INFORMATION ON THE PAYROLL REQUIREMENTS IN VIETNAM
After setting up a business in Vietnam, the next big hurdle is hiring the staff that you will need to help grow your operation. The initial hiring process and, ultimately, payroll administration can quickly become a complex and confusing process. Labor intensive sectors, such as manufacturing, are almost certain to face a significant degree of exposure to these challenges, while all companies setting up within Vietnam – from representative offices to fully foreign-owned enterprises – will face some liability.
As a first step towards meeting the challenges presented by payroll, companies should be aware of the basic statutory requirements imposed under Vietnamese law. The following are the most significant payroll related obligations for employers:
- 1. Minimum wages
- 2. Overtime wages
- 3. Individual income tax withholding requirements
- 4. Social insurance withholding requirements
Common minimum wage
The first type is the common minimum wage, which is used to calculate salaries for employees in state-owned organizations and enterprises. The common minimum wage is 1,390,000 VND /month (US$ 61), in effect from 1 July 2018.
Regional minimum salary
The second type of minimum wage is used for employees in all non-state enterprises and is based on regions as defined by the government. From 1 Jan 2018, the National Wages Council has finalized the regional minimum salary rates for 2018, as follows: (1)
- Region I: VND 3,980,000/month
- Region II: VND 3,530,000/ month
- Region III: VND 3,090,000/ month
- Region IV: VND 2,760,000/ month
Social security scheme
- 1. Social insurance (SI)
- 2. Health insurance (HI)
- 3. Unemployment insurance (UI)
From 1 January 2018, all foreign/expat workers will be eligible for SI contributions. The coverage will include sickness, maternity leave, occupational diseases and accidents, retirement and death. In case of a foreign employee leaves Vietnam, a one-time claim for pension will be available. Foreign employees will be liable for 8 percent Social Insurance, while the employer will pay 17.5 percent.
Foreign employees will be liable for 1.5 percent Health Insurance, while their employer will pay 3 percent.
As prescribed by the Vietnamese law, any enterprise that employs 10 employees or more is required to participate in unemployment insurance. Every month, employees have to pay an unemployment insurance premium equal to 1% of their monthly salary, while the employer is required to pay 1% of the monthly salary fund. The time of payment of unemployment insurance premiums by employees and employer is the time when compulsory social insurance premiums must be paid.
For employees that pay unemployment insurance premiums according to their salary decided by their employer, the monthly salary on which unemployment insurance premiums are based is that on which compulsory social insurance premiums are based under the Law on Social Insurance. In case the monthly salary on which unemployment insurance premiums are based is higher than twenty months’ region-based minimum salary, the monthly salary on which unemployment insurance premiums are based will be equal to twenty months’ region-based minimum salary prescribed by the Labor Code at the time of payment of unemployment insurance premiums.
From 1 January 2018, the minimum regional salary cap for UI contributions will range from VND 55,200,000 to VND 79,600,000 per month depending on each region. (1)
- Region I: VND 79,600,000/month
- Region II: VND 70,600,000/month
- Region III: VND 61,800,000/month
- Region IV: VND 55,200,000/month
- (1) For more information on which areas, cities are covered in a specific region, please send us a request via [email protected]