Hire and manage employees in Vietnam

Complying with labor and employment laws in Vietnam

Vietnam’s labor legislation is anchored by the Labour Code 2019 (No. 45/2019/QH14), which took effect in January 2021. It clarifies core aspects of hiring, dismissals, wages, and working conditions for employees throughout the country. The Ministry of Labour, Invalids and Social Affairs (MOLISA) and local Departments of Labour, Invalids and Social Affairs (DOLISAs) enforce the rules in the Labour Code.

Violations—like underpaying overtime or neglecting social insurance—can lead to administrative fines, reputational harm, or, in severe cases, criminal liability. Meanwhile, aligning with labor laws builds trust among local staff, many of whom value job security in a competitive marketplace.

In Vietnam’s collectivist culture, employees often look to stable, compliant employers who provide statutory benefits and cultivate a culture of respect. Demonstrating tinh thần (team spirit) and compliance fosters loyalty in a workforce that appreciates supportive leadership.

Like anywhere in the world, Vietnam’s labor and employment laws can be complex, especially for foreign employers. If you’re looking to hire in Vietnam, simplify your compliance work by partnering with Rippling EOR and get expert HR support on local employment regulations so your business is always up to date on the latest laws.

Employment contracts in Vietnam

Under the Labour Law, employment contracts must be in writing unless the job is temporary and lasts less than three months or the role is for domestic helper work. In those cases, the employment agreement can be oral. Employers must write contracts in Vietnamese or both Vietnamese and the foreign language the employer and employee speak.

Under the law, a labor contract must include:

• Nature of the employment: Including the work the employee will perform and the contract duration. In Vietnam, the law recognizes three types of employment contracts: indefinite-term, fixed-term with a duration of 12-36 months, or seasonal lasting less than 12 months.

• Working hours: Maximum working hours are eight per day or 48 per week. The employment contract should also include rest hours.

• Employee's salary: Employees can’t earn less than the minimum wage, which varies depending on their location.

• Working place/location: The employee’s place of work must be in the labor contract. Include mobility clauses when needed. If an employee needs to travel to other temporary locations in order to perform their job duties, their employer should reimburse them for travel costs.

• Conditions on occupational safety and hygiene: Employers in Vietnam are required to provide employees with sufficient protective equipment for their occupational safety and hygiene. Both employers and employees must comply with occupational safety and hygiene regulations.

• Social insurance: Both employees and employers contribute to Vietnam’s social insurance fund at statutory rates. The employment contract should include the details.

Labor unions in Vietnam

Vietnam’s trade union system is centralized under the Vietnam General Confederation of Labour (VGCL). Unlike Western models, Vietnamese unions are typically state-affiliated. Still, they represent worker interests in wages, working conditions, and dispute resolution.

Some key points for employers to note:

• Enterprise-level unions exist: Larger companies often have their own in-house union chapter, recognized by management and local authorities.

• Collective bargaining tends to be smooth: While official unions exist, the negotiations are less adversarial than in some countries, partly due to close state oversight.

• Unions are typically the first step in workplace dispute resolution: In case of conflicts, the union can mediate with management, or cases may escalate to labor arbitration councils or courts.

Employers should strive to maintain good relationships with unions and unionized employees. If your workforce meets the threshold for union formation, try to proactively engage union reps. In factories or large offices, support union-led welfare events.

Mitigating permanent establishment risk in Vietnam

A permanent establishment (PE) refers to a fixed location, such as an office, factory, or branch, where a business regularly conducts its activities in a foreign country. If a company has established PE in another country, it might have to pay corporate income taxes there on the revenue it earns in that jurisdiction.

In Vietnam, the standard corporate income tax rate is 20%, which makes it especially important for foreign businesses to mitigate their permanent establishment risk when legally appropriate. Forms of Vietnam-based PE include:

• Branches, representative offices, factories, workshops, means of transportation, oil fields, or other natural resources extraction sites

• Construction sites

• Service-providing centers, including consulting services

• Agents of foreign enterprises

• Representatives in Vietnam who have the authority to sign contracts on behalf of foreign companies or who are responsible for providing goods and services regularly in Vietnam

Companies expanding to Vietnam (or hiring employees there) can mitigate their PE risk by ensuring their business activities don’t meet any of the above criteria to amount to a fixed place of business. Here are a few precautions to take:

• Limit local authority. If your employees in Vietnam finalize major deals, you might be deemed to have a PE.

