How to hire employees in Vietnam

When it comes to hiring in Vietnam, employers face a unique set of opportunities and challenges. The Vietnamese job market is characterized by its youthful demographic, high levels of education, and increasing proficiency in English, making it a promising talent pool for international firms. 

However, successful recruitment requires more than just identifying the right candidates; it involves understanding local employment laws, cultural expectations, and competitive compensation packages. 

This article aims to equip businesses with the necessary information and strategies to effectively hire and retain top talent in Vietnam, from navigating legal requirements to fostering a work environment that appeals to Vietnamese professionals.

What you need to know before hiring employees in Vietnam

Job market in Vietnam

When exploring how to hire employees in Vietnam, the following trends can help you hire cost-effectively and pay talent correctly. 

• In 2021, employment was distributed with 29.04% in agriculture, 33.13% in industry, and 37.82% in services, showing a balanced economic engagement.
• In 2020, 47% of Vietnamese were optimistic about technology's job impact, with 42% excited and only 7% nervous, indicating the growth of a young tech-savvy workforce. .
• 61% believed technology would enhance their daily work, while 57% felt it would improve their job prospects, highlighting a tech-savvy workforce. According to Forbes Reports that Vietnam's labor force is highly optimistic (47%) and excited (42%) about adopting technology in their job roles.
• In the first half of 2023, Vietnam showcased its economic tenacity, growing by 3.72% amidst global challenges. The country's vibrant service sector, boosted by tourism and smart policies, signals a welcoming environment for businesses. Competitive labor costs in such a dynamic economy promise significant savings and opportunities for talent-driven growth. This adaptable, economically attractive market is poised for the upcoming changes in Vietnam's hiring trends for 2024, hinting at a dynamic shift in how businesses engage with local talent in the evolving economic climate.

Vietnam Hiring Trends

In 2024, Vietnam's job market is poised for growth, driven by a balanced distribution of employment across industries and services.The workforce's optimism about technology's impact on jobs reflects a forward-looking and adaptable labor market, with 47% optimistic and 42% excited about future prospects 

Vietnam's employers are enhancing benefits to attract and retain talent amid rising competition and healthcare costs, with 60% citing talent competition as a key challenge. Health benefits, career development, and flexible work arrangements are top priorities, indicating a shift towards more holistic employee welfare strategies. 

Vietnam's hiring trends for 2024 underscore the importance of embracing technological advancements, investing in employee welfare, and offering competitive benefits to navigate the dynamic employment landscape successfully.

How to hire employees from Vietnam

1. Set up an entity in the country

Establishing a legal entity in Vietnam offers businesses a strategic foothold for significant growth or a sustained presence in the Southeast Asian market, facilitating direct management of employees and optimizing long-term cost efficiencies. 

The process entails choosing an appropriate business structure, such as a Limited Liability Company (LLC) or Joint Stock Company (JSC), crucial for compliance and operational success. This includes obtaining an Enterprise Registration Certificate and drafting a charter, which are essential steps for legal and tax registration.

Successfully navigating this process demands a detailed grasp of Vietnamese corporate and labor laws. Businesses may also need to seek expert advice or set up in-house expansion teams to guarantee compliance with HR and payroll regulations.

2. Hire independent contractors

Engaging independent contractors in Vietnam offers businesses the flexibility to scale operations and tap into specialized skills for project-based work. This model allows for cost-effective hiring for short-term needs without the commitments associated with permanent employment. 

However, when employing contractors, many businesses risk violating employee misclassification laws. AEmployee misclassification in Vietnam, as in many countries, refers to employers' incorrect categorization of workers, which can lead to improper application of labor laws and regulations. This usually involves labeling employees as independent contractors or vice versa. 

 Besides, the aforementioned complexities, while contractors do provide agility and access to niche skills, their loyalty and integration into the company culture might not be as reliable  as ] full-time employees. 

This distinction is vital for companies to consider when opting for this hiring strategy in Vietnam's dynamic market.

3. Partner with an EOR in the country

Partnering with an Employer of Record (EOR) in Vietnam simplify  hiring  for businesses looking to hire in Vietnam without a local entity. EoRs help you seamlessly integrate into the Vietnamese market, by taking the onus on labor compliance, payrolling and benefits.  This strategic collaboration frees companies from compliance hassles and focuses on hiring, employee experience and growth. 

