One employee in Vietnam means 15+ government registrations, monthly social insurance filings, and union consultation requirements. Most companies don't find out until they're already non-compliant.
Vietnam's labor laws heavily favor employees, and the government enforces them aggressively. Get the employment contract wrong and the entire agreement defaults to indefinite-term status. Miss mandatory 13th-month salary payments and you'll owe back pay plus 12% annual interest when discovered during labor inspections.
You've got three ways to hire in Vietnam legally. Each comes with different costs, timelines, and headaches.
Option 1: Set up your own entity
- Cost: €15,000-40,000 upfront, €8,000-12,000 annual maintenance
- Timeline: 4-6 months minimum
- Complexity: Investment certificate, business license, tax registration, social insurance registration, union setup
- Makes sense when: Hiring 15+ people long-term, permanent market presence
Option 2: Hire contractors
- Cost: None upfront, but severe misclassification risks
- Timeline: Immediate
- Risks: Back taxes, social insurance penalties (up to €50,000), reclassification to employees
- Makes sense when: Short projects (< 6 months), specialized consulting
- Note: Hire with Columbus handles compliant contractor agreements too
Option 3: Use an employer of record (Recommended for most)
- Cost: $179/month per employee
- Timeline: 2-3 days to hire
- Complexity: None - we handle everything
- Makes sense when: 1-15 employees, testing markets, multi-country teams
Here's the math: hiring 3 people means $537/month ($6,444/year) vs €25,000+ entity setup plus €10,000/year maintenance. EOR pays for itself for the first 3-4 years, and you can hire immediately instead of waiting 6 months. An EOR like Hire with Columbus handles employment contracts, payroll processing, social insurance contributions, personal income tax, mandatory benefits, and keeps you compliant with Vietnam's frequent labor law changes.
Ready to hire in Vietnam without the compliance headaches? Get started with Hire with Columbus.
What employment types can you use?
You've got three ways to bring someone onboard in Vietnam. Here's how the costs and risks compare.
How can you hire in Vietnam?
Before diving into contract types, you need to choose your hiring approach. Each has different costs, timelines, and complexity levels.
| Approach | Upfront Cost | Timeline | Best For | Key Considerations |
|---|---|---|---|---|
| Set up entity | $15,000-25,000 | 4-6 months | 20+ employees, permanent presence | Full compliance burden, ongoing legal costs |
| Hire contractors | $0 | Immediate | Short projects (<6 months) | Misclassification risks, limited control |
| Use EOR (Recommended) | $0 | 2-3 days | 1-50 employees, market testing | $179/month per employee, full compliance |
Setting up your own entity means registering a Vietnamese subsidiary, getting tax numbers, setting up payroll systems, and hiring local HR expertise. The incorporation alone costs $15,000-25,000, plus monthly accounting fees around $800-1,200. You're looking at 4-6 months before your first hire gets paid.
This makes sense if you're planning 20+ employees long-term and want complete control. But most companies underestimate the ongoing compliance work. Monthly tax filings, annual audits, labor law updates, and managing relationships with Vietnamese authorities.
Hiring contractors seems tempting because you can start tomorrow. But Vietnam's labor laws are strict about misclassification. If someone works set hours, uses your equipment, or integrates with your team like an employee, they probably are one legally.
The penalties hurt: back taxes, social insurance contributions, plus fines up to $5,000 per misclassified worker. Vietnamese courts favor workers in disputes, so "but they signed a contractor agreement" won't save you.
Using an employer of record like Hire with Columbus gives you the best of both worlds. We become the legal employer in Vietnam while you manage day-to-day work. Your hire gets a proper employment contract, full benefits, and legal protection. You avoid entity setup costs and compliance headaches.
The math is straightforward: 5 employees cost $895/month through an EOR versus $25,000+ upfront plus ongoing costs for your own entity. Most companies break even around 15-20 employees, but only if you're planning to stay in Vietnam long-term.
