Vietnam Labor Law & HR Compliance

Labor Code 2019 and Social Insurance Law 2024 govern all FDI employment relationships in Vietnam, with mandatory social insurance, health insurance, and unemployment insurance contributions reaching approximately 30% of gross salary for contracts ≥12 months effective July 1, 2025, under Decree 158/2025/ND-CP. 

CFOs and HR Directors of FDI companies face immediate compliance obligations—payroll system updates to accommodate bank transfer mandates for salaries exceeding VND 5,000,000 (Decree 320/2025/ND-CP), semi-annual labor usage reporting via the National Public Service Portal due June 5 and December 5, and penalty exposure up to VND 150,000,000 for social insurance non-compliance. 

The 2026 regulatory shift eliminates previous foreign employee exemptions while tightening documentation requirements for tax-deductible salary expenses, requiring immediate HR policy review and protocol updates across hiring, payroll, and reporting systems.

This manual provides the operational framework FDI employers need to navigate employment contracts, work permit requirements, social insurance obligations, payroll compliance mechanics, and penalty mitigation strategies under Vietnam’s evolving labor law landscape.

Hiring Employees: Contracts, Work Permits & Probation

Foreign vs Local Hiring Requirements

Foreign nationals must obtain work permits before employment unless exempt under Decree 152/2020/ND-CP. Exemptions cover intra-company transferees, specialists under 30 days, and certain executive roles, but most foreign employees require permits processed through DOLISA. For detailed eligibility criteria and exemption cases, refer to our complete Vietnam work permit application guide.

Work permit applications require labor demand justification, criminal background clearance, health certificates, and authenticated educational credentials. Processing extends 15-20 business days from complete submission. Foreign employees must not actually commence work or receive salary in Vietnam until a valid work permit or applicable exemption takes effect; employing or paying a foreign worker while the permit is still processing exposes the employer to sanctions even if approval is later granted.

Tax authorities frequently audit foreign employee files during corporate income tax inspections. Missing work permits render salary expenses non-deductible and trigger penalties under Labor Code 2019.

Employment Contract Types & Electronic Contracts

Under Labor Code 2019, FDI companies mainly use definite‑term contracts (12–36 months) and indefinite‑term contracts, with strict limits on renewing definite‑term contracts before they convert to indefinite status; the former ‘seasonal or specific jobs under 12 months’ category is no longer a standard contract type and should be checked carefully against current rules before use. 

Electronic contracts gained legal validity under the 2021 Labor Code amendment, requiring identical provisions as written contracts—scope of work, working hours, wages, job location, and social insurance details. Digital signatures follow standard authentication protocols.

Social insurance obligations depend on the applicable Social Insurance Law and decrees, which currently tend to extend mandatory participation to most standard labor contracts from at least 1 month in duration; employers should not assume that only contracts of 12 months or more, or any ‘seasonal’ label, are exempt. FDI manufacturers favor definite-term contracts for workforce flexibility, yet tax authorities scrutinize serial renewals as disguised indefinite employment.

The primary structural risk is misclassifying contract types. Using seasonal contracts for permanent roles triggers retroactive social insurance collection plus penalties. DOLISA inspectors aggregate contract periods to determine true employment duration. For definite-term vs indefinite-term contract rules and auto-conversion thresholds, see hiring employees in Vietnam labor contract types.

Probation Period Limits

Labor Code 2019 sets maximum probation periods by job group, including up to 180 days for certain managerial roles, 60 days for some highly skilled or professional positions, 30 days for specified technical or administrative jobs and 6 working days for other roles; employers should map each position to the correct group before setting probation. Termination during probation requires no advance notice; post-probation dismissals demand 30-45 days’ notice.

Common compliance gaps: exceeding duration limits and failing to document performance evaluations. Both expose FDI employers to labor disputes and reinstatement claims.

Salary, Payroll & Social Insurance Compliance

Minimum Wage & Salary Structure

Vietnam maintains two minimum wage types: the common minimum wage of VND 2,340,000 (used for state employees and social insurance calculations) and zone-based minimum wages for non-state enterprises. Zone-based rates vary by Region I-IV based on geographic development levels, with Region I covering major cities like Hanoi and Ho Chi Minh City commanding higher minimums. 