Compliance risk while hiring in Vietnam

Here are the primary areas of compliance attention:

For Hiring Foreign Employees: Vietnam welcomes skilled foreign professionals, but it's important to assist them in obtaining the correct work visas and permits. We recommend partnering closely with the Department of Labor, Invalids and Social Affairs (DOLISA) for smooth processing. It's a step that shows your commitment to both compliance and to your future employees.

Classifying Workers Correctly: Distinguishing between employees and independent contractors is more than administrative detail; it's about ensuring fairness and compliance. Misclassification can have serious implications, but with careful attention, it's easily managed. This consideration helps protect your business and respects the rights of workers.

Contributing to Social Insurance: Contributing to Vietnam's social security system is not only a legal requirement but also a gesture of care towards your employees, encompassing health insurance, unemployment benefits, and retirement provisions. Timely contributions reflect your company's integrity and contribute to a positive workplace environment.

Key Aspects of Vietnam Labor Law

Employment Contract:

In Vietnam, employment contracts can be drafted in Vietnamese or another language, as agreed upon by the employer and employee. For short-term roles under three months, a written contract isn't mandatory. 

These agreements must detail: job duties, hours, salary, workplace, duration, safety conditions, insurance, and benefits, adhering to or exceeding statutory requirements. While certain employer modifications like raises or promotions don't need employee agreement, a year's notice for such changes is required. Payments to local workers must be in Vietnamese Dong. 

Working Hours:

The standard workweek is 40 hours, generally 8 hours per day.

Overtime:

Any work beyond 8 hours a day is considered overtime and is compensated at 150% of the hourly wage. However, a daily limit of 2 hours of overtime is allowed, making a maximum of 10 hours per day.

Minimum Wage:

Vietnam sets its minimum wage by geographic zones, reflecting the cost of living differences across the country.
Recent updates include increases across all zones, effective July 1, 2022. The decree also adjusts minimum hourly wages, ensuring fair compensation for all workers.
For detailed wage structures by zone and more on employment regulations in Vietnam, click here to read more.

Payroll laws in Vietnam

In Vietnam, employers must ensure timely monthly wage payments in Vietnamese Dong (VND), comply with minimum wage standards, and fulfill tax and social insurance obligations. Payroll practices should align with the country's labor laws, including social, health, and unemployment insurance contributions, while staying abreast of regulatory updates to avoid penalties.

Employment benefits in Vietnam

Leave Policies in Vietnam

1. Paid Time Off

In Vietnam, employees have the right to at least 12 days of annual leave annually. For each additional five years of continuous service, this entitlement grows by one day,.

2. Public Holidays

In Vietnam, public holidays include New Year's Day, Tet (Lunar New Year), Hung Kings Commemoration Day, Reunification Day, Labor Day, and National Day. If a holiday falls on a weekend, the next workday is considered as a holiday. Expatriates also get a day off for their home country's traditional new year and national day. .

3. Sick Days:

Sick leave benefits for Vietnamese employees:

4. Maternity Leave

In Vietnam, maternity leave entitlements offer significant support to female employees, ensuring both time off and financial assistance during and after pregnancy.Here’s a detailed look at the entitlements and procedures for maternity leave:

• Female employees are entitled to 6 months of maternity leave, with up to 2 months prenatal and the rest postnatal. Additional months for multiple births.
• Vietnamese nationals receive 100% salary from Social Insurance, based on the last six months' average, up to 20 times the minimum common salary.
• Maternity payment for expatriates is employer-employee agreed.
• Application for leave should be submitted 15 days before the expeced  day of delivery, along with the application for Social Insurance subsidies and required documents within 30 days post-birth.

5. Paternity Leave

• Vietnamese nationals receive 100% of the previous month's salary from Social Insurance for paternity leave.
• For expatriates, paternity leave compensation is agreed upon between the employer and the employee.

Public Health Insurance 

In Vietnam, public health insurance contributions are compulsory, for employers and employees. The insurance covers expenses for treatmentat government hospitals, focusing on essential treatments, examinations, and hospitalization.  Many companies also seek additional private insurance for more comprehensive care and access to a wider range of services and facilities, including private rooms and English-speaking doctors, for a better healthcare experience.

Filing tax in Vietnam

Other Tax and Social Security Contributions

In Vietnam, employer payroll contributions total up to 21.50%, covering social, health, and unemployment insurance, while employee contributions amount to 10.50% plus a one-time disaster management fund fee of 90,000 VND. These contributions ensure employees are supported in various areas, including retirement, health, and employment transitions. 

For a comprehensive understanding of the specific rates and contribution types, please refer to the detailed guide here.

