apply as virtual assistants). This allows local employees to choose their desired employer while benefiting from significant levels of flexibility.
Moreover, Vietnam being a fast-growing economy and one of the desired countries to hire remote employees from, the business environment in the economy has been relatively robust. This has enabled professionals and employees to hone their skills and develop into specialists and leaders in their chosen field of work.
With employees having a plethora of choices while choosing jobs, it is crucial to ensure that you are streamlining and perfecting your onboarding process. This leads to a growing need to provide a smooth employee experience.
Partnering with a Vietnamese PEO like Multiplier can help you here. Our SaaS-based Vietnamese PEO and EOR solutions assist global brands to gain a competitive edge in Vietnam. We can help you handle your global HR operations while focusing on growing your business compliantly.
However, if you want to go about it yourself and expand in Vietnam, below are a few crucial aspects that can help you compliantly expand into Vietnam.
An employment contract must be written in Vietnamese or foreign languages that apply to employers and employees.
Employment contracts for temporary jobs lasting less than three months need not be written.
The employment laws of Vietnam mandates an employment contract to include the following material terms:
- Responsibilities to be performed
- Working hours and rest hours
- Wages or salary
- Working place/location
- Duration of the contract
- Conditions on occupational safety and hygiene
- Social insurance and other benefits for the employee
In practice, statutory material terms are standard labor contracts for simple work only.
Alternatively, the job description, responsibilities, compensation, and benefits can be referred to when creating an employment contract.
Additionally, employers and employees are free to agree on any other terms in addition to the mandatory provisions, provided that these terms are no less favorable than certain statutory rights and must not be contrary to social morals.
However, there are certain changes that employers can make without the employees’ consent, such as salary increases and promotions. In these cases, employers need only send 12 months notifying them of the change.
The employer must process salaries of local employees Vietnamese Dong.
Partner with Multiplier’s Vietnamese PEO today to make the process of onboarding easy.
All residents and non-residents are subject to Personal Income Tax in Vietnam. However, a resident is liable to pay tax on income sourced in Vietnam and the portion of the income from foreign sources (except for non-taxable income that includes income from real estate transferred between a husband, wife, and blood relations, scholarships, and overseas remittances).
Income tax rates in Vietnam are progressive to 35%. Nonresident employees in Vietnam are taxed at 20%. Nonemployment income is taxed between 0.1% and 25%.
Individuals with an income in Vietnam are responsible for self-declaration and tax payment. Below is a table that furnishes the income tax for employees in Vietnam.
* Vietnamese Dong
- Residence – An individual is resident if they:
(1) Spend a minimum of 183 days or more in the aggregate in 12 months in Vietnam that starts from the date the individual arrives in Vietnam
(2) Maintain a residence in Vietnam; OR
(3) Have leased a residence for 90 days or more in a given tax year.
- Deductions: Available for family considerations for residents, comprising children under 18, unemployed spouses, and elderly and unemployed parents.
Ensuring employer and employee taxes are paid and complied with is relatively complex, especially when entering a new market. Partner with Multiplier’s Vietnamese PEO and EOR services for our professionals to help you file taxes timely and compliantly.
The maximum working hours under normal working conditions are 8 hours per day or 48 hours per week.
Reduced working hours for employees subject to extremely heavy, dangerous, or toxic working conditions. In such cases, the reduced working hours must be a minimum of 1 – 2 hours.
Minimum rest periods and breaks are 24 consecutive hours per week must be observed.
There are different minimum salaries that exist and depend on the location of the workplace. This is reviewed by the government of Vietnam from time to time.
The place of work or location must be stated in the employment contract. Mobility clauses can be included in employees’ employment contracts, if necessary.
For a job that requires an employee to travel to other temporary locations, it is normal for employers to reimburse all reasonable travel expenses.
There are no provisions for probationary periods in the labor laws of Vietnam. However, it is common to do so when engaging with new employees.
In cases when an employer decides to include a probation period, it must not exceed
- 60 days (or 3 months) for work that requires specialized or highly technical skills
- 30 days (1 month) for other types of work
Health Benefits & Leaves
It is mandatory for all enterprises, entities, and organizations that employ employees under indefinite-term labor contracts to provide Social Insurance. Providing health benefits also applies to companies with employees under definite-term labor contracts with a duration of three months or more.
Contribution to the social insurance funds for employees and employers must be at statutory rates. The social insurance fund pays allowances for areas that include
- Sick leave
- Maternity leave
- Work-related accidents
- Occupational disease
There are no provisions for pension plans under Vietnamese Labor Law.
