MANAGING

CHANGE
LABOUR REGULATIONS IN VIETNAM
With the increasingly open business environment
and international integration policies, Vietnam
continues its stable development into one of Asia’s
most attractive investment destinations in the
process of restructuring global supply chains and
a potential market for international corporations.
Vietnam needs a more skilled workforce
to change comprehensively from an agricultural
country into a sought after location for industrial
production and services. To set course for sustainable
growth and attracting foreign investment, Vietnam
Government has made several changes in the
Labour regulations.
Establishing international labour standards
is a necessary and coherent step on this way.

Rödl & Partner

MANAGING
CHANGE
LABOUR REGULATIONS IN VIETNAM

3
Content
1. Introduction 6
2. Law on Labour Contracts 6
2.1. Labour Contract  7
2.2. Terms of Labour Contracts  8
2.3. Foreign employees  8
2.3.1. Visa  9
2.3.2 Temporary Residence Card (TRC)  10
2.3.3. Foreigners requiring a work permit 11
2.3.4. Application process for a work permit 12
2.3.5. Exemptions for foreigners 13
2.4. Probation 13
2.5. Working hours, rest hours, holidays, overtime 14
2.6. Minimum wages 15
2.7. Salary during sickness and maternity / paternity leave 16
2.8. Potential bonus schemes  16

3. Internal Labour Rules (ILR’s) 17

4. Labour discipline 17
4.1. Health and safety obligations 18
5. Trade Union 18
6. Strikes 19
7. Termination of Employment 19
7.1 Unilateral termination 21
7.1.1 Termination by Employer 22
7.1.2 Termination bay Employee 24
7.2 Bilateral termination 24

8. Taxes and duties 25

8.1 Personal income tax (PIT) 25
8.2 Compulsory social insurance, health insurance,
unemployment insurance and trade union fees 25

9. Penalties 26
9.1 Work permit violations 26
9.2 Penalties for employers for violations in Trade
Union Contributions 26

About us 28
Contact30
1. Introduction
The following provides a short overview over the regulatory and
practical requirements on Labour regulations of Vietnam.

Vietnam’s population is about 95 million. The current labour force is

around 58 million people, and about 1 million young adults entering the
labour market annually, Vietnam has a large base of the labour force.
However, approximately only 12 % of the population is considered to
be trained or skilled.

As one might expect, the position of employees is rather well protected

compared to other countries. Protection wise there is no distinction
between foreigners with a local labour contract and Vietnamese
employees. The Labour Code, however, grants certain protections to
particular groups of employees (women, disabled, elderly, etc.)

Vietnam’s labour legislation and its implementation in practice are

well developed. It covers almost all aspects of labour relations in the
work place from the right to work to the right to organise of workers,
from labour contracts to collective bargaining agreements, from
minimum working ages to minimum wages, etc.

The Law on social security has introduced some wide-ranging

changes which are considered to be good for international investors.
As a member of the WTO and FTA’s being initiated, Vietnam is in
urgent domestic and international demand for the incorporation and
implementation of international labour standards. Vietnam will receive
legal, political and economic benefits from the implementation of
FTA’s with the region and beyond. Those agreements will increase
trust, legal certainty and therefore be beneficial for foreign investors
in Vietnam.

2. Law on Labour Contracts

The main law regulating employment relationships in Vietnam is the
2019 Labour Code, which took effect on 1 January 2021. For foreign
nationals, there is also a set of implementing regulations, including
Decree 152/2020/NĐ-CP, which mainly provides guidance on matters
related to work permits for foreign workers in Vietnam.

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 The Labour Contract must follow the key contents as provided by laws.
This applies also to multinational companies that prefer to have their own
standard contracts for all jurisdictions they do business in.

The Vietnamese Labour regulations provide the legal options of probation,

indefinite and definite labour contracts.

2.1. LABOUR CONTRACT

The labour contract should be written in Vietnamese. If one of the parties is

a foreigner (this includes foreign-invested enterprises), the contract may be
bilingual (Vietnamese, followed by a translation into a foreign language), but
the Vietnamese version prevails in case of inconsistencies between the two
versions.

