Happy and satisfied employees make your business thrive and lead to even better profits. However, the specific benefits for employees in Vietnam might not all be familiar to you yet. By using our PEO and EOR service we can provide compliant labor contracts for employees in Vietnam including local benefits.
When expanding your company’s presence in a new country, you need to ensure compliance both in your employment contracts and benefit guarantees. These involve social security contributions, sick leave, health insurance, and unemployment, to name a few.
What are the Employee Benefits in Vietnam?
Companies making their move into a new territory must ensure they comply with employees’ guarantees, benefits, compensation, and entitlements when they draw up contracts for their new staff members. Mandatory entitlements typically cover social insurance, unemployment support, paid vacations, termination and notice periods, maternity leave, and severance payments.
In Vietnam, employee benefits are governed by a range of laws, statutes, articles, and amendments drawn together under the umbrella of Vietnam’s Labor Code. Companies employing staff in Vietnam must comply with the complex regulations of the Vietnam Tax Department (Tong cuc Thue) and compulsory procedures imposed by the Vietnam Social Insurance Agency (SIA) via the Ministry of Labor.
The Tax Administration Law of July 2020 implemented new regulations for filing returns. Overseas companies must comply with the Foreign Contractor Tax (FCT) in addition to personal, corporate and sales tax rates and withholding deductions from employees’ salaries.
What Compensation Laws exist in Vietnam?
In Vietnam a framework of employment laws and regulations guarantee employees are protected in various areas. Legislation covers such as minimum wages, social insurance, redundancy, termination and severance, discrimination, working hours, vacation leave, maternity, and paternity issues and more. Statutory and mandatory minimums cannot be undercut by collective agreements negotiated by the Vietnam General Confederation of Labor (VGCL), although they can improve entitlements for employees.
Employees’ guaranteed benefits and compensation include:
Minimum wage: The minimum wage rates are regionally based. Regions 1 and 2 (Ho Chi Minh City and Hanoi urban and rural areas) have a monthly minimum of (Vietnamese Dong) VND 4.42million (US$183). Regions 3 and 4 (provincial cities) apply VND 3.43million (US$150) as the minimum. Remainder of country – VND 3.07million (US$133). The rates apply across all sectors of commerce and industry.
Working hours: The amended Labor Code limits working hours to eight per day and 48 per week. Overtime, by mutual agreement, cannot exceed four hours per day, 40 a month or 200 each year. Industries subject to seasonal variations, such as textiles, clothing, and electronics, have an annual overtime maximum of 300 hours.
Paid vacation: Amendments to the Labor Code stipulate all employees receive a basic 12 days minimum per year. Employees working in hazardous, dangerous, or toxic environments receive either 14, 15 or 16 days. Leave is allowed pro rata for less than 12 months’ employment. Workers with the same employer for more than five years receive an additional day every five years. Workers are also paid for national holidays.
Maternity allowance and 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. Women into the seventh month of pregnancy cannot work overtime or at night and cannot undertake long distance business trips. If their job entailed heavy work, they should be transferred to lighter duties or work one hour less each day on the same pay.
Paternity Leave: The paternity allowance is for five to 14 days paid leave depending on the type of birth, number of children and if the child is adopted.
Termination and severance: An open-ended contract require 45 days’ notice, with 30 days for fixed-term employment. The Labor Code lays down that these are now the only permitted labor contracts in Vietnam. Workers employed with their company for more than 12 months receive two weeks average salary for each year. Termination due to business or technological change brings severance pay of one month’s salary per year served. Employment cannot be terminated during pregnancy or maternity leave. Under the amended Labor Code, employees can terminate their contract immediately for mistreatment, becoming pregnant or if they are not paid on time.
Discrimination: Vietnam’s amended Labor Code introduced stronger safeguards regarding discrimination over sexual harassment, race or nationality, ethnic group, gender, marital status, pregnancy, political views, disability or membership of trade unions or labor groups. These will be enforced further by Ministry of Public Security regulations imposing strict obligations on employers asking for certain information from applicants for new positions or from existing staff. Employers will have to register with the Personal Data Protection Commission (PDPC), detailing their measures to process and protect the information. This will particularly apply to matters concerning health and any criminal background checks.
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. Leave allowance per year depends on working days during the year. Workers in regular employment qualify as follows: 30 days after paying 15 years of premiums; 40 days for between 15 and 30 years of payments; 60 days after paying premiums for more than 30 years. Employees in hazardous, toxic, or heavy industrial occupations are receiving an extra 10 days’ sick leave for each of the qualifying years’ bands.
Overtime: Overtime can be requested only with the employee’s agreement. The Labor Code stipulates those hours above the norm of eight hours per day and 48 each week are overtime. Compensation rates over and above the normal hourly pay are:
Type of overtime
Public holidays and paid leave days
Weekday night work
30% extra over above rates
Overtime cannot exceed 40 hours per month and there are other restrictions. Women into their seventh month of pregnancy or with children under one year old cannot work overtime.