• Document your business activities. If you want to avoid PE status, maintain written evidence that management decisions occur outside Vietnam.

• Consult a local tax expert. Because Vietnam’s CIT rate is 20% (with potential incentives in certain sectors/regions), consult local tax advisors if you’re uncertain about your risk of inadvertently forming a PE.

• Work with an EOR. A properly structured presence can clarify your tax obligations. Rippling EOR can navigate tax and employment laws, helping your business comply with permanent establishment laws in Vietnam.

robationary period in Vietnam

The probation phase in Vietnam is governed by the Labour Code, allowing employers to assess a new hire’s capability before committing fully. Conversely, a probationary period allows employees to gauge whether the role and cultural fit meet their expectations.

Under the law, probation periods have limits. They can last:

• Up to 60 days for roles requiring specialized/technical knowledge

• Up to 180 days for high-level managerial positions under certain conditions

• Up to 30 days for most other positions

During probation, wages must be at least 85% of the contracted wage. Either side can terminate the employment agreement without severance if the probation proves unsatisfactory, as long as they give prior notice as agreed in the probation contract. If the contract doesn’t specify a notice period, no notice is required by either party.

Ahead of a probation period, employers should provide new employees with a job description and performance metrics. They should also offer feedback halfway through; if the candidate is struggling, specify improvements they need to make to keep the job once probation ends.

Local laws in Vietnam

In a country that has embraced global trade yet preserves its socialist-oriented market economy, local legislations reflect both modernization and state-led frameworks. Understanding the diverse landscape of Vietnamese labor laws can prevent hefty fines, licensing troubles, and reputational fallout.

Vietnamese labor and business regulations extend beyond the Labour Code and the Law on Enterprises, which requires foreign businesses to navigate the landscape carefully to ensure compliance. For global employers with a distributed workforce, complying with various laws across jurisdictions can be tricky. With that in mind, here are some other important local labor laws and regulations to know as you consider hiring in Vietnam:

• The data protection landscape is currently evolving. Vietnam’s first comprehensive data protection law, the Personal Data Protection Decree (PDPD), was implemented on July 1, 2023. It gives individuals more control over how their personal data is processed. As Vietnam moves to protect individuals’ personal information, employers should stay aware of how data protection laws are changing.

• Environmental protection laws are robust. Manufacturing or large-scale projects require environmental impact assessments, and noncompliance can result in plant shutdowns or legal sanctions, especially in eco-sensitive areas like the Mekong Delta.

• Corporate taxes in Vietnam are high. Without exemptions, businesses pay a 20% Corporate Income Tax (CIT) and a 10% Value Added Tax (VAT).

Worker classification and misclassification in Vietnam: Contractors vs. employees

In Vietnam, deciding if someone is an employee or an independent contractor (also called a contingent worker) isn’t just a matter of nomenclature—it has real implications for social insurance, benefits, and legal responsibilities. The Labour Code 2019 is important for employers here—while it doesn’t explicitly define the differences between contractors and employees, it does state that if the individual’s role and relationship point to an employment arrangement, the law expects a labor contract with associated obligations.

Worker classification in Vietnam: Key differences between contractors and employees

Consequences of misclassification in Vietnam

Misclassification can happen if a business uses contractors or contingent workers who function more like full-time employees. Under the Vietnamese Labour Code, a worker who performs a job under an employer's management, administration, and supervision and receives remuneration for the work likely has an employment relationship and should be classified as an employee.

Misclassifying workers in Vietnam can result in serious consequences. Companies found to have misclassified employees as contractors or contingent workers can face steep fines, including:

• Back taxes and penalties: In addition to backpaying unpaid income and social security taxes, businesses may be responsible for fines and administrative penalties. For example, failing to withhold personal income tax from a misclassified employee can result in a 20% penalty on the underpaid tax, plus interest of 0.03% per day.

• Criminal sanctions: In extreme cases, businesses can face monetary sanctions, prohibition from holding certain positions or jobs, or even imprisonment. This typically occurs when the employer has committed a criminal offense, such as evading taxes or illegally terminating a worker.