As a general rule, a labour contract is effective from the date stated in

the contract and there are no filing requirements to effectuate the labour
relationship. An employer has to declare its use of employees to the labour
authority within 30 days from the date of its commencement of operation.
Further reports on changes have to be made every six months.

Salary paid to Vietnamese employees must be paid in Vietnamese Dong

(VND). Within the territory of Vietnam all transactions in contracts and
agreements are required to be conducted in Vietnamese Dong. The law
provides several exceptions to this general rule. Foreign employees (whether
they are residents or non-residents) are permitted to receive salaries,
bonuses and allowances in a foreign currency. Therefore, the salary may be
stated and paid in any tradable currency.

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2.2. TERMS OF LABOUR CONTRACTS

Probation Period Probation can be agreed by parties. The duration of a

probationary period depends on the qualification and
education and job position of the new employees but
must not exceed the time limit as provide by law, i.e. 6,
30, 60, 180 days on case by case basis.

Definite Term Definite labour contracts can be agreed by parties up to

Labour Contract 36 months and twice in a row. 12 months is common
after probation.

Indefinite Term After two definite term contracts in a row, an indefinite

Labour Contracts term contract must be concluded.

Foreigners Locally employed foreigner will in practice always have

a maximum of 24 months contracts due to work permit
regulations.

2.3. FOREIGN EMPLOYEES

The Labour Code explicitly states that it applies to foreign nationals

working in Vietnam, and the general rule is, that foreigners working
in Vietnam must comply with the Vietnamese Labour regulations,
unless an international treaty to which Vietnam is a party objects.
Foreigners can either have a local labour contract or be seconded
from the parent company (“Internal Transfer”). If a labour contract is
signed with a Vietnam-based entity, the law of Vietnam must apply
regardless of the choice of law by the parties.

In Vietnam, a visa and a work permit are two separate documents

that are used for different purposes. A visa is an official endorsement
allowing a foreigner to enter and to remain within Vietnam, while a
work permit is the permission for a foreign worker to work in Vietnam.
A visa can be replaced by a temporary residence card (“TRC”) which
grants a foreign worker the right to stay in Vietnam for a certain length
of time. If a foreigner wants to stay and to work in Vietnam, a work
permit and a visa or a TRC will be required.

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2.3.1. Visa

The following visas are relevant in terms of employment and business

activities:

Forms of Objectives Issuance authority

visa

Business – This type of visa is for foreigners Overseas Vietnamese

visa attempting to enter Vietnam for embassy / consulate
business purposes.
– The common validity of a multiple-
entry business visa is three
months.

Family visa – This type of visa is for direct family Overseas Vietnamese
member of a foreigner working in embassy / consulate
Vietnam. The family members must
have the adequate evidence of
dependency.
– The maximum validity of a
multiple-entry family visa is 12
months on a case by case basis.

Working visa – This type of visa is issued when an Overseas Vietnamese

foreigner obtains a work permit. embassy / consulate
– The validity of a multiple-entry
working visa is the same as the
validity of the work permit
(maximum two years on a case by
case basis).

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 Investment – This type of visa is for foreign Overseas Vietnamese
Visa investors mentioned in the embassy / consulate
Enterprise Registration Certificate
and the Investment Registration
Certificate.
– The maximum validity of a
multiple-entry investment visa is
depended on the Investment Value
(<3, 3-50, 50-100, 100+ billion
VND) and shall be granted for the
duration of 1, 3, 5 and / or 10 years
depending on value respectively.

For the Visa application (except for tourist visa) the following points have to
be considered:

Required documents Timeline Application Result

– Application forms five working An approval for employee to

– Enterprise Registration days receive the visa at overseas
Certificate Vietnamese embassy /
– Copy of passport consulate

Note: In practice, the authorities only issue visas with the maximum validity of one year. To stay in Vietnam
for more than one year, a foreigner must have a TRC.

