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 Labor Law: The HR Questions Every Foreign Employer Must Answer
Vietnam’s Labour Code 2019, which came into force on 1 January 2021, significantly updated the legal framework for employment relationships — affecting contract types, overtime caps, probation rules, trade union obligations, and termination procedures. For foreign-invested companies entering Vietnam, getting the employment framework right before the first hire avoids the most common and costly HR compliance failures.
The following FAQ covers the labor and HR questions most consistently asked by G20 investors setting up operations in Vietnam, answered by ECOVIS Vietnam Law.
Employment Contracts
What employment contract types are permitted in Vietnam?
The Labour Code 2019 recognises two primary contract types: definite-term contracts (for up to 24 months) and indefinite-term contracts. The previous 12-month seasonal contract category has been removed. When a definite-term contract expires and the parties continue working without a new contract, the contract automatically converts to indefinite-term after 30 days (for contracts of 12 months or more). After two definite-term contracts with the same employer, any subsequent contract must be indefinite-term.
In practice, most foreign-invested companies use a definite-term contract for the first two years, then convert to indefinite-term. The conversion is not discretionary — it is statutory. Companies that continue using indefinite successive definite-term contracts without conversion expose themselves to termination procedure complications and retroactive indefinite-contract obligations. Employment agreements with probationary terms (maximum 6 days for certain categories, 30 days for most positions, 60 days for highly technical roles) must be clearly documented separately or as a probationary agreement stage.
What is the minimum wage in Vietnam?
Vietnam sets regional minimum wages that differ across four zone classifications. Zone 1 (metropolitan areas including Hanoi and Ho Chi Minh City inner districts) has the highest minimum wage; Zone 4 (rural provinces) has the lowest. Minimum wages are adjusted periodically by government decree and typically increase annually. Companies must apply the minimum wage for the zone where the workplace is located — not the zone where the company is registered. The applicable minimum wage also sets the floor for social insurance contribution calculation. Using an incorrect zone minimum wage — a common error when companies register centrally but operate at dispersed sites — creates retroactive social insurance and salary underpayment exposure.
What are the rules on overtime in Vietnam?
Normal working hours in Vietnam are capped at 8 hours per day and 48 hours per week. Overtime is permitted up to a maximum of 40 hours per month and 200 hours per year under the standard rule (extendable to 300 hours per year for certain sectors with approval from the Ministry of Home Affairs (formerly MOLISA)). Overtime premiums are: 150% for weekday overtime, 200% for weekend overtime, and 300% for public holiday overtime. The overtime cap is enforced on a calendar year basis — companies that routinely exceed the annual overtime cap face administrative penalties and, in some cases, employee claims. Industries with high seasonal production peaks — electronics assembly, garments, footwear — must plan overtime budget and staffing levels carefully to stay within the annual cap without disrupting production.
Work Permits for Foreign Staff
When do foreign managers and technical staff need work permits in Vietnam?
All foreign nationals working in Vietnam require a work permit unless they qualify for a statutory exemption. Exemptions under the Labour Code 2019 include: investors who contribute capital to a limited liability company; members of the Board of Directors of a joint-stock company; persons entering for less than three months to market goods or services; persons in Vietnam under international treaty obligations; certain education and training roles; and others specifically identified by regulation. A work permit exemption confirmation letter from the Ministry of Home Affairs — which has assumed the state labour management functions of the former Ministry of Labour, Invalids and Social Affairs (MOLISA) — is required for most exempted categories — it is not sufficient to self-assess exemption eligibility without obtaining the letter.
Work permits are valid for up to two years and must be obtained before the foreign national begins work — not after. Business visas do not substitute for work permits when a work permit is required. The most consistent violation pattern in foreign-invested companies is extended working presence in Vietnam on a business visa without a work permit — a practice that creates exposure for both the employer and the individual.
What is the process for obtaining a Vietnam work permit?
Work permits in Vietnam are issued by the Ministry of Home Affairs or the provincial Department of Home Affairs. These functions were previously administered by MOLISA and the provincial DOLISA, whose labour management responsibilities were transferred to the Home Affairs system under Vietnam’s ministerial restructuring. The process requires the employer to file the application with supporting documents for the foreign national: criminal background check from both the home country and Vietnam (for prior Vietnam stays), health certificate, education certificates certified and legalised, evidence of professional experience, photos, and contract or appointment letter. Processing typically takes five to seven working days for standard applications. The employer must also obtain approval from the relevant ministry or provincial authority for the position if it is in a regulated category.
The hiring company must also obtain the Ministry of Home Affairs’ approval for the need to use foreign labour before applying for the individual work permit. This “demand approval” step is often overlooked: companies that proceed directly to the individual work permit application without demand approval face rejection. Planning the complete demand-approval-to-work-permit sequence, including document legalisation timelines from the home country, typically takes three to eight weeks from initiation.
Social Insurance and Payroll
What compulsory insurance contributions apply to Vietnam employees?
Vietnamese employees and employers are required to contribute to three compulsory social funds: social insurance (SI), health insurance (HI), and unemployment insurance (UI). Employer contributions total approximately 21.5% of the employee’s salary (capped at 20 times the base salary) for SI, HI, and UI combined. Employee contributions total approximately 10.5%. The contribution base is the contracted salary for the relevant period. From 2022, the contribution base must include all regular recurring allowances — not just basic salary — which has increased the effective base for companies that previously structured a high-allowance, low-basic-salary remuneration package to minimise social insurance obligations.