• Lawsuits and reputational damage: A dissatisfied worker can file a complaint with labor inspectors or the People’s Court, which could lead to reputational risk.

If you’re controlling daily tasks, scheduling, and providing tools, consider them employees. A contractor agreement under the Civil Code can be valid if they truly operate independently, with no set hours or instructions, and handle their own finances. Be sure to keep thorough documentation, from emails to performance records, that confirms the nature of the relationship.

Clarifying roles ensures you comply with Vietnam’s labor protections, avoids financial pitfalls, and preserves goodwill. It’s about building trust with a workforce that values stability—and ensuring your company meets its legal and ethical obligations in this fast-evolving market.

Take our FREE misclassification analyzer quiz

Misclassification risk can come out of the blue. Ensure you’re classifying workers correctly through a series of questions.

Learn more

Wages and payroll in Vietnam

Managing wages and payroll in Vietnam isn’t just about monthly salary transfers. Employers need to take into account regional minimum wages, social insurance contributions, and personal income tax withholdings. It’s important to have an organized system to ensure compliance in a country where labor authorities actively monitor pay practices. Learn more about wages and payroll in Vietnam below.

Minimum wage in Vietnam

Vietnam has two types of minimum wage: the common minimum wage and the regional minimum wage.

The common minimum wage applies to employees in state-owned organizations and enterprises. It’s also used to calculate the social contribution for all employees in the country, even if they work at a business where the regional minimum wage applies to them. As of July 2024, the common minimum wage is VND 2,340,000 per month.

The regional minimum wage applies to employees in all non-state enterprises and varies depending on the business's location. The Vietnamese government defines four zones and both monthly and hourly minimum wages under the labor code. Region 1 (covering major urban hubs like District 1 in Ho Chi Minh City or central Hanoi) has the highest rate, while Region 4 (more rural areas) has the lowest.

As of July 2024, the regional minimum wage is:

All employers must comply with minimum wage rates—underpaying employees below these benchmarks can lead to immediate fines or forced back pay. Skilled employees often earn far above the minimum, but it’s a floor you cannot go below for any full-time job. It’s important, especially as a global employer, to know your region’s mandated rate and track any annual or biennial adjustments. This ensures you stay aligned with the cost of living in one of Southeast Asia’s fastest-developing markets.

Payroll frequency in Vietnam

While Vietnam’s Labour Code lets employers and employees agree on the pay cycle they want to use—monthly, weekly, or biweekly—monthly is generally the standard. Paying employees accurately and on time fosters trust and helps them budget for living costs and family obligations. Be clear and transparent about your pay cycles to manage employees’ expectations and build goodwill with your workforce.

13th month pay in Vietnam

13th month pay is an additional salary payment—often considered a bonus. Though not explicitly required by law, a 13th month payment, or Tết bonus, is a common practice in Vietnam. Employers often disburse an extra month’s wage around Tết (Lunar New Year) to help their employees celebrate with family or travel home—embracing a cultural tradition of gift-giving and community.

Many local employees accustomed to the 13th month tradition perceive it almost as a standard entitlement. In a competitive employment landscape, skipping the Tết bonus can push employees to look elsewhere. It’s also important for global employers to take note that Tết is the country’s biggest holiday. A bonus helps employees enjoy festivities without financial worry.

Spell out bonus calculations in the labor contract or internal policy—some base it on a full year of service, others on performance metrics. If you do not want employees to perceive it as a guaranteed wage, label it a “discretionary bonus” with clear conditions.

Although not mandatory, providing that 13th month pay cements your standing as a family-friendly employer, which can resonate with Vietnam’s collective culture. It can also significantly affect staff retention and goodwill.

Run payroll compliantly in Vietnam

Accurate payroll means balancing legal frameworks, local traditions, and the everyday realities of handling social contributions and taxes. A slip-up, such as failing to withhold enough social insurance or misunderstanding personal income tax brackets, can land you in hot water with authorities.By working with an EOR, you can get all the help you need to handle deductions, adhere to local wage laws, and make accurate, on-time payments. Rippling EOR makes hiring and paying employees across the globe quicker and easier than ever.