2.3.2 Temporary Residence Card

The TRC replaces a visa and it can be issued if a foreigner has a work permit,
a Law Practice Registration or an Investment Registration Certificate
investing more than three billion VND. The family can get the TRC along
with the employee as long as they have dependency evidence.

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 The TRC can be renewed if the foreigner and his / her family do not need to
leave Vietnam provided that the foreigner must work for the same company
sponsoring his / her visa at the first time.

2.3.3 Foreigners requiring a work permit

The initial principle is that all foreign individuals (i.e. non-Vietnamese

citizens) require a Work Permit issued by the Department of Labour, Invalids
and Social Affairs (“DOLISA”) before they commence and undertake any
employment in Vietnam, exceptions apply.

Manager / CEOs Specialists Technicians

– Managerial position – At least five years of – Technical training or

that is entitled to work experience and other specialised
enter into the practicing license training at least one
company’s satisfying job year and at least
transactions (on requirement three years of work
behalf of the (Guidance on this to experience in trained
company) which is be expected), or field, or
mentioned in the – Bachelor’s degree (or – At least five years of
company’s license / higher) and at least work experience and
Charter. three years of work practicing license
– CEO’s appointed (if experience in area satisfying job
registered in the relevant with requirement.
license, manager proposed position.
definition above
applies).

Work permits are issued by the local DOLISA where a foreign employee is
working. They are issued for a maximum period of two years and may be
renewed for one time only. Before employing a foreigner on the basis of a
local labour contract, the employer must apply for a need of foreign labour
at the local DOLISA . In case of Internal Transfer, the parent company has to
confirm that the employee has worked for the parent company for at least
one year.

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2.3.4. Application process for a work permit

For the application process the following points have to be considered:

Application process Required documents Timeline Result

Step 1 Report on the need ten Approval on the

Registration of the of using foreign working need of using
need of using foreign employee days foreign employee
employee

Step 2 – Application form five Work permit with

Application for work – Approval on the working the limitation of
permit need of using days two years
foreign employee
– Criminal record
from overseas OR
in Vietnam
– Health check
from overseas OR
in Vietnam
– Experience
confirmation AND
Educational
qualifications

Step 3 Copy of signed Note: The signed labour

Submission of labour labour contract contract must be submitted
contract (recruitment to the labour authority within
case) five working days upon the
date of signing the labour
contract

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2.3.5. Exemptions for foreigners

There are various exemptions for foreign individuals seeking to undertake

employment in Vietnam without a Work Permit.

Short term assignment – Less than 30 days per time and up to three times a
year
– Not required to apply for Confirmation on work
permit exemption but required to make prior notice
to the local DOLISA

Internal Transfer in 11 – Working for the mother company at least 12 months

service industries – Business lines (CPC code) details stipulated in the
relevant guidance
– Required to apply for Confirmation on work permit
exemption

Investor / member of – Individual Investor / Member (mentioned in the

Board of Directors License) with contributed / authorised capital equal
or more three billion VND
– Member of the BoD in the Vietnamese entity with
contributed / authorised capital equal or more three
billion VND
– Not required to apply for Confirmation on work
permit exemption but required to make prior notice
to the local DOLISA

Lawyer – Foreign Registered Lawyer License

Traineeship – Currently studying overseas

Foreigner – Marrying to a Vietnamese person

2.4. PROBATION

It is common practice to arrange a probation period in Vietnam when engaging

new employees. The duration of a probationary period as agreed by the two
parties shall depend on the nature and complexity of the work and the job
position. In details, the parties may agree on the following probationary
periods:

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 – up to 180 days in the case of the job being enterprise manager;
– up to 60 days for working in a position requiring college level or higher
specialised or technical expertise;
– up to 30 days for working in an industry or trade requiring intermediate
level skills or a technician or professional staff; or
– up to six working days for any other position that require no training.

Presently, a probationary period can be included in either the labour

contract or in a separate probation agreement. The probation agreement is
mutual agreement by the employer and the employee to set forth the terms
and conditions applied for the employment relationship during the
probationary period. In case the probationary period is included in the
probation agreement, there is no obligation to pay social security
contributions during probationary period. Otherwise, the employer is
required to pay the social security contributions for the probationary period
if the probation period includes in the labour contract.