Stay updated on the latest regional rates and their impact on your workforce via our report on Vietnam’s 2026 minimum wage increases

The common minimum wage serves a critical function beyond state payroll—it establishes the ceiling for social insurance contribution calculations. Maximum insurable salary equals 20 times the common minimum, creating the upper bound for mandatory contribution amounts regardless of actual salary levels. The choice between gross and net salary contracts determines compliance exposure—see Vietnam payroll gross-to-net calculations and SHUI compliance.

Cash payments remain common in FDI manufacturing for daily wages and overtime. Bank transfers became mandatory for salaries exceeding VND 5,000,000 under Decree 320/2025/ND-CP. Cash payments above this threshold lose tax deductibility—corporate income tax calculations must add back non-compliant expenses. Tax authorities scrutinize payroll registers during audits—discrepancies between reported expenses and bank records trigger investigations.  

Social Insurance Contribution Rates

From July 1, 2025, combined social insurance, health insurance and unemployment insurance contributions for foreign employees on standard labor contracts reach approximately 30% of the contribution salary base (employer 21.5%, employee 9.5%) under Social Insurance Law 2024 and Decree 158/2025/ND-CP. 

This breaks down to employer 21.5% (17.5% SI including 14% pension and 3% sickness/maternity, plus 3% HI and 1% UI) and employee 9.5% (8% SI, 1.5% HI) for foreign workers; Vietnamese employees contribute an additional 1% UI for a total of 10.5%. Beyond social insurance, foreign employees must finalize personal income tax annually under Vietnam’s 183-day residency rules, with progressive rates up to 35% for tax residents or 20% flat rate for non-residents.

Payment deadlines fall monthly by the 20th of the following month. Late payments trigger interest and fines. The Vietnam Social Insurance Agency can demand unpaid contributions for periods 2+ years prior, plus penalties reaching VND 150,000,000.

Decree 158/2025/ND-CP eliminates foreign employee exemptions from July 1, 2026 onward—all foreign employees on contracts ≥12 months must participate. No opt-outs, no exceptions. Unlike pre-2026 rules allowing expatriate opt-outs, foreign employees now face identical obligations as Vietnamese nationals. For Reference Level ceiling calculations and procedures, see Vietnam social insurance 2026 compliance framework.

The key risk: retroactive collection. The Agency conducts periodic audits comparing reported headcount against employment records. Discrepancies trigger investigations extending back multiple years.

Trade Union Fee: 2% Employer Obligation

All FDI employers must contribute 2% of the salary fund used for compulsory social insurance to trade union activities, regardless of whether a grassroots union exists. This mandatory cost applies under 2024 Trade Union Law Article 29.

The 2% is calculated on the social insurance salary base, not gross payroll—a distinction creating confusion for FDI companies. Payment occurs monthly alongside social insurance, remitted to district unions or Vietnam General Confederation of Labor.

The common mistake: miscalculating the base by using gross payroll instead of SI salary fund, triggering back payment when detected. Ensure your finance team is aligned with the Vietnam trade union fee contribution rules for FDI companies to avoid these errors.

Mandatory Reporting Deadlines

Semi-annual labor reports require submission before June 5 (Jan-Jun) and Dec 5 (Jul-Dec) via the National Public Service Portal. Reports must include headcount by contract type, foreign employee details with work permit numbers, and social insurance participation status.

Employers must maintain a labor-management book at head office documenting basic employee information, with workforce changes reported semi-annually. Portal failures commonly stem from incomplete data—missing ID numbers or incorrect work permit references.

A compliance gap: FDI companies submit reports but fail to reconcile figures with social insurance enrollment, creating audit-flagging discrepancies. Synchronize HR, payroll, and SI databases for consistent reporting.

Working Hours, Overtime & Leave

Standard Working Hour Limits

The working hour limit is 48 hours per week—8 hours daily maximum. Overtime cannot exceed 12 hours/day, 40 hours/month, and 200 hours/year under Labor Code 2019.

