Employers in Vietnam must contribute 2% of the salary fund used for compulsory social insurance (SI) contributions, effective July 1, 2025, under the 2024 Trade Union Law (Law 50/2024/QH15). The 2% trade union fee is calculated on the salary fund used for compulsory social insurance contributions, which itself is subject to the general SHUI salary ceiling of 20 times the statutory basic wage per employee under social insurance regulations.
Many foreign investors only recognize this obligation after operations begin, often during labor audits when authorities flag calculation errors. The distinction between SI salary fund and gross payroll matters: calculating on gross payroll instead of the SI salary fund can mean overpaying by 15–25% each month, and those funds are generally non-refundable. Non-compliance can lead to back‑payment for all unpaid periods together with administrative penalties for violations related to trade union fee payment under Decree 12/2022/ND-CP.
Foreign workers on contracts of 12 months or longer can join grassroots unions starting July 2025, but cannot hold leadership positions—those remain reserved for Vietnamese citizens. Your 2% employer contribution applies to all employees regardless of nationality or their union membership decisions. Exemptions exist for severe economic hardship but require full arrears payment by the last day of the month following suspension end—deferrals, not waivers. Industrial zones like Hai Phong show over 90% union penetration across 350 FDI enterprises, demonstrating how proactive enforcement has replaced reactive auditing in manufacturing-heavy regions.
The 2% Union Fee: What You’re Actually Paying On
The 2% trade union fee calculates on the salary fund used for compulsory social insurance contributions, not total gross payroll—this distinction trips up most FDI companies. Why? Because using gross payroll means overpaying monthly, and authorities won’t refund the difference when you discover the mistake.
What’s Included in the Calculation Base
Included in SI Salary Fund:
- Basic salary
- Allowances subject to social insurance (position allowances, responsibility allowances, area coefficients)
Excluded from SI Salary Fund:
- Performance bonuses, Tet bonuses, 13th-month salary
- One-time payments (signing bonuses, retention payments)
- SI-exempt allowances (phone, gasoline, housing, meal allowances)
Contribution cap: 20 times the statutory basic wage per employee. As of July 1, 2024, with the basic wage at VND 2,340,000 (~USD 94), the maximum SI salary is VND 46,800,000 (~USD 1,880) per employee—resulting in a maximum monthly trade union fee of VND 936,000 (~USD 38) per employee (20 × VND 2,340,000 × 2%).
Payment logistics: Trade union fees are generally paid monthly in the month following salary payment to the district-level trade union where your company is registered, often aligned with SI deadlines. Confirm the exact payment date and account details with your relevant trade union organization—don’t assume a uniform deadline across provinces.
The trade union fee shares the same calculation base as SHUI contributions—for full 2026 rate breakdowns and Reference Level ceiling rules, see Vietnam social insurance 2026 rates, caps, and compliance framework.
The Common Calculation Error
FDI payroll managers unfamiliar with Vietnam’s compensation structure default to gross salary calculations, resulting in 15–25% overpayments. The error surfaces during internal audits or payroll provider switches—but recovering accumulated overpayments proves nearly impossible since union fee payments are non-refundable.
Calculation formula: (SI salary fund) × 2% = monthly union fee
Examples:
- Company with VND 1 billion (~USD 40,200) monthly SI fund = VND 20 million (~USD 804) union fee
- Employee earning VND 50 million with VND 2,340,000 basic wage = VND 936,000 maximum contribution (20 × VND 2,340,000 × 2%), even though 2% of full salary = VND 1,000,000
The gross vs SI salary fund distinction affects both union fees and SHUI deductions—see employer payroll costs and gross-to-net calculation guide for worked examples separating each component.
Who Must Pay and Who Can Join
Your 2% employer contribution applies to all employees in your SI salary fund—Vietnamese nationals and foreign workers alike. No nationality-based exemption exists, creating budget implications many FDI CFOs discover only after finalizing first-year operational budgets. Company size doesn’t matter: 20 employees or 2,000, the 2% rate applies.