During the probationary period, the probationary salary shall be negotiated

by both parties but shall not be lower than 85 % of the ordinary salary for
the job. Either party may terminate the employment relationship during the
probationary period without serving a prior notice or paying compensation.

2.5. WORKING HOURS, REST BREAKS DURING WORKING HOURS, HOLIDAYS,

OVERTIME

The following is an overview over working hours, leave and overtime

regulations in Vietnam.

Maximum – eight hours a day

Working Hours – 48 hours per week
The State encourages employers to apply 40-hour workweeks.

Rest breaks – At least 30 minutes break; OR

during working – At least 45 minutes break during night time
hours If an employee works a continuous shift of at least six
consecutive hours or more, the rest break shall be included in
working hours.
The continuous shift working under the Labour Code is an
employment practice designed that at least two people or two
groups of people taking turns to work on the same working
position, calculated for a period 24 consecutive hours and the
transition time between two shifts does not exceed 45 minutes.

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 Paid leave – 12 days paid leave; one additional day for every five years of
(Annual leave) employment
– 11 public holidays; foreign employees are additionally
entitled to a day off with pay on 1 traditional public holiday
and 1 national day of their country
– Additional days off to special occasions (marriage, death,
etc.)
Overtime Not more than 12 hours work / day, 40 hours overtime / month
and 200 hours overtime / year (in some sectors 300 hours / 
year with permission from DOLISA)
Overtime The overtime pay is at least 150 % of actual hourly wage on a
payment normal working day, at least 200 % on a weekly day off and at
least 300 % on a public holiday or paid days off (exclusive of
wages of public holidays and paid days off prescribed by the
Labour Code).

2.6. MINIMUM WAGES

Vietnam currently applies two different minimum wages simultaneously,

the Basic Minimum Wage and the Regional Minimum Wages. While the
Basic Minimum Wage sets the base for the calculation for the cap of social
insurance, health insurance and the salary for state-employees, the regional
minimum wages plays the important role for setting the minimum wage
of non-state employees and the base for the cap of the unemployment
insurance.

Basic Minimum Wage: The Basic Minimum Wage is 1,490,000 VND per
month and applied across the country.

Regional Minimum Wages: As the cost of living varies, the Vietnam

government divides the Regional Minimum wages into four groups to reflect
the economic realities.

From January 2020, regional minimum wages is between minimums of 3.07

million VND (approx. 133 US Dollars) to 4.42 million VND (approx. 192 US
Dollars), as follows:

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 Region Cities Minimum Wage

Region I Parts of Hanoi and HCMC, Dong Nai 4,420,000 VND / 

Province, Vung Tau Province, Binh Duong month
Province, …*

Region II Remaining districts of Hanoi and HCMC, 3,920,000 VND / 

Da Nang, Hung Yen Province, Hue month
province, Can Tho, Rach Gia, …*

Region III Remaining provincial cities, …* 3,430,000 VND / 

month

Region IV Covers the remaining administrative 3,070,000 VND / 

divisions month

*For more detailed information cf. appendix Decree No. 90/2019/ND-CP; defined as per November 15th 2019

2.7. SALARY DURING SICKNESS AND MATERNITY / PATERNITY LEAVE

An employer is not required to pay salary to an employee who is ill or on

maternity leave. Salary during this period is paid by the social insurance
fund. Maternity leave is six months. A female employee who is pregnant,
on maternity leave or has a child below 12 months of age can only be
dismissed if the enterprise ceases operation; no other causes for dismissal
are recognised. Paternity leave is also statured with 5 — 14 working days,
depending on the number of children born and the circumstances of the
birth.

2.8. POTENTIAL BONUS SCHEMES

It is common in Vietnam to pay a 13th month salary (i.e. Tet bonus). Such
bonus can be depending on the performance of the employee and / or the
company.

International investors commonly provide an additional private health

insurance. Team outings and company trips are commonly expected by
the employees and are considered a bonus. In a country with high staff
fluctuation, such team events are usually be considered important.