Resolution No. 17/2022/UBTVQH15 permits 300 hours/year for textile, footwear, and electronics industries during seasonal orders. Most sectors stay bound to 200 hours annually.

Vulnerable workers face restrictions: employees aged 15-18, those with disabilities, pregnant women (7th month onward), and nursing mothers with children <12 months cannot work overtime. For hazardous work, employers must limit hours per national technical regulations.

Overtime Compensation Triggers

Compensation triggers extend beyond hours worked: weekends, public holidays, and night hours (22:00-6:00) activate overtime payment obligations.  Vietnam mandates 11 paid public holidays with 300% overtime requirements—see the public holidays Vietnam 2026 employer cost guide.  Employee consent must be obtained before overtime assignments—employers cannot unilaterally mandate extended hours.

Employee Protections & Workplace Rights

Anti-Discrimination & Sexual Harassment Prevention

Labor Code 2019 protects employees from discrimination based on race, gender, nationality, ethnic group, marital status, pregnancy, disability, HIV status, and trade union membership. Sexual harassment receives explicit prohibition—defined as physical, verbal, or non-verbal conduct including body language, electronic communications, and display of sexual content. 

The workplace definition extends beyond office walls. Coverage includes business trips, vehicles used for work purposes, phone conversations related to employment, and social activities connected to company operations. This broad scope requires FDI employers to implement harassment prevention policies covering all employment-related contexts, not just on-site locations.

Female Employee Protections

Female employees with children under 12 months receive 60-minute daily breaks for breastfeeding during work hours. During menstruation periods, female employees receive 30-minute breaks, with the number of days agreed upon by both parties but required to be a minimum of three working days per month.

If female employees do not take these breaks and continue working, employers must pay additional wages for the work performed—separate from overtime compensation. This creates dual payment obligations when breaks are foregone: regular wages for the work performed plus the mandated break time compensation.

Workplace Democracy & Trade Union Rights

Labor Code 2019 mandates periodic dialogues between employers and employee representatives addressing wages, working conditions, labor disputes, and company policies affecting workers. Foreign workers on contracts of 12 months or longer can join grassroots unions at FDI enterprises.

The 2021 Labor Code amendment permits independent unions to operate, though state approval remains required. The Vietnam General Confederation of Labor maintains oversight authority, with workplace democracy provisions requiring documented dialogue sessions at specified frequencies.

For dialogue scheduling requirements, documentation templates, and union establishment procedures, see our guide to workplace democracy and periodic dialogue requirements. For employee grievance procedures and dispute resolution frameworks, see our guide to labor disputes in Vietnam.

Termination & Retirement

Termination Rules & Severance

Employees can unilaterally terminate employment contracts with advance notice requirements varying by contract type—definite-term contracts typically require 30 days’ notice, while indefinite contracts may demand 45 days. Immediate termination rights exist for specific circumstances: mistreatment by employers, pregnancy complications affecting work capability, or unpaid salary beyond agreed payment dates.

Employers face restrictions on unilateral termination. Labor Code 2019 Article 36 establishes the exclusive grounds for employer-initiated termination—terminations outside these conditions expose employers to wrongful dismissal claims and reinstatement orders. Required payments at termination include unused annual leave compensation, severance allowance calculated per tenure formulas, and any contractual bonuses earned but unpaid. Article 36 establishes seven lawful grounds—see employee termination in Vietnam legal grounds and compliance risks for procedural requirements.

Retirement Age Provisions

Retirement age increases incrementally under Labor Code 2019. Males progress from 60 years 6 months (2022) toward 62 years (2028), with annual increases of 3 months per year. Females progress from 55 years 8 months (2022) toward 60 years (2035), with annual increases of 4 months per year.

Incremental Retirement Age 2022-2026:

Early retirement provisions exist for hazardous work environments—workers can retire sooner with reduced benefit calculations. Late retirement extensions permit skilled workers in private sector roles to continue employment up to 5 additional years beyond standard retirement age, subject to employer agreement and capability assessments.