Foreign Worker Rights and the Two-Tier Structure
Foreign workers on 12+ month contracts can join grassroots unions starting July 1, 2025—with limitations. They can participate in activities and pay voluntary 1% employee union dues, but cannot hold leadership positions or become union representatives. Governance roles remain reserved for Vietnamese citizens under the 2024 Trade Union Law.
Two-Tier Structure:
- Employer (2%): Pays on entire salary fund regardless of who joins or nationality—mandatory
- Employee (1%): Voluntary, paid only by union members who choose to join
Your foreign country director earning VND 150 million monthly contributes to your obligation calculation even if they never join and cannot serve as representative. The 1% employee dues are separate—only actual union members pay this through salary deduction.
Contract duration determines foreign worker union eligibility—review Vietnam labor contract types, probation rules, and hiring compliance for structuring compliant terms.
Foreign workers must hold valid work permits before union membership eligibility applies—confirm permit status against Vietnam work permit requirements and FDI compliance procedures.
Payment Requirements Regardless of Union Presence
A common misconception: the 2% employer contribution becomes optional without a grassroots union. It doesn’t. Payment is required regardless—funds support the broader Vietnamese trade union system, not just workplace-specific activities. You cannot condition payment on having active union members at your location.
Payment Destinations:
- With grassroots union: District-level union where your company registers
- Without grassroots union: Vietnam General Confederation of Labor (VGCL) designated accounts from business registration
Document payment account details in your finance procedures before the July 2025 effective date. Your provincial Department of Labor provides specific account information during business registration.
Trade union fee registration is one of several mandatory obligations at company setup—for the full employer compliance framework including contracts, permits, and insurance, see Vietnam employment law and HR compliance for FDI companies.
Prohibited Employer Conduct: What Not to Do
Article 10 of the 2024 Trade Union Law bans 8 categories of anti-union practices—creating legal liability that extends beyond paying the 2% fee on time. These prohibitions affect hiring, terminations, contract renewals, and daily management decisions starting July 1, 2025.
- Discrimination: Cannot dismiss, discipline, or deny contract renewals based on union participation. Terminating a union representative for performance requires thorough documentation proving zero connection to union activities.
- Coercion: Works both ways—cannot require union membership as a hiring condition and cannot use economic threats against unions (threatening relocation or benefit cuts if workers unionize). Foreign managers sometimes cross this line inadvertently during restructuring discussions.
- Obstruction: Cannot hinder union establishment, dominate union operations, or fail to provide necessary conditions. You must facilitate grassroots union formation when employees petition—not delay, discourage, or create barriers.
- Financial Interference: Delaying payments, underpaying calculated amounts, or misusing union funds creates the same penalty exposure as non-payment: VND 5–75 million (~USD 200–3,000) fines under Decree 12/2022/ND-CP plus mandatory payment of shortfalls.
Anti-union conduct violations frequently escalate into formal labor disputes with back-pay and reinstatement exposure—understand resolution procedures in Vietnam labor dispute resolution and employer compliance procedures.
Terminating union representatives requires additional procedural safeguards beyond standard dismissal rules—see employee termination legal grounds and severance calculation procedures for protected-category compliance.
Train both Vietnamese and expatriate managers on these prohibitions before July 2025. Document restrictions in your HR policy manual and conduct specific training for anyone involved in hiring, termination, or disciplinary decisions.
Exemptions and Suspensions: The Arrears Reality
Exemptions exist for employers facing economic difficulties or force majeure events—but suspensions are deferrals, not waivers. You must pay full arrears by the last day of the month following suspension end. Maximum suspension: 12 months under the 2024 Trade Union Law, Article 30. Approval rates remain low with strict documentation requirements.
What Qualifies and How to Apply
Qualifying Conditions:
- Documented operating losses (audited financial statements)
- Inability to pay employee salaries (bank statements proving insufficient funds)
- Force majeure: natural disasters, fires, pandemics causing business suspension
General business slowdowns, market competition, or reduced profitability don’t meet the threshold. Authorities require verifiable hardship, not quarterly revenue dips.