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3. Internal Labour Rules (ILR’s)
An enterprise with 10 employees or more must have written Internal Labour
Rules (“ILR”) covering all important items of the working environment. The
written ILR come into effect through registration with DOLISA. In case there
is an Organisation representing the employees at the grassroots level (i.e.
internal labour union and / or any Organisation established on a voluntary
basis by the employees at the company), the employer must consult with
such Organisations.

If an employer employs less than 10 employees, it is not required to register

a written ILR, but must comprise the contents regarding the labour discipline
and material responsibility in the labour contracts.

Well-worded ILRs are important in order for the employer to be able to take
disciplinary action against employees, or to terminate labour contracts
in case of poor performance. It is difficult for an enterprise to dismiss an
employee for an offense if this offense is not specified in the ILR, or if the
enterprise does not have duly registered ILR.

An employee who breaches ILR may, depending on the seriousness of the

breach, be disciplined. The limitation period for dealing with a breach of
labour discipline is 6 months to 12 months depending on the violation.

4. Labour discipline
There are various types of labour disciplinary measures which depend on
the seriousness of the breach of labour rules committed by an employee,
which are:
– Reprimand
– Deferral of wage increase for a maximum six months
– Demotion
– Dismissal

The procedures for handling a violation of labour discipline must be strictly

followed the procedure as provide by Labour regulations.

The principles for handling a violation must be as follow:

– A meeting must be organised and duly recorded, the employer will bear
the burden of proving fault of the employee with the adequate evidences.

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 – Organisation representing employees at the grassroots level, in which
the employee is a member, has to participate.
– The employee has the right to defend himself or ask for a lawyer.

It is prohibited to impose more than one form of labour discipline for

a single violation. For an employee who simultaneously commits more
than one violation of labour discipline, only the highest form of discipline
corresponding to the most serious violation can be applied. Exemptions
of the application of labour discipline apply to employees that are sick,
pregnant or on maternity and / or are mentally disordered.

Prohibited acts when handling violations of labour discipline include:

– Infringing upon the body or dignity of the employee;
– Applying a fine or wage reduction, instead of a disciplinary measure;
– Impose more than one form of discipline for a single violation of labour
discipline;
– Disciplining an employee who has committed a violation that is not
defined in the internal working regulations or in the labour contract in
case the employer hires less than 10 employees.

4.1. HEALTH AND SAFETY OBLIGATIONS

An employer must comply with the law on occupational safety and hygiene.
The employer must rely on standards, national technical regulations and
local technical regulations on occupational safety and hygiene in order
to formulate their own internal rules and working procedures to ensure
occupational safety and hygiene as appropriate for each type of machinery,
equipment and workplace.

Employers provide health insurance by law for their employees, and

must provide regular annual health checks. It is common in international
companies to provide an additional private health insurance in order to cover
the employee better than the compulsory health insurance.

5. Trade Union
There is a multilevel system of trade unions in Vietnam, which ranges from
the Vietnam General Confederation of Labour (VGCL) as an umbrella
Organisation to the unions at grassroots level. Apart from collective
negotiations, trade unions fulfill such tasks at company level, which are
taken over by the works council in other countries. Unlike in some European

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 countries, trade unions in Vietnam are not entitled to participate in
management decisions and presently have no right to be informed about
the economic performance of the enterprise.

Employers are not obliged to establish a trade union, but they assume the
responsibility of creating a favorable environment for their establishment.
In order for a trade union at enterprise level to be established, five or more
employees have to unite and request for voluntary participation in the
Vietnamese union. Employers must provide the union in their enterprise
with a suitable workplace and adequate facilities. Union officers are entitled
to certain time off with pay in order to fulfill their functions.

The compulsory trade union fee equals 2 % of total salary for social insurance
contribution of all employees per month and has to be paid to the trade
union’s account, in which 70 % of the trade union fee will be returned to the
grassroots union of the company.

