EMPLOY IN VIETNAM WITH EASE
Global expansion is a step to make for any business, regardless of what you wish to achieve. The opportunities that can come with an expansion can be both incredibly exciting as well as intimidating and confusing, especially when you consider all of the registration procedures that needs to be done and documentation required.
Expanding to countries such as Vietnam – which is characterized by a highly-skilled and educated workforce, transparent employment and tax laws, a robust infrastructure network linking to the rest of Asia, and leading sectors in agriculture, information technology, manufacturing, tourism, construction, and logistics – can bring both excitement to the possibilities, but also significant stress to ensuring the entity with the country’s rigorous legal structures and laws.
Ensuring compliance without the sufficient knowledge of the country’s laws also adds to the stress of getting your new entity off the ground and ready to test new markets. Going at it without the proper support can increase the costs, time and risks involved.
Each new markets bring new challenges, and these can be worked through more efficiently and cost-effectively with the support of an International Professional Employer Organization (PEO) such as Bradford Jacobs, especially through our Employer of Record (EOR) framework. This can be best utilized when businesses are just beginning their expansion process and require more information before committing to incorporating an entity and fully establishing themselves in that market.
The economy of Vietnam is a mixed socialist-oriented market economy, which is the 37th-largest in the world as measured by nominal gross domestic product (GDP) and 23rd-largest in the world as measured by purchasing power parity (PPP) in 2020. Vietnam is a member of the Asia-Pacific Economic Cooperation, the Association of Southeast Asian Nations (ASEAN), and the World Trade Organization.
A developing country with a lower-middle-income economy, Vietnam is nevertheless one of the fastest growing economies of the 21st century, and its total GDP is predicted to rival those of several developed nations by 2050.
Almost all Vietnamese enterprises are small and medium enterprises (SMEs). Vietnam has become a leading agricultural exporter and served as an attractive destination for foreign investment in Southeast Asia. Vietnam’s economy also relies largely on foreign direct investment to attract the capital from overseas to support its continual economic rigor.
It is part of international and intergovernmental institutions including the United Nations, the CPTPP, the Non-Aligned Movement, and the OIF. It has assumed a seat on the United Nations Security Council twice. Contemporary issues in Vietnam include corruption and a poor human rights record.
In Vietnam, SMEs are defined as enterprises with capital investment of less than 100 million VND and total employees of less than 300. SMEs are often planned within industrial clusters.
SMEs continue to play a major role in Vietnam, accounting for 98 percent of all enterprises, 40 percent of GDP, and 50 percent of employment or 1.2 million jobs. As per the Ministry of Finance, Vietnam has more than 600,000 firms, with nearly 500,000 private and 96 percent being small and micro-enterprises.
SMEs also play a relevant role in exports, accounting for 88% of exporting enterprises and for about half of export volume. However, 70% of Viet Nam’s SME export volume comes from foreign-owned SMEs which have relocated to Viet Nam to be closer to multinational enterprises (MNEs) acting as their lead buyers.
|Country||Vietnam (the Socialist Republic of Vietnam)|
|No. of States/Provinces||57 provinces and 4 centrally administered cities|
|Principal Cities||Ho Chi Minh City, Hanoi, Da Nang, Haiphong, Biên Hòa, Can Tho, Thuận An, Dĩ An, Huế, & Vũng Tàu|
|Local Currency||Vietnamese dong (VND)|
|Major Religion||Irreligion/folk beliefs, and Buddhism|
|Date Format||(d)d/(m)m/yyyy or (d)d-(m)m-yyyy|
|Time Zone||Indochina Time (GMT+7)|
|Country Dial Code||+84|
|Border Countries||China to the north and Laos and Cambodia to the west. The South China Sea lies to the east and south.|
|Tax Year||1 January – 31 December (calendar year)|
|Minimum Wage||N/A – but have regional minimum wages|
|Taxpayer Identification Numbers||Vietnam Tax Code (Mã Sṍ Thuḗ) – Personal & Business|
Social Insurance Code
|Leading Sectors||electronics, machinery, steel, food processing, wood industry, textile, footwear, vehicle, rice, coffee, cashews, seafood, vegetables, and tourism|
|Main imports||integrated circuits, telephones, semiconductor devices, light rubberized knitted fabric, and broadcasting accessories|
|Main exports||broadcasting equipment, telephones, integrated circuits, textile footwear, and office machine parts|
|Main trading partners||United States, China, Japan, South Korea, Hong Kong, Chinese Taipei, and Thailand|
|Government Type||Unitary Marxist–Leninist one-party socialist republic|
|Current Prime Minister||Nguyễn Xuân Phúc (President), Phạm Minh Chính (Prime Minister)|
Vietnam focuses on the following key sectors, which all have a significant impact on the country’s economy:
The employer-employee relationship in Vietnam is governed by the Civil Code and Labor Code, which was amended in 2021 to bring in new worker guarantees. Additionally, proposals from the Ministry of Public Security will impose stricter obligations on employers regarding privacy and data protection.
