Attorney Vu Manh Quynh is the Managing Partner of ECOVIS Vietnam Law, advising international investors on Foreign Direct Investment (FDI), corporate governance, and regulatory compliance in Vietnam.

Vietnam’s labor regulatory framework is more complex than most investors anticipate at the project feasibility stage. The Labor Code 2019 and its implementing decrees create obligations that begin before the first employee is hired — internal labor regulations must be registered with DOLISA before employment commences. For factories scaling to 500+ employees rapidly, the compliance burden is substantial: four social insurance contributions, trade union formation obligations, mandatory quarterly DOLISA reports, work permit requirements for all foreign employees, and a foreign employee ratio cap that many fast-scaling factories breach without realising it.

This article is Section VII of the 100 FAQ about Factory Setup Vietnam series. It covers questions Q61–Q70.

What minimum wage applies to manufacturing workers in Vietnam?

Vietnam uses a regional minimum wage system (Decree 74/2024/ND-CP, effective July 2024): Region I (Hanoi, HCMC core districts): VND 4,960,000/month; Region II (provincial cities, satellite districts): VND 4,410,000/month; Region III (remaining provincial towns): VND 3,860,000/month; Region IV (rural areas): VND 3,450,000/month. Industrial zones in Binh Duong, Dong Nai, Hung Yen typically fall in Regions I or II. Minimum wages are revised annually — budget for 5–8% annual increases based on the 2019–2024 trend. Actual factory wages typically run 20–40% above the minimum wage for skilled production workers.

What social insurance contributions are mandatory for manufacturing companies in Vietnam?

Under the Social Insurance Law 2014 and implementing decrees, employers and employees must contribute to four mandatory funds: (1) Social Insurance (BHXH) — employer 17.5%, employee 8% of monthly salary; (2) Health Insurance (BHYT) — employer 3%, employee 1.5%; (3) Unemployment Insurance (BHTN) — employer 1%, employee 1%; (4) Trade Union Fund — employer 2% of payroll (to the Vietnam General Confederation of Labour), regardless of whether a trade union exists. Total employer burden: approximately 23.5% on top of gross salary, capped at 20× the base salary. Budget this from day one of employment.

Is forming a trade union mandatory for a foreign-invested factory?

Under the Law on Trade Unions 2012 and Labor Code 2019, employees have the right to form a trade union — the employer cannot prevent it. If employees form a trade union (or once the factory reaches 20+ employees, VGCL provincial bodies will actively approach the workforce), the employer must: facilitate trade union activities; provide a trade union office; contribute 2% of payroll to the Trade Union Fund monthly; and consult the trade union on disciplinary decisions, redundancy plans, and working time arrangements. Non-payment of the 2% Trade Union Fund contribution is a common compliance failure that triggers back-payment obligations plus penalties.

What work permit requirements apply to foreign employees at a Vietnamese factory?

All foreign nationals working in Vietnam must hold a valid Work Permit (Giấy phép lao động) under Decree 70/2023/ND-CP, unless they qualify for a specific exemption (e.g., intra-company transferees under WTO commitments for L-1 equivalent, or individuals working under 30 days). Work permit application requires: criminal record certificate (apostilled, from home country); health certificate; proof of professional qualifications or management experience (degree + 3 years in the field for specialists; 5 years for managers); employer confirmation documents. Processing: 5–7 working days at DOLISA. Work permit validity: maximum 2 years, renewable.

Is there a limit on the number of foreign employees a factory can hire in Vietnam?

Yes. Decree 70/2023/ND-CP imposes a foreign worker ratio cap: the number of foreign employees must not exceed 3% of total headcount for standard manufacturing. Employers wishing to hire foreign employees above this threshold must obtain prior written approval from the Chairman of the provincial People’s Committee, with justification demonstrating that the skills required are not available domestically. In practice, approvals are granted for specialised technical and management roles but require a documented training plan to localise the role within 2–3 years. Non-compliance with the cap is a statutory violation subject to fine and work permit revocation.

What is required for internal labour regulations in Vietnam?

Under Labor Code 2019 Article 118, employers with 10 or more employees must issue Internal Labour Regulations (Nội quy lao động) covering: working hours and rest periods; workplace safety rules; order and discipline; disciplinary procedures; prohibited acts; material responsibility; and grievance procedures. The regulations must be registered with the provincial DOLISA before they can take legal effect. Without registered regulations, the employer cannot legally dismiss employees for disciplinary reasons. Regulations must be made available to all employees and posted at the workplace. Update and re-register when substantive changes are made.

What are the probation rules for factory employees in Vietnam?

Labor Code 2019 Article 25: maximum probation period is 60 days for work requiring college-level training or above; 30 days for secondary vocational training or technical worker grade; 6 working days for other work. Probation wages must be at least 85% of the agreed regular wage. Only one probation period per job position — an employer cannot impose a second probation for the same role. During probation, either party may terminate without notice and without compensation. After probation, the employment contract must be confirmed (or terminated) — failure to confirm converts probation into indefinite contract. This is a common compliance gap in fast-scaling factories.

What are the legal requirements for terminating an employee in Vietnam?

Labor Code 2019 sets strict termination requirements. Unilateral termination by employer requires: lawful grounds (one of the grounds in Article 36); advance notice (45 days for indefinite contracts, 30 days for fixed-term 12–36 month contracts, 3 days for fixed-term under 12 months); consultation with the trade union representative; and severance pay (half a month’s salary per year of service, for service before January 2009). Dismissal for disciplinary reasons requires: a registered internal disciplinary procedure; a written disciplinary meeting (biên bản họp xử lý kỷ luật); and the employee’s signature or witness documentation. Wrongful termination expels the employer to reinstatement, back-pay, and 2-month compensation under Article 41.

What reports must a factory file with DOLISA?

Factories must file with the provincial Department of Labour, Invalids and Social Affairs (DOLISA): (1) Internal Labour Regulations — before employment commences; (2) Foreign employee list — upon hiring any foreigner, and quarterly updates; (3) Labour use report (báo cáo sử dụng lao động) — semi-annually (January and June), reporting headcount, wages, and social insurance status; (4) Occupational safety and health report — annually by January 15; (5) Workplace accident reports — within 24 hours of a serious incident. Non-filing is a routine compliance failure and one of the first items inspected by DOLISA during labour inspections of foreign-invested factories.

What are the most common HR compliance failures in foreign-invested manufacturing factories?

Top 8 HR compliance failures: (1) Failure to register Internal Labour Regulations before employment — undermines all disciplinary actions; (2) Non-payment or underpayment of Trade Union Fund (2% of payroll); (3) Social insurance contribution on base salary only, excluding allowances that should be included in the contribution base; (4) Breach of the 3% foreign employee cap without prior approval; (5) Expired work permits — failure to renew 30 days before expiry; (6) Failure to file semi-annual DOLISA labour use reports; (7) Improper use of fixed-term contracts — Labor Code limits fixed-term renewals to one renewal before an indefinite contract is required; (8) Non-consultation with the trade union before mass layoffs or unilateral termination decisions.