Employment contract types in Vietnam
Once you've chosen your hiring approach, you need the right contract type. Vietnam recognizes four main employment contracts, each with specific rules and restrictions.
Permanent contracts (indefinite-term)
These are your standard full-time employment agreements with no end date. Most companies use permanent contracts for core roles because they offer stability and flexibility.
Employees get full benefits, including 12 days annual leave (increasing to 14 days after 5 years), social insurance, and strong termination protection. You can still terminate for cause or redundancy, but you'll need proper documentation and notice periods.
Hire with Columbus handles all permanent contract requirements, from proper Vietnamese language versions to mandatory clauses about social insurance and labor union rights.
Fixed-term contracts
These contracts have specific start and end dates, maximum 36 months. They're useful for project-based work, seasonal needs, or covering maternity leave.
There's a catch: you can only renew a fixed-term contract once. After that, it automatically becomes permanent. This prevents companies from keeping employees in temporary status indefinitely.
Fixed-term employees get the same benefits as permanent staff. Same leave entitlements, social insurance, and overtime rates. The only difference is the defined end date.
Part-time contracts
Part-time employees work less than 48 hours per week (Vietnam's full-time standard). They get proportional benefits based on hours worked.
A part-timer working 24 hours weekly gets 6 days annual leave instead of 12. Their social insurance contributions are calculated on actual salary, not full-time equivalents.
Part-time contracts work well for customer service roles covering specific time zones or specialized consultants who don't need full-time engagement.
Seasonal contracts
These cover work that's inherently seasonal. Think tourism, agriculture, or holiday retail support. Maximum duration is 12 months, and they can't be used for regular business operations.
Seasonal workers get basic protections like overtime pay and safe working conditions, but limited leave entitlements. Most international companies don't use seasonal contracts unless they're in obviously seasonal industries.
Which contract type should you choose?
For most international hires, permanent contracts are the way to go. They offer stability for employees and flexibility for employers who plan to keep good people long-term.
Use fixed-term contracts when you genuinely have project-based work or need to cover specific temporary needs. Don't use them to avoid commitment because Vietnamese labor law will convert them to permanent anyway.
Part-time contracts make sense for roles that don't require full-time attention or when you're testing market demand before growing your team.
When you hire through Hire with Columbus, we'll recommend the right contract type based on your specific situation and handle all the Vietnamese legal requirements. We draft contracts in Vietnamese (legally required), include mandatory clauses, and ensure compliance with 2025 labor law updates.
The key is matching your contract type to your actual business needs, not trying to reduce obligations. Vietnamese employment law protects workers regardless of contract type, so focus on finding great people and treating them well.
How does payroll and taxation work?
Your €60,000 employee in Vietnam actually costs €74,400 per year once you add employer contributions and mandatory insurance. Vietnam's payroll system stacks multiple taxes and social contributions that can catch first-time employers off guard.
Here's what you're really paying for that €60k salary: base salary plus 23.5% in employer contributions for social insurance, unemployment insurance, and union fees. Then your employee pays personal income tax on top of their gross salary.
Personal income tax brackets
Vietnam uses a progressive tax system with rates from 5% to 35%. The brackets apply to monthly income after deductions for social insurance contributions.
| Monthly Income (VND) | Monthly Income (EUR) | Tax Rate |
|---|---|---|
| Up to 5,000,000 | Up to €188 | 5% |
| 5,000,001 - 10,000,000 | €188 - €376 | 10% |
| 10,000,001 - 18,000,000 | €376 - €677 | 15% |
| 18,000,001 - 32,000,000 | €677 - €1,204 | 20% |
| 32,000,001 - 52,000,000 | €1,204 - €1,957 | 25% |
| 52,000,001 - 80,000,000 | €1,957 - €3,010 | 30% |
| Over 80,000,000 | Over €3,010 | 35% |
Personal income tax gets deducted from the employee's salary each month. You handle the withholding and remittance to tax authorities.