Employer and employee taxes in Vietnam

Like in any other country where your business might expand, employers in Vietnam are responsible for complying with payroll tax regulations; failure to do so can result in government penalties. Understanding how to handle employer and employee taxes is crucial for compliance and stability.

Vietnam’s tax system demands careful calculation and withholding of employees’ personal income tax (PIT), as well as employees’ and employers’ contributions to social, health, and unemployment insurance. Slipping up—like missing monthly filings or underreporting wages—can lead to fines and hamper your business’s reputation, especially when labor and tax authorities conduct random spot checks.

Here are the top things to understand about employer and employee taxes in Vietnam.

Employer taxes in Vietnam

Employee taxes in Vietnam

In addition to payroll taxes, employers must withhold and remit personal income tax from their employees’ paychecks on their behalf. Vietnam has a progressive personal income tax, meaning the more an employee earns, the higher their income tax rate:

Penalties for not paying taxes in Vietnam

Failing to comply with Vietnam’s tax rules—be it for PIT, social insurance, or corporate taxes—can prove costly. Authorities such as the General Department of Taxation (GDT) and the Vietnam Social Security (VSS) don’t hesitate to impose sanctions or freeze operations if employers don’t fulfill their obligations.

Missing monthly or quarterly deadlines often leads to administrative fines (typically a fixed amount or a percentage of the unpaid sum). Expect retroactive payments plus penalty interest if you under-declare wages (to reduce PIT or social insurance). Foreign employers should note that the tax authorities coordinate with the Department of Labour, and unregistered foreign employees not only breach labor law but also can trigger additional tax scrutiny.

Fines can range from VND 2 million to tens of millions for each offense, depending on severity. Interest on late payments is calculated daily and can accumulate quickly if unpaid balances are large or pile up.

If severe or repeated violations occur, local tax offices can request suspension of your business license or limit expansions.Staying on top of your tax obligations in Vietnam is crucial. By promptly paying monthly or quarterly taxes, cooperating with audits, and keeping thorough financial records, you ensure a positive standing in an environment that values regulatory compliance and transparency. Help mitigate tax compliance concerns by letting an EOR handle payroll taxes on your behalf, ensuring they’re paid correctly and on time. This allows you to focus on growing your business in Vietnam and beyond.

Employee benefits in Vietnam

When expanding your operations into a competitive hiring environment like Vietnam, one way to attract and retain top talent is by offering robust employee benefits. Vietnamese employees often look for a mix of statutory benefits, which are required under labor law, and company-added perks. Failing to meet minimum legal requirements can lead to labor disputes, while offering extra perks can set you apart when competing for talent.

Here’s an overview of statutory and optional benefits.

Mandatory benefits in Vietnam

Mandatory benefits are legally required, meaning employers must provide them to their employees. Under the Labour Code 2019 and related regulations, employers in Vietnam must provide key entitlements that safeguard employee welfare. These revolve around insurance and workplace conditions:

• Social insurance: Both employers and employees make mandatory contributions to Vietnam’s social insurance scheme, which covers many benefits for employees, including:

  • Sick leave

  • Maternity leave

  • Insurance for work-related accidents and occupational diseases

  • Pensions

  • Life insurance

• Health insurance: Employers are also required to make mandatory contributions to Vietnam’s national healthcare system, which covers benefits for all employees.

• Unemployment insurance: Employers must provide unemployment insurance to cover employees who lose their jobs through no fault of their own.

• Sick leave

• Maternity leave

• Insurance for work-related accidents and occupational diseases

• Pensions

• Life insurance

Optional benefits in Vietnam

Many employers go beyond statutory baselines to remain competitive, offering optional and fringe benefits to make it easier to attract high-quality job candidates, especially in major urban centers like Ho Chi Minh City (Saigon) or Hanoi, where skilled professionals have multiple job options. Combining mandatory and optional benefits is the recipe for an appealing employer brand that helps you stand out, but it can still be challenging to decide what optional benefits to include in your package. Here are some common optional benefits you might consider when hiring in Vietnam:

• 13th month salary or Tết bonus: As mentioned earlier, this is nearly a cultural norm rather than just a perk.

• Private healthcare plans: These plans cover private hospital treatments or outpatient services—a benefit that’s particularly valued among the white-collar workforce.