Social insurance for foreign nationals working in Vietnam under labour contracts of 12 months or more became compulsory from January 2022. Foreign employees entitled to social insurance contribute at the same employee rate as Vietnamese employees. Companies that incorrectly excluded foreign staff from social insurance contributions after January 2022 carry arrears liability.
What are the internal labour regulations requirements?
Companies with ten or more employees must register internal labour regulations (nội quy lao động) with the provincial Department of Home Affairs (formerly the Department of Labour, Invalids and Social Affairs — DOLISA) within 10 days of the regulations taking effect. Internal labour regulations must comply with the Labour Code’s mandatory content requirements and cover: working hours and rest periods; workplace safety rules; disciplinary procedures and forms of disciplinary action; bonuses and deductions policy; and temporary suspension during investigation. Failure to register internal labour regulations — or having regulations that do not comply with mandatory content requirements — prevents the employer from applying disciplinary action (including dismissal) to employees, creating a significant enforcement gap. Many foreign companies operating without properly registered internal labour regulations discover this only when attempting to discipline or terminate an employee.
Trade Unions
What are the trade union obligations for foreign-invested companies?
Vietnam’s Law on Trade Union gives employees the right to establish or join a trade union. Employers are required to contribute 2% of the wage fund to the Vietnam General Confederation of Labour (VGCL) trade union fund regardless of whether a union exists in the company. If a grassroots trade union is established within the company, the employer must also facilitate its activities (meeting space, time off for union officials) and enter into collective bargaining. The 2% trade union fund contribution is mandatory from the date of first hire — it is not contingent on union establishment and is not waivable by agreement.
Foreign companies should be aware that Vietnam’s trade union framework is moving toward stronger collective agreement standards and increased transparency obligations under labour law reforms. This is an area where staying current with regulatory developments matters: companies that structure their employment framework for Labour Code 2019 compliance without tracking subsequent circulars and decrees risk gaps as the framework evolves.
Termination
What are the rules for terminating a Vietnamese employee?
Termination of Vietnamese employees is governed by specific statutory procedures that differ by contract type, termination reason, and employee category. Unilateral termination by the employer requires a valid ground (redundancy, employee disciplinary dismissal, employee long-term incapacity, etc.), the correct notice period (30 days for definite-term contracts; 45 days for indefinite-term contracts; no notice for certain categories of immediate dismissal), payment of severance or job-loss allowance where applicable, and compliance with consultation obligations where trade union representatives are involved.
Wrongful termination — terminating without a valid ground, without the correct notice, or without following disciplinary procedures where required — exposes the employer to reinstatement orders, back-pay liability, and additional compensation. The most common wrongful termination scenarios in foreign-invested companies are: terminating without registered internal labour regulations (which prevents the employer from applying disciplinary dismissal), omitting the mandatory consultation step with the trade union representative, and using economic redundancy as a ground without a genuine restructuring that meets the statutory definition. Pre-termination legal review of every proposed employment termination is strongly recommended for foreign-invested companies in Vietnam.
Frequently Asked Questions
Can foreign companies use independent contractors instead of employees in Vietnam?
Yes, but the distinction between an employee and an independent contractor in Vietnam is based on the substance of the relationship — not the label used in the contract. Indicators of an employment relationship include: regular and fixed working hours, exclusive engagement, work done at the company’s premises using the company’s tools, integration into the company’s management structure, and one-party’s right to direct how work is performed. “Contractors” who work in ways that resemble employment will be reclassified as employees by labour authorities — with consequent social insurance, minimum wage, and termination obligation exposure. The risk is highest for IT, engineering, and service-delivery roles where “contractors” are integrated into client-facing operations.
How many annual leave days are employees entitled to in Vietnam?
Under the Labour Code 2019, the minimum annual leave entitlement is 12 working days per year for standard employment. Employees in heavy, hazardous, or dangerous occupations, or those aged under 18, are entitled to additional leave. Leave accrues at one day per month of work. Unused annual leave can be carried forward for up to three years. Annual leave payments that substitute for unused leave must be made in cash at the applicable daily wage rate. Companies that impose leave “use it or lose it” policies without statutory basis face claims for unpaid annual leave on termination.
What Vietnam employer obligations apply to foreign national managers on short-term assignments?
Foreign nationals on intra-company transfer assignments to Vietnam for more than three months require work permits (or work permit exemption letters). Their salary must comply with Vietnamese minimum wage requirements for their role classification, and compulsory social insurance contributions apply for those on contracts of 12 months or more. Short-term assignments of up to 90 days may avoid the work permit requirement under the business visitor exemption — but the individual must not perform substantive employment duties (management, production, sales) beyond market introduction and business development activities.
Setting up a compliant HR and employment framework for Vietnam operations? ECOVIS Vietnam Law advises on employment contract structuring, work permit applications, social insurance compliance, internal labour regulations, and trade union obligations. Contact Attorney Vu Manh Quynh at vietnam@ecovislaw.vn | Website: www.ecovislaw.vn
This material is for general informational purposes only and does not constitute legal, tax or professional advice. Investors should seek specific advice based on their business sector, ownership structure and investment location in Vietnam. Legal and regulatory references reflect the position as of August 2026 under the Labour Code 2019.
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. Email: vietnam@ecovislaw.vn | Website: www.ecovislaw.vn