How to set up HR System in Vietnam

In the fast-paced and dynamic business environment of Vietnam, having an efficient and well-structured HR system is more critical than ever. As companies expand their operations and compete for top talent in this thriving market, the need to set up a human resource system in Vietnam that aligns with local regulations and international standards has become paramount.

Vietnam's business landscape is evolving, with increased globalization, a younger and tech-savvy workforce, and changing labor laws. Navigating this complexity while ensuring compliance and optimizing HR processes can be challenging. That's where the expertise of HR system setup comes into play.

Understanding the Challenges and Solutions for HR System Setup in Vietnam

Vietnam's thriving business environment presents numerous opportunities for growth and expansion. However, it also brings forth several challenges that necessitate a robust HR system. Here, we explore the significance of setting up a human resource system in Vietnam and the challenges that businesses encounter in this context.

Regulatory and Compliance Challenges

Navigating Vietnam's intricate labor laws and compliance requirements can be daunting for both local and foreign businesses. The country's legal framework is constantly evolving, and staying updated is crucial to avoid legal complications. Establishing an HR system that ensures compliance with local regulations while adhering to international standards is imperative for long-term success.

Vietnam's labor laws encompass a wide range of aspects, including employment contracts, working hours, minimum wages, social insurance, and taxation. Staying compliant with these regulations is essential to avoid penalties and disputes that can negatively impact business operations.

Talent Acquisition and Retention in Vietnam

Vietnam boasts a young and dynamic workforce, but the competition for top talent is fierce. Effective talent acquisition and retention strategies are vital for businesses aiming to secure the best professionals. An adept HR system can streamline recruitment processes, identify suitable candidates, and implement employee retention programs to keep valuable talent within the organization.

In a highly competitive job market, companies need to differentiate themselves to attract and retain skilled employees. Offering competitive salary packages, professional development opportunities, and a positive workplace culture are essential components of a successful talent retention strategy.

Adapting to Cultural Differences

Vietnam's rich cultural diversity is a hallmark of its society, and this extends to the workplace. Businesses must be sensitive to cultural nuances and adapt their HR practices accordingly. An HR system that integrates cultural awareness and inclusivity fosters a harmonious work environment and enhances employee morale and productivity.

Understanding Vietnamese cultural norms, communication styles, and social hierarchies is crucial for effective HR management. Moreover, recognizing and celebrating cultural festivals and holidays can contribute to a more cohesive and engaged workforce.

Key Components of an HR System in Vietnam

To establish an efficient HR system in Vietnam, businesses need to focus on key components that contribute to effective human resource management.

Recruitment and Onboarding

Recruitment and onboarding are pivotal processes for businesses in Vietnam, where the competition for top talent is fierce. In a dynamic job market, attracting the right candidates requires a well-structured approach. HR system setup services play a vital role in this phase by providing the technological infrastructure needed for efficient recruitment.

These services assist in posting job vacancies on various platforms, including online job boards and social media. They also offer Applicant Tracking Systems (ATS) that help businesses manage candidate applications, schedule interviews, and perform background checks. Moreover, they can provide data-driven insights into the most effective recruitment channels and strategies, helping companies optimize their hiring processes.

Once candidates are selected, a seamless onboarding process is essential. HR systems offer tools to streamline the onboarding experience, including digital document management for contracts and employee handbooks. This ensures that new hires receive all necessary information and complete essential forms promptly.

Payroll and Benefits Management

Payroll and benefits management require precision and compliance with Vietnamese labor regulations. The Vietnamese government has established a number of labor regulations that govern minimum wage requirements, working hours, and benefits for workers in Vietnam. These regulations are designed to protect the rights of workers and to ensure that they are treated fairly. 

Minimum wage requirements, working hours, and benefits are all important factors that should be included in company regulations which are the rules and procedures that govern the workplace. They are typically set by the employer and are designed to ensure that the workplace is safe and productive.

By including these factors in company regulations, employers can ensure that they are complying with the law and that they are providing their employees with the benefits they are entitled to.

