Vietnam Payroll and Benefits Guide
What global businesses need to know about payroll in Vietnam
It wasn’t so long ago that the idea of a foreign enterprise expanding into Vietnam would have been considered extremely unlikely, given its position as a socialist planned economy. But Vietnam is much more open to international business than it used to be, and with a population of over 100 million people, it represents a real opportunity in the south-east Asian region.
The Vietnamese economy has a well-balanced mix of sectors. Industry and services each contribute approximately 40% to GDP, with exports going all over the world to the United States, China and the European Union.
There have been a number of recent changes to Vietnam’s payroll and employment regulations. Some will make things easier for businesses, such as streamlined procedures for hiring foreign workers, but there are also some complications, including a relatively complex sick pay system. This guide covers all the key facts around running payroll in Vietnam.
Getting Started
There are some limits around the areas of business in which foreign enterprises can operate in Vietnam. Some come with particular conditions around foreign ownership, while others are barred from foreign involvement altogether. You should check Vietnam’s Law on Investment before you start your set-up process, especially if you intend to operate in advertising, transport, minerals, manufacturing, telecoms or shipping.
You’ll need to start by gaining an Investment Registration Certificate from the Department of Planning and Investment, which should take no more than 15 days, then an Enterprise Registration Certificate from the same body. There is no fixed minimum share capital in Vietnam (except for a select number of specific industries), but it’s recommended to have at least US $10,000 as a base.
Then you can apply to the Department of Tax for your tax code number, and then apply for an in-country bank account. After this, you should register for all the relevant labor and social security authorities and payments.
Employment Considerations
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 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.
The new Social Insurance Law, which took effect on July 1 2025, has expanded social insurance eligibility and participation. The minimum contribution period to be eligible for pension benefits has been reduced from 20 years to 15 years. Additionally, Vietnamese citizens aged 75 and older who don’t receive a pension can now qualify for a social pension allowance.
The standard working week in Vietnam is 48 hours: eight hours a day, six days a week. Overtime is limited to four hours a day (and should never exceed 50% of an employee’s normal working day), 60 a month and 200 a year. Overtime should be paid at 150% of normal salary, rising to 200% at weekends and 300% on public holidays. Companies in some industries can apply for local authority permission to extend overtime limits to 300 hours per year.
Notice periods are 45 days, but shorter periods apply for fixed-term contracts of up to three years in duration. Probation periods normally run between six and 60 days depending on the job role, but can run for up to six months for managerial staff. Employees must be paid at least 85% of their full salary during their probationary period.
Compensation and Severance
Vietnam’s minimum wage rates have risen sharply over the last decade or so. Different rates apply to different regions, with higher rates in urban Hanoi and Ho Chi Minh City than in smaller towns or rural areas.
The latest hike of 7.2% took effect on January 1 2026, with the lowest rate at VND 3,700,000 per month (approx. £105; $140; €120) and the highest at VND 5,310,000 per month (approx. £150; $200; €175).
The payment of a 13th-month bonus is customary in Vietnam, as it is in many other countries in the region. It can be paid either at the end of the normal calendar year or in time for Tet – the Vietnamese new year in January/February. It’s also common for employers to pay monthly allowances for commuting expenses, home internet, and a meal allowance. In the case of the latter, the maximum cap is VND 730,000 per month (approx. £20; $30; €25), but these payments are not subject to income tax.
Severance pay is half a month’s salary per year of employment, as long as an employer has at least one year’s service.
Tax and Social Security in Vietnam
Income tax in Vietnam is levied on a progressive scale. The first VND 60 million (approx. £1,700; $2,300; €1,950) earned per year is taxed at 5%, with a rate of 10% kicking in after this. With higher earnings, rates of 15%, 20%, 25% and 30% are applied before the highest rate of 35% is applied to earnings over VND 960 million per year (approx. £27,500; $36,400; €31,400). Non-residents are taxed at a flat rate of 20%.
Corporation tax is 20%, rising to as much as 50% for certain energy and minerals businesses. The standard VAT rate is 10%. There is also a Special Sales Tax where variable rates are applied to certain goods and services that are either manufactured in, or imported into Vietnam. These typically include alcohol and tobacco, and vehicles such as cars, buses and planes.
There are four main types of social security contribution in Vietnam:
- Social insurance: 17.5% employer, 8% employee
- Health insurance: 3% employer, 1.5% employee
- Unemployment insurance: 1% employer, 1% employee (only payable by either party for Vietnamese employees)
- Trade Union Fee: 2% employer
Unemployment insurance contributions by either party, only apply on the first VND 99.2 million of a monthly salary (approx. £2,840; $3,760; €3,240). For all other contributions made by employers, contributions only apply to the first VND 46.8 million earned by an employee per month (approx. £1,340; $1,770; €1,530).
Holidays and Leave
Employees in Vietnam get 12 working days of paid leave per year and receive one further day per year for every five years of service with the same employer. Basic entitlements start at 14 days for employees who are disabled or under 18, and 16 days for those working in hazardous conditions.
Vietnam has 12 public holidays per year, five of which comprise the week-long Tet festival, which normally falls in January or February. On top of this, foreign workers are also allowed paid time off on the traditional New Year’s Day and national day of their home country.
Maternity leave is six months, and a maximum of two months of this can be taken before the birth. It’s mandatory to take the first four months post-birth as part of this leave. Salary is covered at normal rate by social security, and this is also the case for the paternity leave entitlement of five days.
Regulations around sick leave and sick pay have been modified by the Social Insurance Law which took effect in July 2025. Initial paid sick leave entitlement (covered by social security) is between 30 and 70 days at 75% of salary, varying according to the level of the employee’s social security contributions over the years and their working conditions.
After this period, any further sick leave is reduced to 65% of salary for those with at least 30 years of contributions, 55% for those with at least 15 years, and 50% for those with less than 15 years.
Employees also get three days’ paid leave for a family bereavement, three days if getting married, and one day if their child is getting married.
Payroll in Vietnam: a summary
As this guide demonstrates, there are some complexities around running payroll in Vietnam, especially the differences in how Vietnamese and foreign workers are considered. Recent changes to legislation have added to the challenge of staying on the right side of compliance. The best way to avoid any unforeseen issues, and to address new changes as they arise, is to work with a global payroll partner that can connect you to country-specific expertise on the ground in Vietnam.
This article is for informational purposes only and is not intended to convey or constitute legal or any other advice. It is not a substitute for advice from a qualified professional.