• Meal allowances or free lunches: Factories in industrial zones typically provide canteens offering local dishes.

• Team-building and cultural activities: Consider offering trips, activities, conferences, or team on-sites to help your team get to know one another.

• Performance or KPI bonuses: Beyond the Tết bonus, some companies award quarterly/annual incentives for meeting sales or productivity milestones.

Working hours, overtime, and leave in Vietnam

When hiring in foreign jurisdictions, employers need to understand working hours, overtime rules, and leave laws, which can all vary significantly across international borders. In Vietnam, managing schedules, overtime, and time off requires balancing national labor rules with cultural rhythms like seasonal breaks and family obligations. The Labour Code 2019 spells out the fundamentals, which require employers to give their workers enough time off to ensure they aren’t overworked and have ample rest between workdays.

Standard working hours in Vietnam

The Labour Code generally caps regular working hours at eight hours per day and 48 hours per week. Many offices adopt a 5.5- or 6-day workweek (especially smaller companies). Larger enterprises or multinational firms typically run Monday–Friday with a shorter day on Saturday—some align with the more common five-day workday seen in other countries.

Employers should note:

• There’s no legal requirement to restrict the workweek to 40 hours, but some employers do so to align with global standards.

• Any work arrangement that exceeds eight hours daily or 48 hours weekly needs to adhere to Vietnam’s overtime rules, which are covered in more detail below.

• In industrial zones, it’s common to see rotating shifts covering 24-hour production. Make sure you have a system for shift planning and rest breaks, especially if you’re in the manufacturing field.

Overtime laws in Vietnam

In Vietnam, overtime is allowed only if the employee agrees to it. Employees cannot work more than 50% of their normal working hours per day in overtime. They also should not exceed 200 total hours of OT per year, though up to 300 hours can be approved for certain sectors or urgent projects (like seasonal garment work or electronics surges).

Overtime pay rates depend on when the employee works past their normal working hours:

• 150% of their normal wage for overtime on regular working days

• 200% of their normal wage for overtime on weekly rest days

• 300% of their normal wage for overtime on public holidays or during their paid leave days

Rest period and break laws in Vietnam

The Labour Code ensures employees get time to rest and recover, aiming to maintain both productivity and well-being. For shifts exceeding six hours, employees are entitled to a 30-minute break, often used for lunch or a short rest. If working at night (10 p.m. to 6 a.m.), employees may get additional breaks or higher pay rates.

Employees are entitled to at least one day off per week, commonly Sunday or Saturday, but some factories stagger rest days to keep their operations continuous.

Leave laws in Vietnam

Employees in Vietnam are entitled to several different types of leave:

• Annual leave: Employees who have worked for their employer for at least 12 months are entitled to at least 12 days of fully paid annual leave. Minors, employees with disabilities, and those who work in heavy, toxic, or dangerous jobs are entitled to 14 days per year. Those who work in extremely heavy, toxic, or dangerous jobs (as defined by MOLISA) are entitled to 16 days per year. Employees can take leave in installments or combine vacation days for up to three years.

• Sick leave: Vietnam’s social insurance scheme pays for sick leave. Employees are entitled to 75% of their normal wage if they take sick leave due to their own illness or injury or to care for a child under seven years old. The maximum entitlement is:

  • 30 days per year for employees who have paid into the system for less than 15 years

  • 40 days per year for employees who have paid in for 15-30 years

  • 60 days per year for employees who have paid in for more than 30 years

• 30 days per year for employees who have paid into the system for less than 15 years

• 40 days per year for employees who have paid in for 15-30 years

• 60 days per year for employees who have paid in for more than 30 years

Employees can take more than their maximum sick leave entitlement if needed without pay as long as they reach an agreement with their employer.

• Maternity leave: Women are entitled to up to six months of maternity leave—two months prior to their due date and four months after. For multiple births, the mother is entitled to an extra month of leave per additional child. An employee who adopts an infant is entitled to leave until the child is six months old. As long as the employee has paid social insurance for at least six months, the social insurance scheme covers maternity leave at 100% of the employee’s wages and pays them an additional lump sum payment equivalent to twice their monthly basic salary in the month of the child’s birth or adoption.