Multiplier’s Vietnamese PEO and EOR cover locally-renowned, homogenous benefits for employees in Vietnam.
Annual paid leaves for employees are as below
- Working in normal conditions is entitled to a minimum of 12 days of paid annual leave
- Working under heavy, toxic, or hazardous conditions is entitled to a minimum of 14 days of paid annual leave
Annual leaves to exclude public holidays.
An employee is also given 1 additional day of paid annual leave for every 5 consecutive years of service for an employer, and there is no cap on these additional leave days.
Vietnam has 11 public holidays for which employees receive their normal pay entitlement.
If any public holidays fall on a weekend, employees can take the next weekday off.
Expatriate employees are entitled to one (1) paid day off for their traditional new year and another (1) paid day off for their country’s national day.
The holidays include
- New Year’s Day
- Hung Kings Commemoration Day
- Reunification Day
- Labor Day
- National Day
Employees suffering from illness and/or disability or taking leave. However, a doctor’s certificate is required to receive sick pay. The social insurance fund is responsible for the sick pay for employees, provided that they submit the required documentation evidencing their leave.
The maximum entitlement is:
Employers must ensure leaves are provided to pregnant employees for their regular health checkups. A female employee who
- Workers in normal conditions are entitled to maternity leave for 4 months.
- Working in heavy or harmful working conditions or working in a remote location, she can take up to 6 months’ maternity leave.
For multiple childbirths, an employee is entitled to an additional 30 days’ leave.
The social insurance fund provides maternity allowance during maternity leave.
Accidents at Work
It is mandatory for the employer to take complete responsibility for an occupational disease or a work-related accident in a workplace. The employer must fully attend to an injured employee in a work-related accident.
Full salary must be paid to the employee for the period an employee has taken leave. An employer must also cover medical treatment expenses pertaining to an occupational disease or a work-related accident.
The employee must be examined and assigned a category of injury after the treatment. Ideally, this will help employers analyze the employee’s ability to work due to work-related accidents or diseases.
An injured employee is entitled to a social insurance benefit that is paid as a lump sum or monthly installments that the social insurance fund pays.
The termination process is fairly complex in countries known for an influx of workforce. This is where Vietnamese PEO and EOR platforms such as Multiplier can help in an efficient termination process.
Proper legal grounds must exist for an employer to terminate a labor contract with an employee that includes
- Performance issues
- Prolonged illness
- A force majeure event
- Winding up of the company
Employers are required to follow several statutory steps as laid out by the employment contract such as
- Sending written warning notice
- Sending a notice pertaining to the termination of employment to employees
In cases of wrongful termination, employers must
- Reinstate the employee
- Pay their salary for the period they were not allowed to work
- Pay two months of the employee’s gross salary as a penalty for the wrongful termination.
Time Limits for Claims Following Termination
The claims in Vietnam majorly arise from
- Disciplinary measures resulting in dismissing an injured employee in an employment contract
- Compensation for loss and damage and payment of allowances.
Employee: An employee may resign from their so long as they give the employer advance notice. The notice must be in writing that shall be 30 working days for termination of a fixed-term labor contract or 45 working days for an indefinite labor contract.
Termination by Parties’ Mutual Agreement
An employer and an employee are entirely free to agree to terminate an employment contract mutually. It is not mandatory to give advance notice of termination if both parties have agreed to terminate the employment contract mutually.
Both parties may choose to waive certain procedures. All the necessary terms should be finalized and addressed in a document and signed by both parties. These terms include
- Employment termination
- Severance payments
- Personal income tax
- Social insurance
Employers must make severance payments to employees who have continually served an employer for 12 months or more. In certain cases, employers are exempted from paying severance, including retirement or dismissal. Severance Pay is paid to employees if employees have made contributions to the unemployment insurance fund.
Special Tax Provisions and Severance Payments:
Any income earned by an employee is subject to personal income tax (PIT) that are in the form of
- Monetary allowance
Severance payments paid at the minimum statutory level are not subject to personal income tax (PIT); however, any extra payments are subject to PIT. However, employers must withhold and pay PIT to taxation authorities.
With Multiplier’s Vietnamese PEO and Vietnamese EOR solution, treading into a new market is as seamless as confidently ice-skating. We can help you onboard your candidate handle payroll and HR issues without worrying about setting up a subsidiary and ensuring compliance with local laws.Once you have hired your desired talent, start customizing employment contracts for them in a few clicks and manage the workforce from a single platform. You can also pay thousands of employees in Vietnamese Dong with a single click. Hire and expand into Vietnam using the best SaaS-based PEO service in Vietnam.
Contact us to grow your business in Vietnam today.