Employees who joined the grassroots union of the company is also obligated
to pay the trade union member fee, equivalent to 1 % of salary that is used
as a basis for social insurance contribution to the trade union’s account.
60 % of the trade union member fee will be returned to the grassroots union
of the company.

6. Strikes
If there is a strike, this is presently usually a wildcat strike, i.e. a strike that
is not initiated by any union. Reasons for strikes to occur include the desire
on the part of the employees to negotiate a higher salary, or benefits. Such
strikes are illegal as the law provides that strikes must be led by a union and
are allowed only after dispute resolution mechanisms have failed. The best
precaution against illegal strikes is the creation of a friendly atmosphere at
the workplace and to treat the employee in a fair and reasonable manner.

7. Termination of Employment
TThe rights employees have when their labour contract is terminated depend
upon the reason of termination and the type of labour contract. This has
effects on the notice period and possible severance payments. The Labour
Code is largely oriented to the needs of the workforce and, in particular in
the case of labour disputes, is usually interpreted in favour of the employee.

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 The employment relationship ends in the following cases:

Basis Prior notice Separation Other

requirement1 benefit requirements

Expiry of labour contract None Severance None

allowance of 0.5
Work completion months‘ salary
for each year
Mutual termination of employment,
excluding
periods covered
Employee is sentenced by the statutory
to serve a jail term, unemployment
capital punishment, insurance
or is prevented from scheme2
performing the job by (“Severance
judgement or decision of Allowance”)
a court

Employee dies or is
declared missing or
lacking legal capacity for
civil acts by a court

Employer terminates its

operation or no longer has
a legal representative or
an authorised person.

This requirement means that termination must be notified a certain period of time ahead of it being
1

implemented as prescribed by Vietnamese Labour regulations. For bases that are not subject to the prior
notice requirement, the termination can be communicated at any time that the party having the right to
terminate considers appropriate and reasonable.
2
Compulsory unemployment insurance was introduced with effect from 1 January 2009.

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 Foreign employee who is None None None
expelled due to judgments
or decisions of courts and
competent authorities in
Vietnam

Foreign employee whose

work permit has been
invalidated

Expiry of probation
without concluding a
labour contract

Unilateral termination Please refer to Unilateral Termination below.

of the Employee or the
Employer

7.1. UNILATERAL TERMINATION

At a first glance, terminating a Labour Contract seems to be complicated.

Especially, unilateral termination the labour contract by the Employer
only possible in very few case after a long and burdensome process of
termination. In principle, an employment relationship can only be terminated
if such termination is supported by a legitimate reasons and by observing
the applicable notice period.

The statutory minimum notice periods are depended on the type of labour
contract.
– Definite-term contracts of less than 12 months: three working days
– Definite-term contract: 30 calendar days
– Indefinite-term contract: 45 calendar days
(“Normal Notice Period”)

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 In some special industries and trades and special jobs (e.g. enterprise
manager), the statutory minimum notice periods shall be as follow:
– Definite-term contracts of less than 12 months: At least equal to a
quarter of the term of the labour contract.
– Definite-term contract and Indefinite-term contract: 120 days
(“Special Notice Period”)

7.1.1 Termination by Employer3

Basis Prior notice Separation Other

requirement4 benefit requirements

Lawful reason trigger Applicable Severance For the reason

to the unilateral notice period Allowance5 of termination
termination of the required due to the poor
Employee. performance of
– The poor performance the Employee:
of the Employee. Criteria for
– Prolonged Illness of assessing the
the Employee work completion
– Force Majeure events should be
that lead to the provided in
reduction of labour a separate
force due to a scale- performance
down of business assessment
– Employee reaches the policy issued by
retirement age the employer
– Employee provided and consult with
untruthful information the Organisation
– Employee is absent representing the
from the workplace employees at
following temporary the grassroots
suspension of labour level (if any) in
contract advance.
– Employee is absent
from workplace
without legitimate
reason from 05
consecutive working
days or more

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Employer conducts Notice to the Job-loss A labour usage
restructuring, trade union allowance of plan must be
technological change, and the one month‘s developed and
economic reason, Department salary for consult with the
merger, acquisition, of Labour, each year of Organisation
consolidation or division Invalids employment, representing the
and Social excluding employees at
Affairs where periods covered the grassroots
employer is by the statutory level (if any) in
located unemployment advance and
insurance giving prior
scheme, and notice of 30 days
in any case not to the People’s
less than two Committee of the
months‘ salary province and to
the employees.