• Parental leave: A male employee who pays into the social insurance scheme is entitled to five to 14 working days if his wife gives birth. The length of paternity leave depends on the number of children born and the circumstances of their birth.

• Personal leave: Employees can take paid personal leave in the event of:

  • Their wedding. Employees are entitled to three paid days off when they get married.

  • Their child’s wedding. When their natural or adopted child gets married, employees are entitled to one paid day off.

  • The death of a close family member. Bereavement leave varies; employees are entitled to three paid days off if a parent, spouse, spouse’s parent, or child dies and one paid day off if a grandparent or sibling dies.

• Public holidays: Employees are entitled to time off on several public holidays, some of which (like Tet) span multiple days:

  • New Year’s Day

  • Lunar New Year (Tet)

  • Hung Kings' Commemoration Day

  • Reunification Day

  • International Labour Day

  • National Day

• Their wedding. Employees are entitled to three paid days off when they get married.

• Their child’s wedding. When their natural or adopted child gets married, employees are entitled to one paid day off.

• The death of a close family member. Bereavement leave varies; employees are entitled to three paid days off if a parent, spouse, spouse’s parent, or child dies and one paid day off if a grandparent or sibling dies.

• New Year’s Day

• Lunar New Year (Tet)

• Hung Kings' Commemoration Day

• Reunification Day

• International Labour Day

• National Day

Work permits in Vietnam

When you hire a new employee in Vietnam, it’s up to you as their employer to make sure they have the right to legally work there before they start. Working in Vietnam as a foreigner, whether for a local company or an international enterprise, generally requires a work permit to do so—with some limited exemptions. Obtaining a work permit is a collaborative effort between the employer and local authorities.

Who needs a work visa in Vietnam?

Generally, all foreign nationals intending to work must hold a Work Permit or an Exemption Certificate (rare cases include internal transferees, investors, and short-term experts under certain thresholds). The employer usually initiates the process with the Department of Labour, Invalids and Social Affairs (DOLISA) in the relevant province for a foreign worker to get their Work Permit.

Some examples of individuals who might qualify for exemptions include:

• Members/owners of LLCs

• Board members of JSCs who meet investment or capital requirements

• Experts working under 30 days multiple times, totaling under 90 days per year

Some bilateral/trade agreements can also reduce permit requirements for specialized roles.

How long does it take to get a work visa in Vietnam?

Processing times vary, often based on DOLISA’s workload. They can also be affected by how long the employer takes to prepare documents and assemble the application. Once all documents are in order, DOLISA typically processes the work permit application within two to four weeks. However, if any of the employee’s documents need legalization or translation, adding another two to four weeks to the timeline is a good idea.

If you’re sponsoring an employee’s visa to work in Vietnam, start the process as early as possible—collecting legalized degrees and background checks from your home country can be slow. Aim for at least two to three months of lead time before the employee’s intended start date, especially during peak recruitment seasons.

Types of work visas in Vietnam

Vietnam offers a variety of work authorization paths, reflecting the diverse needs of its workforce. The most commonly accepted types of work permits include:

• Work Permit for foreign employees: For standard employment under labor contracts (tech specialists, management roles, etc.). Valid for up to two years.

• Practice Certificate: For regulated professions like lawyers or doctors, issued by relevant ministries (Justice, Health, etc.).

• Exemption Certificate: Short-term experts (under 30 days per stint, under 90 days total yearly), certain board members, or capital-contributing investors meeting thresholds. Often used by seasonal consultants or foreign owners.

• Investor Visa or Temporary Residence Card: If you have a significant capital stake in a local entity, you might bypass typical work permit rules, though you must meet local investment levels.

Termination and redundancy in Vietnam

Termination procedures likely aren’t at the forefront of your mind as you prepare to make your first hire in Vietnam. But ending employment in the country, whether due to individual misconduct or mass layoffs, must follow strict protocols. Arbitrary dismissal is prohibited, and employees enjoy protections like notice periods and severance—mirroring the country’s emphasis on worker rights. That’s why it’s so crucial for all employers—domestic or foreign—to understand the laws around offboarding. If you don’t follow fair processes when letting an employee go, you could be setting yourself up for legal trouble.