Amendments to the Labor Code stipulated that a contract can either be open-ended (indefinite) or fixed term, with no other options allowed, apart from probationary contracts.
When hiring new staff and drawing up their contracts, specific requirements from the Labor Code apply and must be considered. These include:
Generally, a labor contract in Vietnam is effective from the date it is signed, not from when it is lodged with the labor authorities. The Labor Code, as amended in 2019 and coming into force from January 2021, recognizes these types of contracts and employment agreements:
Vietnam residents are taxed on their worldwide income, while non-residents are taxed only on locally earned income at a fixed rate of 20%.
Individuals become tax residents if they reside in-country for 183 days or more between January 1 and December 31 or for 12 months continuously after arriving in Vietnam.
Residences for foreigners include homes that are owned or leased for 183 days or more, hotel rooms, guest houses etc. that are covered by a Resident’s Card issued by the Ministry for Public Security.
Employment income is generally deducted at source by employers for remitting to the Vietnam Tax Agency. Generally, all types of income and remuneration – including benefits and payment in kind – are considered taxable. This would include royalties, commission, bonuses paid in stocks or shares for example.
Health and Social Insurance: Employers and employees contribute towards the Health Insurance Fund (HI), including foreigners. Vietnamese nationals also contribute to the Social Insurance Fund (SI) and Unemployment Fund (UI). State insurance allows all workers access to a stipulated public hospital for basic treatments. Most foreigners take out insurance for access to private clinics and hospitals.
Employers’ statutory costs include contributing a percentage of employees’ salaries to three social security funds: 17.5% to social insurance, 3% to health insurance and 1% towards unemployment insurance. These are remitted to the Social Insurance Agency (SIA).
Sick Pay: Employees receive sick pay from the Social Insurance Fund, not from the employer, and it is based on 75% of salary from which social insurance premiums were paid during the preceding month. An employee is entitled to sick leave if the following conditions are met:
The maximum number of paid sick leave days within a year, calculated according to working days and excluding public holidays, New year holidays, and weekends, is as follows:
Qualification for employees in hazardous, toxic, or heavy industrial occupations are:
Paid Vacations: Under National Employment Standards (NES), full-time employees are entitled to four weeks’ annual leave each year. Employees classified as shift workers receive five weeks annual leave.
Casual workers are not entitled to annual leave, but their salary is ‘casual loaded’ above their basic rate as compensation. Employees covered by award or enterprise agreements may receive additional leave; employees not covered by such agreements may ‘buy’ extra vacation by giving up equivalent pay.
Public Holidays: Entitlement for employees includes 11 paid public holidays yearly as decided by the Prime Minister. These include:
Foreign nationals are given an extra day off to celebrate their National Day. An extra day is given when a public holiday falls on a weekend. An employee who works overtime during the nighttime on a public holiday shall receive compensation at the rate of 390%.
Effective January 1, 2021, one day off for the National Day, either on 1st or 3rd September has been added. The schedule of “National Day” holidays will be decided annually by the government authority.
Maternity/Paternity Allowance & Entitlements: Maternity leave is six months for a full pregnancy, with days off varying between 10 and 50 days in the case of miscarriage or termination. The Social Insurance Law allows 100% of salary for the six months. After giving birth (or adopting a child less than four months old) the mother is entitled to a lump sum of two months’ average salary
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