Social insurance contributions breakdown
Vietnam splits social insurance contributions between employer and employee. The employer portion adds 23.5% to your total employment costs.
| Contribution Type | Employer Rate | Employee Rate | Total Rate |
|---|---|---|---|
| Social Insurance | 18% | 8% | 26% |
| Health Insurance | 3% | 1.5% | 4.5% |
| Unemployment Insurance | 1% | 1% | 2% |
| Union Fee | 2% | 1% | 3% |
| Total | 24% | 11.5% | 35.5% |
These rates apply to salary up to a maximum of 20 times the regional minimum wage. For Ho Chi Minh City in 2025, that cap is roughly €1,600 per month.
The union fee is mandatory even if your employee doesn't join a union. Vietnam requires all employers to contribute to the Vietnam General Confederation of Labor.
Payment schedule and timing
Vietnamese employees expect monthly salary payments by the 15th of the following month. Most companies pay on the 10th to avoid weekend delays.
You'll also need to budget for the 13th month bonus, which is mandatory under Vietnamese labor law. This equals one month's salary and gets paid before Tet (Vietnamese New Year) in January or February.
Some companies also pay a mid-year bonus during summer, though this isn't legally required. Factor in at least 8.33% extra annually (one month divided by 12) for the mandatory 13th month payment.
Total employment cost example
Here's what a €60,000 annual salary actually costs you in Vietnam:
- Base salary: €60,000
- Employer social insurance (18%): €10,800
- Employer health insurance (3%): €1,800
- Employer unemployment insurance (1%): €600
- Union fee (2%): €1,200
- Total annual cost: €74,400
That's a 24% markup on the base salary. Your employee receives €60,000 gross but pays about €8,500 in personal income tax and €6,900 in employee social contributions, taking home roughly €44,600.
Payroll cycle and deadlines
Vietnam runs on strict payroll deadlines. Miss them and penalties start at 20% of the unpaid amount.
Monthly payroll taxes must be filed by the 20th of the following month. Social insurance contributions are due by the 15th. Annual personal income tax reconciliation happens by March 31st for the previous tax year.
You'll file monthly tax declarations even if you have no changes to report. Vietnam's tax system doesn't allow skipping months or quarterly filings for regular employees.
Common payroll mistakes
The biggest mistake is miscalculating the social insurance cap. Many companies apply the 24% employer rate to the full salary instead of capping it at 20 times minimum wage.
Another frequent error is forgetting the union fee. It's not optional, and labor inspectors specifically check for this during audits. The 2% employer contribution catches many foreign companies off guard.
Late tax filings trigger automatic penalties of 20% plus daily interest charges. Vietnam doesn't offer grace periods for foreign companies learning the system.
Setting up compliant payroll in Vietnam yourself means hiring a local accounting firm (€800-1,200/month), buying payroll software (€200-400/month), and hoping you don't miss deadlines that trigger fines up to €5,000. Plus you'll need HR expertise that costs €40k+ annually.
With Hire with Columbus, we handle all payroll calculations, tax filings, and compliance requirements for $179/month per employee. Your team gets paid on time, taxes get filed correctly, and you avoid the penalty headaches entirely.
Okay, that's a lot of legal jargon.
Here's the thing: you don't actually need to remember any of this. That's literally what we're here for. We'll handle the compliance while you focus on building your team in Vietnam.
No lawyers required. Promise.
What benefits and leave are required?
Every employee gets 12 days minimum annual leave, but it scales up based on how long they've worked. Employees with 5-10 years of experience get 13 days, 10-15 years gets 14 days, and 15+ years gets 15 days.
The catch? Unused vacation days expire at year-end unless you pay them out at full salary rate. No carrying over to next year, which means you'll either have employees taking December vacations or you'll be cutting extra checks.
Vacation accrues monthly. Employees earn one day per month worked. New hires can't take their first vacation until they've completed 12 months, unless you're feeling generous and advance it to them.