Here’s what to know about termination and redundancy rules in Vietnam.

Does at-will employment exist in Vietnam?

At-will employment is a legal principle—common in the US—that allows either an employer or employee to end their employment relationship at any time, for any reason (or even without reason), as long as they don’t break any laws. For example, at-will employment doesn’t allow for firing an employee on a basis that amounts to discrimination.

Vietnam’s Labour Code 2019 rejects the at-will concept. Employers need specific reasons—like performance failures, repeated contract breaches, or force majeure—to legally terminate any employee. Even a non-renewal of a fixed-term contract must be handled per local guidelines.

Actionable grounds for dismissal include:

• Disciplinary: Serious misconduct like theft, violence, or repeated policy violations

• Poor performance: Must have documented improvement plans

• Redundancy or restructuring: Business reorganization, technology changes, etc.

• Mutual agreement: Employee and employer must sign a mutual termination agreement

Vietnamese employees may be surprised if you abruptly end the contract with no explanation—and this can lead to reputational damage or potential legal conflict. Providing justification and due process fosters respect and compliance with local norms.

Notice periods in Vietnam

A notice period refers to when an employee or employer must provide advance notice before ending an employment relationship. In Vietnam, notice is required when terminating a labor contract. Minimum notice is typically:

• 45 days for an indefinite-term contract

• 30 days for a fixed-term contract lasting 12–36 months

• Three working days for a contract under 12 months

Shorter notice or immediate dismissal can apply if the employee commits severe misconduct. However, you must still adhere to lawful disciplinary processes.

Severance pay in Vietnam

Terminating employees with at least 12 months of service typically obligates the employer to pay severance or job-loss allowance—depending on whether the termination is a normal end-of-contract or a redundancy scenario.

Here are the general rules that apply to these types of payments:

• Employees receive half a month’s wage for each year of service not covered by unemployment insurance (i.e., pre-2009 or in certain non-UI-eligible roles).

• The calculation is based on the average wage for the six months before termination.

• If unemployment insurance has covered their role post-2009, severance might be replaced by a job-loss allowance in certain redundancy cases.

Severance can be complex, requiring you to track which periods were covered by unemployment insurance. Maintaining clear payroll and insurance records is key to correct computations and avoiding post-termination disputes.

How to terminate employees compliantly in Vietnam

Ending the employment relationship in Vietnam demands respect for labor laws, local customs, and thorough documentation. Rushing through or ignoring the correct channels can lead to legal headaches or damage to your reputation.

When terminating employees in Vietnam, you must:

1. Show a valid reason for the termination. This can include poor performance, misconduct, or genuine redundancy.

2. Initiate disciplinary processes or give notice. For misconduct, follow an official disciplinary process, including a meeting with the employee and possibly a trade union rep. For normal termination, provide the correct notice (30–45 days or more).

3. Finalize payment, including severance or job-loss allowance. Calculate final wages, unused leave, and severance or job-loss allowance.

When managing a global team, keeping track of termination regulations can be a challenge. Employers have to contend with just-cause rules, varying notice and probation periods, and inconsistent severance laws across different jurisdictions. Instead, consider partnering with an EOR solution, which can take care of compliance on your company’s behalf, ensuring you stay on the right side of the law from onboarding to offboarding.

What are the requirements for work permits in Vietnam?

Most foreigners need a work permit unless they fit an exemption category. The employer or EOR applies at the local Department of Labour, presenting legalized qualifications and experience proofs. Permits are valid for up to two years and can be renewed.

What is always required when an employer terminates an employee in Vietnam?

Employers must provide a lawful reason (e.g., poor performance, breach of contract, or redundancy) plus proper notice (30–45 days or more, depending on the contract type). Additionally, you must pay final settlements (unpaid wages, unused leave, and severance) within 14 days from the end date. Arbitrary firing can lead to reinstatement orders or compensation.

How does a US company pay a foreign employee in Vietnam?

There are generally three ways a US company can pay a foreign employee in Vietnam:

1. Form a local entity and open a local bank account to run payroll under Vietnamese law (with all withholdings).

2. Partner with an EOR that manages salary, insurance, and taxes on your behalf.

3. Use a global payroll service that can integrate payroll for multiple countries.