Dismissal Please refer to the Labour Discipline

3
Termination by employer is not allowed in any of the following situations:
– Employee has been on leave for treatment due to sickness or accident, except in case of basis (c) of
Section 1.2;
– Employee is on leave as permitted by the employer;
– Pregnant employee; or
– Employee is on maternity leave or is raising a child under 12 months old.

4
This requirement means that termination must be notified a certain period of time ahead of it being
implemented as prescribed by Vietnamese Labour regulations. For bases that are not subject to the prior
notice requirement, the termination can be communicated at any time that the party having the right to
terminate considers appropriate and reasonable.

5
Except for the cases in which the employee is entitled to receive retirement pension as prescribed by social
insurance laws, and the cases in which the employee is absent from workplace without legitimate reason
from five consecutive working days or more.

23
7.1.2 Termination by Employee

Basis Prior notice Separation Other

requirement4 benefit requirements

At employee‘s Normal Severance None

discretion Notice Allowance
Period

Lawful event trigger None Severance None

to the unilateral Allowance
termination of the
Employee.

7.2. BILATERAL TERMINATION

The employment relationship can be terminated by a termination agreement.

In contrast to dismissal, the termination contract is the most common and
most viable option for terminating the employment relationship.

In practice, unilateral termination of employment may be troublesome and

time consuming. A mutual termination agreement between the employer and
the employee is often used. This helps to avoid any dispute that may arise or
any shortcoming of the termination procedure. The employer and employees
may reach agreements on the date of termination, severance payments,
etc. The time required to comply with termination procedures is reduced
significantly when resolved through mutual agreement.

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8. Taxes and duties
8.1. PERSONAL INCOME TAX (PIT)

Vietnamese and foreigners working in Vietnam are subject to personal income

tax (PIT). The tax base depends on the residence status of the individual.
Basically, the duration of a foreign employees stay determines his tax status.
Tax residents are those individuals meeting one of the following criteria:
– Residing in Vietnam for 183 days or more in either the calendar year or
the period of 12 consecutive months from the date of first arrival; or
– Having a permanent residence in Vietnam and are unable to prove tax
residence in another country in the case where the actual residing days
in Vietnam is less than 183 days

Tax residents are subject to Vietnamese PIT on their worldwide income

including both employment and non-employment income. Foreign tax credit
is only applicable to income sourced from overseas, and is conditional upon
satisfaction of supporting documents.

Individuals not meeting the conditions for being tax resident are considered
tax non-residents. Tax non-residents are subject to PIT on the allocated
income for the work relating to Vietnam, irrespective of presence in Vietnam.

While the PIT rates vary for non-employment income, employment income is
taxed at progressive PIT rate up to 35% for tax residents and flat rate of 20 %
for non-tax residents.

8.2. COMPULSORY SOCIAL INSURANCE, HEALTH INSURANCE, UNEMPLOYMENT

INSURANCE, AND TRADE UNION FEES

Vietnam has a compulsory social, health and unemployment insurance

scheme. Contributions are to be borne by both the employer and the
employee. The basis for calculating the contributions is the monthly salary
as stipulated in the labour contract (capped at 20 times common minimum
wage for social insurance / health insurance and 20 times minimum regional
wage for unemployment insurance).

An employer is obliged to withhold the employee’s portion of the insurance

contribution from the salary of the employee and transfer the amount
together with the employer’s portion to the insurance carrier.

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 The contribution rate to trade union funds is set at 2 % of the salary fund
for Social Insurance contributions for employees. This fee must be paid into
Trade Union funds once per month.