What are the compliance requirements?
Written contracts are mandatory in Vietnam. Verbal agreements don't count and expose you to claims for unpaid wages, benefits, and severance. Here's exactly what you need to know to stay compliant.
Employment contract requirements
Every employment contract in Vietnam must be written in Vietnamese and signed within 15 days of the employee's start date. Miss this deadline and you'll face fines up to 75 million VND (about $3,000) plus potential claims for back pay and benefits.
Your contract must include these mandatory clauses or it's deemed invalid:
- Job title and specific duties
- Work location and any travel requirements
- Start date and contract duration
- Working hours and overtime arrangements
- Salary breakdown (base pay, allowances, bonuses)
- Social insurance registration details
- Probation period terms
- Termination conditions and notice periods
There's another catch: you need to register the contract with local labor authorities within 10 days of signing. Skip this step and face additional fines of 50-100 million VND ($2,000-$4,000).
Probation periods
Vietnam caps probation at 60 days for jobs requiring college degrees and 30 days for other positions. You can't extend these limits even if both parties agree.
During probation, either side can terminate with just 3 days' notice. After probation ends, full employment protections kick in and termination becomes much more complex and expensive.
Most companies miss this detail: you must specify the exact probation length in the contract. Write "up to 60 days" and Vietnamese courts will interpret this as the full 60 days, even if you intended something shorter.
Working time regulations
Standard work week is 48 hours maximum, typically spread across 6 days. Daily limits are 8 hours for normal work and 10 hours including overtime.
Overtime rules are strict:
- Maximum 4 hours per day
- Maximum 40 hours per month
- Maximum 300 hours per year (or 400 hours with government approval)
- Minimum 200% pay for overtime hours
- Minimum 300% pay for holiday/weekend work
You must maintain detailed time records for every employee. Labor inspectors can request these during audits, and missing records result in fines of 10-20 million VND ($400-$800) per violation.
Notice periods
Notice requirements depend on contract type and tenure. Get this wrong and you'll owe payment in lieu of notice plus potential wrongful termination claims.
| Years of Service | Employee Notice | Employer Notice |
|---|---|---|
| Under 1 year | 3 days | 30 days |
| 1-3 years | 30 days | 45 days |
| Over 3 years | 45 days | 45 days |
Fixed-term contracts have different rules: 3 days' notice regardless of tenure, but only for contracts under 12 months.
Termination process
You can't just fire someone in Vietnam without following strict procedures. The process depends on whether you're terminating for cause or without cause.
For misconduct terminations, you need:
- Written warning with 6-day response period
- Investigation meeting with employee representation
- Documented evidence of the violation
- Final termination letter within 30 days
For redundancy or restructuring:
- 30 days' advance notice to employees and labor union
- Consultation period with worker representatives
- Government notification for layoffs over 20 people
- Priority rehiring rights for terminated employees
Skip any step and face reinstatement orders plus back pay for the entire period.
Severance pay requirements
Severance is mandatory for most terminations except gross misconduct. The calculation is straightforward but the amounts add up quickly.
| Years of Service | Severance Pay |
|---|---|
| Under 12 months | 0 months |
| 1-3 years | 1 month per year |
| 3-5 years | 1.5 months per year |
| 5-10 years | 2 months per year |
| Over 10 years | 3 months per year |
Base the calculation on average monthly salary over the last 6 months, including allowances and bonuses. For a 5-year employee earning $2,000 monthly, you're looking at $15,000 in severance alone.
Data protection compliance
Vietnam's data protection law mirrors GDPR requirements. You need explicit consent to collect employee data and must implement security measures to protect it.
Key requirements for employee data:
- Written consent for collection and processing
- Data minimization (collect only what's necessary)
- Secure storage with access controls
- Breach notification within 72 hours
- Employee rights to access and delete their data
Violations carry fines up to 5% of annual revenue or 100 million VND ($4,000), whichever is higher. For most companies, the revenue-based calculation is what hurts.