Income Tax

In Vietnam, income tax rates range from 0% to 30%, with the rate increasing progressively based on annual income brackets. The lowest rate applies to incomes up to 5,000 MYR, while earnings above 2,000,001 MYR are taxed at the highest rate of 30%. 
This tiered system ensures a fair taxation process, with higher earners contributing a larger percentage of their income. 
For a detailed breakdown of all tax brackets and specific rates, please refer to the full tax rate table here.

Business culture in Vietnam

Here’s a brief overview of the key components to keep in mind:

Relationship Building:
‍Prioritize cultivating strong, trust-based relationships with business partners and colleagues through respectful social interactions.

Communication:
‍Adopt an indirect communication style, attentive to non-verbal cues, to maintain harmony and respect in dealings.

Hierarchical Respect:
‍Show deference to seniority and organizational rank, using titles and last names to express respect in all business interactions.

Decision-Making:
‍Embrace a collective decision-making process that values group consensus and harmony over individual achievements.

Gift Giving:
‍Exchange small, thoughtful gifts in a business context to show respect and appreciation, while carefully navigating the boundaries to avoid any perception of bribery.

Top sectors to hire from in Vietnam 

Manufacturing:

Employing around 11.8 million people,  the sector is significant in terms of employment. Its growing share, reaching over 21 percent in 2022, signifies its expanding role in Vietnam's economy, driven by the country's export-oriented strategy.

E-commerce and Digital Marketing: 

With rapid growth in this sector, employers are prioritizing the creation of strong employer brands and offering flexible work arrangements to attract skilled professionals.

Export-oriented Economy: 

The manufacturing sector stands out for its contribution to Vietnam's exports, especially in commodities like mobile phones, electronics, and textiles. Agriculture also continues to be significant, with timber and aquaculture products contributing to export income.

Top cities to hire from Vietnam

Hanoi: 

The capital city, home to prestigious institutions like Vietnam National University and Hanoi University of Science and Technology, is a prime location for hiring graduates with strong technical and scientific backgrounds. The city's focus on education and technology development makes it an ideal place for sourcing highly skilled professionals in IT, engineering, and sciences.

Ho Chi Minh City (HCMC):

Known for its dynamic economy and being the financial hub of Vietnam, HCMC boasts significant talent in business, technology, and the arts. With institutions like Ho Chi Minh City University of Technology, it's a strategic location for hiring in finance, technology, digital marketing, and creative industries.

Da Nang:

This coastal city, with a growing reputation as a tech startup hub, offers a pool of talent in IT and services sectors. Its development focus on high-tech parks and education, including universities with strong engineering and IT programs, makes it a burgeoning spot for innovative companies seeking tech-savvy professionals.

Hai Phong: 

As a key industrial and maritime city, Hai Phong is strategic for hiring in manufacturing, logistics, and maritime industries. Its workforce is known for practical skills and adaptability, supported by vocational training centers and proximity to industrial zones.

Hire in Vietnam  compliantly with Gloroots

Gloroots simplifies hiring in Vietnam by providing Employer of Record (EOR) services that cater to all compliance requirements, both locally and globally. Our EOR platform ensures rapid onboarding of candidates, enabling your business to commence operations smoothly. Tailored to meet the needs of organizations regardless of size, Gloroots' comprehensive solution covers payroll, benefits, and tax obligations, eliminating the necessity for a local legal entity. This approach empowers your business to efficiently assemble a remote team in Vietnam. For detailed insights on how Gloroots can support your hiring strategy in Vietnam, we invite you to get in touch.

Frequently Asked Questions 

1. What types of employment contracts are commonly used in Vietnam?

In Vietnam, employment contracts are categorized based on their duration: indefinite-term contracts, definite-term contracts lasting from 1 to 36 months, and contracts for specific or seasonal tasks under 12 months. Understanding these contracts is crucial for compliance with Vietnam's labor regulations.

2. How can foreign companies hire employees in Vietnam compliantly?

Foreign companies can hire employees in Vietnam compliantly by setting up a legal entity like a joint stock company (JSC) or a limited liability company (LLC), or by partnering with an Employer of Record (EOR) like Gloroots. An EOR can handle employment contracts, payroll, and ensure compliance with local labor laws without the need for a legal entity.

3. What are the main challenges of hiring in Vietnam and how can they be addressed?

The main challenges include navigating complex labor regulations, managing payroll contributions correctly, and ensuring accurate worker classification. These can be addressed by thorough research, compliance with employment and tax laws, or by leveraging the expertise of an EOR service like Gloroots to simplify the hiring and onboarding process.