Compliance, Penalties & DOLISA Inspections

Social Insurance Non-Compliance Penalties

Administrative penalties for social insurance non-compliance are set out in the applicable sanctioning decree and can reach substantial amounts (typically up to VND 75 million for major violations, with retroactive contribution collection, interest charges, and potential criminal referral for serious evasion). Penalty calculations combine base administrative fines with retroactive contribution amounts calculated at historical salary levels and interest charges on late payments.

Common violations include enrolling employees after the mandatory 30-day deadline, underreporting salary bases to reduce contribution amounts, excluding bonus payments from insurable salary calculations, and failing to update social insurance records when employees receive promotions or salary adjustments. Each violation category carries specific fine schedules under related sanction decrees.

For FDI companies with hundreds of employees, retroactive exposure can reach tens of millions VND in unpaid contributions alone, before adding the VND 150,000,000 penalty amounts. The strategic defense: maintain complete employment files, salary payment records, and social insurance enrollment confirmations to demonstrate good-faith compliance efforts even when technical errors occur.

Labor Reporting Violations & Audit Triggers

Late semi-annual report submissions incur administrative fines, while repeated violations flag companies for priority inspection scheduling. What triggers DOLISA inspections: discrepancies between labor reports and social insurance enrollment data, anonymous employee complaints regarding unpaid benefits, work permit violations discovered during immigration checks, and random selection from high-risk industry categories (garment manufacturing, electronics assembly, food processing).

Inspections examine employment contract compliance, work permit validity, social insurance participation accuracy, wage payment records, and occupational safety documentation. Violations discovered during inspections generate separate penalty proceedings for each non-compliant area. The inspection timeline begins immediately upon DOLISA notice, with document requests escalating if initial submissions prove incomplete.

Retroactive Collection Exposure

The Vietnam Social Insurance Agency can demand unpaid contributions for periods extending 2+ years prior to audit discovery. Retroactive amounts include principal contributions calculated at historical salary levels, interest charges on late payments, and administrative penalties for systematic non-compliance.

Common scenarios triggering retroactive collection: misclassifying employees as independent contractors to avoid social insurance obligations, using serial short-term contracts to circumvent the 12-month participation threshold, excluding foreign employees from enrollment before Decree 158/2026/ND-CP implementation, and underreporting actual salary amounts by excluding allowances and bonuses from contribution bases.

Documentation provides the primary defense. Maintain complete employment contract files, work permit validity confirmations, bank transfer records cross-referenced to salary registers, and social insurance enrollment acknowledgments for all employees on contracts ≥12 months. These records demonstrate compliance intent and can reduce penalty exposure even when technical violations occur.

Conclusion

The 2026 compliance landscape represents a fundamental shift for FDI employers operating in Vietnam. Social Insurance Law 2024 and supporting decrees eliminate previous flexibility in foreign employee social insurance participation, mandate bank transfer documentation for tax-deductible salary expenses, and impose strict semi-annual reporting deadlines through the National Public Service Portal.

Employers should ensure payroll systems reflect the updated contribution structure (approximately 30% combined rate) that took effect July 1, 2025 under Social Insurance Law 2024, and prepare for the December 15, 2025 bank transfer documentation requirements under Decree 320/2025/ND-CP.

Foreign employee social insurance rules have converged significantly with those for Vietnamese nationals under the 2024 reforms, and FDI employers should plan for combined contribution obligations approaching 30% while phasing out opt-out assumptions from HR policies and offer templates, based on the specific rates and limited exemptions set out in current regulations. Documentation protocols provide the primary defense against penalty exposure: maintain employment contract files, work permit validity confirmations, bank transfer records, and social insurance enrollment acknowledgments.

Indochina Link Vietnam provides end-to-end HR compliance services for FDI companies—from payroll setup and trade union fee compliance to labor reporting and social insurance registration. Contact our team for a compliance audit before the July 2026 deadline.

Legal Disclaimer: This guide provides general information on Vietnam labor and social insurance compliance and does not constitute legal, tax, or professional advice. Regulations are subject to change; consult qualified Vietnam counsel for advice specific to your situation.