Successful applications typically involve bankruptcy proceedings or extended shutdowns beyond management control—factory fires, government pandemic orders, facility-destroying disasters. Competitive pressure or supply chain cost increases rarely qualify. Even approved applications may receive partial reductions rather than full exemptions, so budget conservatively.
The Arrears Payment After Suspension
After suspension ends, your full 2% obligation resumes immediately—no phase-in. Plus you must pay accumulated arrears by month-end following suspension.
Example: 6-month suspension (January–June) means your July payment includes the standard July obligation PLUS full January–June arrears. Budget accordingly—this catches many companies off guard.
Compliance Risks and Audit Triggers
Non-compliance triggers back-payment for all unpaid periods plus penalties ranging from VND 5–75 million (~USD 200–3,000) under Decree 12/2022/ND-CP. Penalty severity depends on duration and whether authorities determine intentional violation or administrative oversight.
Common Violations:
- Late payment: Beyond the deadline confirmed with your district union—stacking penalties possible
- Wrong calculation base: Using gross payroll vs SI salary fund—multiple charges if combined with late payment
- Non-registration: Failure to register with district union—harshest sanctions (treated as intentional)
- Underpayment: Excluding eligible salary components—back-payment plus fines
Three Audit Triggers: Provincial labor departments audit FDI enterprises every 2–3 years, including union fee compliance. Employee requests to form a grassroots union trigger immediate compliance verification with retroactive calculations. SI auditors cross-check union fees against SI declarations since they share the same calculation base.
Beyond Financial Penalties: Business license renewal delays (weeks to months), investment incentive application denials, and AEO (Authorized Economic Operator) customs certification complications.
High-Priority Audit Targets: FDI enterprises with 200+ employees, manufacturing operations (vs small representative offices), and industrial zones—Hai Phong (>90% penetration, 350 enterprises), Thai Nguyen (245 unions, 200+ FDI companies).
Three Risk Mitigation Actions:
- Configure payroll correctly: Use SI salary fund base, not gross payroll (prevents 15–25% overpayment)
- Document everything: Bank confirmations, union receipts, calculation worksheets reconciling to SI declarations—archive 10 years per standard Vietnamese accounting retention
- Run quarterly internal audits: Catch discrepancies before authorities do—most gaps surface internally first
Payment Procedures and Company Rights
Monthly payment deadlines generally align with SI submission timelines—confirm the exact date with your district union, as this varies by province. This synchronization simplifies compliance since your payroll calendar can bundle both obligations.
Payment Methods (vary by province):
- Electronic transfer via provincial tax portal
- Direct bank transfer to designated union accounts
- In-person submission at district union offices (some provinces)
Verify provincial requirements during business registration—your payment method determines your audit documentation trail.
Required Documentation: Official union receipts or bank transfer confirmations showing payment date, exact amount, calculation period, and receiving union entity. Archive 10 years. Missing records create a presumption of non-compliance with potential back-payment requirements.
Multi-Location Complexity: You cannot consolidate payments across provinces. Each location pays its respective district union separately—3 factories = 3 separate monthly payments and tracking systems.
Your Rights During Union Supervision: You’re entitled to advance notice of supervision content and plans, two-way dialogue during the process, and the right to request review of results afterward. These procedural rights let you contest incorrect findings rather than automatically accepting supervision results.
First-Time Registration: Submit to the district union or VGCL with your business registration certificate, employee list with salaries, and contact person. Processing takes 15 working days. Back-payment gets calculated for any prior operation period—18 months operating without registration means 18 months of arrears calculated during registration review.
This information reflects regulations current as of July 2025 under the 2024 Trade Union Law (Law 12/2024/QH15) and Decree 12/2022/ND-CP. Vietnamese labor and union regulations change periodically. For decisions specific to your company structure, consult qualified legal and tax professionals licensed in Vietnam.
Indochina Link Vietnam provides payroll compliance reviews, trade union fee audit services, and HR policy assessments for July 2025 readiness. Questions about configuring your systems before the effective date or calculating arrears obligations for past periods? We help FDI companies establish compliant calculation procedures and documentation systems for Vietnam labor obligations.