Local Employer Foreign

Employer
Employee Employee

0 % (current) 3.5 % (current)

Social insurance 8 % 17.5 %
8 % (as from 17.5 % (as from
1.1.2022) 1.1.2022)

Health
1.5 % 3 % 1.5 % 3 %
insurance

Unemployment
1 % 1 % - -
insurance

Union Fee - 2 % - -

1.5 % 6.5 %

Total 10.5 % 23.5 % 9.5 % 20.5 %

(as from (as from
1.1.2022) 1.1.2022)

9. Penalties
9.1. WORK PERMIT VIOLATIONS

Penalties for employers for failure to apply for work permits and / or
exemption thereof is an administrative fine of up to 150 million VND (6,500
US Dollars) or deportation.

26
9.2. PENALTIES FOR EMPLOYERS FOR VIOLATIONS IN TRADE UNION
CONTRIBUTIONS

Failure to fully contribute trade union fees or to do so in a timely manner will

subject to an administrative fine of from 24 % to 30 % of the total union fees
due (capped at 150 million VND, approx. 6,500 US Dollars) and interest for
late payment.

Failure to contribute trade union fees for all employees will subject to an
administrative fine from 36 % to 40 % of the total union fees due (capped at
150 million VND, approx. 6,500 US Dollars) and interest for late payment.

27
About us
As attorneys, tax advisers, management and IT consultants and auditors, we
are present with 109 own offices in 49 countries. Worldwide, our clients trust
our 5,120 colleagues.

The history of Rödl & Partner goes back to its foundation as a solo
practice in 1977 in Nuremberg. Our aspiration to be on hand wherever our
internationally-active clients are led to the establishment of our first, own
offices, commencing with Central and Eastern Europe in 1991. Alongside
market entry in Asia in 1994, the opening of offices in further strategic
locations followed, in Western and Northern Europe in 1998, USA in 2000,
South America in 2005 and Africa in 2008.

Our success has always been based on the success of our German clients:
Rödl & Partner is always there where its clients see the potential for their
business engagement. Rather than create an artificial network of franchises
or affiliates, we have chosen to set up our own offices and rely on close,
multidisciplinary and cross-border collaboration among our colleagues. As a
result, Rödl & Partner stands for international expertise from a single source.

Our conviction is driven by our entrepreneurial spirit that we share with many,
but especially German family-owned companies. They appreciate personal
service and value an advisor they see eye to eye with.

Our ‘one face to the client’ approach sets us apart from the rest. Our clients
have a designated contact person who ensures that the complete range of
Rödl & Partner services is optimally employed to the client’s benefit. The
‘caring partner’ is always close at hand; they identify the client’s needs and
points to be resolved. The ‘caring partner’ is naturally also the main contact
person in critical situations.

We also stand out through our corporate philosophy and client care, which
is based on mutual trust and long-term orientation. We rely on renowned
specialists who think in an interdisciplinary manner, since the needs and
projects of our clients cannot be separated into individual professional
disciplines. Our one-stop-shop concept is based on a balance of expertise
across the individual service lines, combining them seamlessly in
multidisciplinary teams.

28
WHAT SETS US APART

Rödl & Partner is not a collection of accountants, auditors, attorneys,

management and tax consultants working in parallel. We work together,
closely interlinked across all service lines. We think from a market
perspective, from a client’s perspective, where a project team possesses all
the capabilities to be successful and to realise the client’s goals.

Our interdisciplinary approach is not unique, nor is our global reach or our
particularly strong presence among family businesses. It is the combination
that cannot be found anywhere else – a firm that is devoted to comprehensively
supporting German businesses, wherever in the world they might be.

29
Contact

HO-CHI-MINH-CITY

Stefan Ewers
5th floor, Friendship Tower
31 Le Duan Street
District 1
Ho-Chi-Minh-City

T + 84 28 7307 2788

M +84 9 3894 9451
[email protected]

HANOI

Jan-Volkert Schmitz
9/F, Daeha Business Center
360 Kim Ma, Ba Dinh District,
Hanoi

T +84 24 7300 0077

M +84 8 6610 3104
[email protected]
Visit us!
www.roedl.com