Understanding Payroll in Vietnam: What Global Companies Need to Know About Vietnam's Payroll System
Apr 25, 2017
Vietnam has about 90 million people living in the country, with an average income of about₫3,294,705 ($145, £113,€134) a month. Vietnam revamped their economy about 30 years ago, and has since seen their numbers increase since then. While this country is still developing, it has made major strides to integrate with the world economy via trade and production. Agriculture, fishing, tourism, and mining are all major sectors of the economy.
As this country continues to grow, foreign companies have been investing heavily in establishing new locations in Vietnam. The salary structure of the country needs to be fully understood to set up a functioning payroll. However, the employment and tax requirements have been changing frequently as the laws attempt to keep up with the burgeoning economy. It is recommended that businesses have an international payroll solution that can help them navigate the requirements.
You will need to work with the Business Registration Office (specifically the Department of Planning and Investment) to get the appropriate business and tax certifications. This can be done at the local level before the data is transferred to the Department of General Taxation. Once the Department of General Taxation has the information, they will issue an enterprise code number which serves as the business registration code and the tax code number as well. You will also need to create and register the company seal with the Business Registration Office.
Once you have the certificates you can apply for a bank account. The process should not take long to establish provided you have all the documents you need. From there, a company will publish the registration information on the National Business Registration Portal (NBRP), register with the Municipal Department for Labor, pay the local tax through either the tax office of bank, and register employees with the Social Insurance Fund.
In Vietnam, the working hours are cut off at 8 hours a day and 48 hours a week. Generally, overtime cannot go more than 4 hours unless provided by special circumstances or rush projects. Employees need at least one day of rest off a month. Overtime is time and half for the first two hours and double time for anything over that.
Contracts are required in Vietnam, and are defined as a written agreement regarding the rights, responsibilities, and working conditions between both parties. They need to be signed by an authorized person within the company in order to be valid. Contracts may or may not specify the length of the agreement, and may or may not also include a collective labor agreement. Probationary periods are to be paid at least 85 percent of the regular salary, with the length of the period determined by the employee's education level.
Minimum wage is dependent upon the area you operate within, which is adjusted to account for depreciation and socio-economic conditions for both the workers and their families. The highest is ₫3,521,926($155, £121,€143) a month in the major cities, while the lowest is₫2,408,543 ($106, £83,€98) in rural areas. It should be noted that minimum wage has raised frequently in the past few years to account for the budding economy. Collective bargaining is in effect for Vietnam for certain industries, but this is new to the country and may or may not apply. There are no specific laws about wage growth or bonuses as of yet. However, much like minimum wage changes, expect the rules to err on the side of worker’s rights if and when they are established. Workers will likely expect raises after 12 months of work.
Employee income tax in Vietnam can be anywhere from 5 to 35 percent, depending on salary. Social security tax is divided into different categories, but typically accounts for 7.5 percent of the total salary. These taxes are automatically withheld. The Corporate Income Tax is 20 percent, though you’ll pay more (up to 50 percent) if you’re in an industry that uses the natural resources of the country. The major taxes and contributions are health insurance, social security, and unemployment insurance. Secondary payments include business licensing, environmental and non-agricultural land tax.
Leave, Maternity and Sick Time
Assuming that employees contribute to the social insurance fund, employees are allowed up to 6 months off of paid maternity leave, with more time off should the mother have twins. Employees are entitled to at least 30 days of paid sick time, and more if they’ve been contributing to the social insurance fund for longer than 15 years. Salaries are typically covered by Vietnam’s social insurance and not the employer. Vietnam has 10 paid public holidays, and workers are entitled to at least 12 days off every year for vacation time once they’ve worked at a company for longer than one year.
|Date||Vietnam's Public Holiday Schedule|
|January 1st||New Year's Day|
|January 26th||Tet Holiday|
|January 27th||Tet Eve (Vietnamese New Year's Eve)|
|January 28th - February 1st||Tet Holiday (Vietnamese New Year)|
|10th day of the 3rd Lunar Month||Hung King's Temple Festival|
|May 1st||Labor Day|
|May 2nd||Reunification Day|
|September 4th||National Day|
As stated, Vietnam continues to shift benefits towards the workers while still trying to attract new companies to set up shop here. There is a lot of untapped potential in Vietnam for companies hoping to expand their business.
Global payroll regulations and finance obligations are only likely to continue changing, meaning you'll need a variety of resources if you're planning to do it alone. However, by choosing an international payroll company to help, you can subvert many of the fines and the legal hassles that come from making even one mistake when setting up the finances for your business.
This article is for informational purposes only and not intended to convey or constitute legal or any other advice. It is not a substitute for advice from a qualified professional.