Common compliance mistakes
Most companies stumble on these requirements that look simple but aren't:
Invalid employment contracts: Missing mandatory clauses voids the entire agreement. We've seen companies forced to pay 2+ years of back wages because their contracts lacked proper social insurance clauses.
Wrong termination process: Skipping consultation periods or documentation requirements leads to reinstatement orders. One client faced $50,000 in back pay after incorrectly terminating a 3-year employee.
Improper overtime calculations: Using base salary instead of total compensation for overtime rates. Labor inspectors love this one because it's easy to spot and carries automatic penalties.
Missing work permits: Foreign employees need work permits before starting. Operating without them means 100-300 million VND ($4,000-$12,000) in fines plus potential business license suspension.
Penalties for violations
Vietnam takes employment law violations seriously. Standard penalties for 2025:
- Invalid employment contract: 50-75 million VND ($2,000-$3,000) plus contract reconstruction costs
- Improper termination: 75-100 million VND ($3,000-$4,000) plus severance and potential reinstatement
- Overtime violations: 10-20 million VND ($400-$800) per affected employee
- Missing work permits: 100-300 million VND ($4,000-$12,000) plus business license risk
- Data protection breaches: Up to 5% of annual revenue or 100 million VND ($4,000)
Common compliance failures in Vietnam:
- Invalid employment contract: $3,000 fine + contract void + back payments
- Wrong termination process: $4,000 fine + severance + legal fees + potential reinstatement order
- Missing mandatory clauses: Contract deemed invalid, full back payments owed
- Improper dismissal: $3,000-$15,000 in compensation + reinstatement risk
Hire with Columbus ensures every contract and termination follows Vietnam law exactly. Our local legal team handles all documentation, registration, and compliance monitoring so you never face these penalties. At $179/month per employee, it's a fraction of what one compliance mistake costs.
What has changed recently?
Vietnam's job market got a major shake-up in 2025, with new regulations that'll directly impact how you hire and manage employees there.
The biggest change? Vietnam introduced stricter foreign worker permit requirements in January 2025. Companies now need to prove they've advertised positions locally for at least 45 days (up from 30) before hiring foreign nationals. The permit processing fee jumped to $850 per application, and you'll need additional health certificates from both the employee's home country and Vietnam.
New labor law amendments
Vietnam's National Assembly passed several labor code updates that took effect in March 2025. The most important change affects overtime calculations. Employees can now work a maximum of 300 overtime hours annually (previously 200), but overtime rates increased to 200% for weekends and 300% for holidays.
They also tightened regulations around remote work arrangements. Companies must now register remote work policies with local labor departments and provide detailed monthly reports on remote employee activities. The registration costs about 5 million VND ($200) annually per remote worker.
Updated social insurance contributions
Social insurance rates changed in July 2025, with employer contributions increasing from 17.5% to 18.5% of gross salary. The unemployment insurance cap also rose. Employees now contribute 1% of salary up to 25 million VND monthly (previously 20 million VND).
Here's the new contribution breakdown:
| Insurance Type | Employer Rate | Employee Rate | Salary Cap |
|---|---|---|---|
| Social Insurance | 18.5% | 8% | 25 million VND |
| Health Insurance | 3% | 1.5% | 25 million VND |
| Unemployment | 1% | 1% | 25 million VND |
Digital tax compliance requirements
Vietnam rolled out mandatory e-invoicing for all companies in April 2025. Every payroll transaction, benefit payment, and expense reimbursement must go through the government's digital system within 24 hours. Non-compliance penalties start at 10 million VND ($400) per violation.
The good news? If you're using an EOR like Hire with Columbus, we handle all these compliance updates automatically. Our local team manages the e-invoicing, updated contribution rates, and new permit requirements so you don't have to track every regulatory change yourself.