Minimum wage requirements

The minimum wage in Vietnam is set by the government and varies by region. The following are the minimum wage requirements from July 01, 2022:

• Ho Chi Minh City and Hanoi: 4,68 million dong (around $192) per month
• Da Nang: 4.16 million dong (around $170) per month
• Other regions: 3.25-3.64million dong (around $133-$150) per month

The minimum wage is reviewed and adjusted on an annual basis.

Working hours

The standard working hours in Vietnam are 8 hours per day and 48 hours per week. 

Article 109 of the Labor Code 2019 outlines provisions for rest breaks during working hours in the following manner:

• An employee engaged in at least 6 hours of work per day, as stipulated in Article 105 of the Labor Code 2019, is entitled to a rest break lasting a minimum of 30 consecutive minutes. 
• For night work, this rest break extends to a minimum of 45 consecutive minutes. If a shift spans at least 6 consecutive hours, the rest break is considered part of the total working hours.
• Beyond the rest break detailed in Section 1 of Article 109 of the Labor Code 2019, employers are required to identify additional short breaks and specify them in the internal labor regulations.

Overtime pay

Overtime is permitted, but the number of overtime working hours of the employee does not exceed 50% of the normal working hours in 01 day. 

In case of weekly work, the total normal working hours plus overtime working hours shall not exceed 12 hours in 01 day, and 40 hours in 01 month.

The total overtime working hours do not exceed 200 hours in 01 year and 200 hours in 01 year in the specific fields, works, jobs as manufacture, processing of textile, garment, footwear, electric, electronic products, processing of agricultural, forestry, aquaculture products, salt production; generation and supply of electricity, telecommunications, refinery operation; water supply and drainage and some special cases regulated.

On June 23, 2015, the Ministry of Labor, War Invalids and Social Affairs issued Circular No. 23/2015/TT-BLĐTBXH on guidelines for some Articles on salaries of Decree No. 05/2015/NĐ-CP.  

Overtime pay equals (=) actual pay per hour or per product of a normal working day multiplied by (x) at least 150% or 200% or 300% multiplied by (x) number of additional hours or additional products.

The rates of 150%, 200%, and 300% are specified in Article 98 of the Labor Code 2019. In particular, an employee who works overtime will be paid an amount based on the piece rate or actual salary as follows:

• On normal days: at least 150%;
• On weekly days off: at least 200%;
• During public holidays, paid leave, at least 300%, not including the daily salary during the public holidays or paid leave for employees receiving daily salaries.

Benefits

In addition to the minimum wage, employees in Vietnam are entitled to a number of benefits, including:

• Social, Health & Unemployment Insurance (SHUI)

• Health insurance: The rate of health insurance is 4.5% of the employee's monthly salary. The employer is responsible for paying 3% of the employee's salary, and the employee is responsible for paying 1.5% of their salary.
• Unemployment insurance: The rate of unemployment insurance is 2% of the worker's monthly salary. The employer is responsible for paying 1% of the worker's salary, and the worker is responsible for paying 1% of their salary.
• Compulsory Social insurance: The employer is responsible for paying 17.5% of the employee's salary, and the employee is responsible for paying 8% of their salary.

The total contribution rate of SHUI is 32% of the employee's monthly salary. The employer is responsible for paying 21.5% of the employee's salary, and the employee is responsible for paying 10.5% of their salary.

Please note that these rates are subject to change. The most recent rates were announced in July 2023.

• Paid sick leave: Employeesare entitled to 30-60 days of paid sick leave per year  which depends on each situation. This leave can be used for any type of illness, including both short-term and long-term illnesses.
• Paid maternity leave: Female employees are entitled to 6 months of paid maternity leave. This leave can be taken before or after the birth of the child.
• Paid paternity leave: Male employees are entitled to a maximum of 14 days of paid maternity leave depending on each situation.. This leave can be taken to care for the newborn child.

Performance Evaluation and Management

Performance evaluation and management are essential components of HR system setup. An effective system provides tools for setting performance goals, conducting regular assessments, and facilitating constructive feedback.

HR systems enable managers to create performance appraisal processes tailored to their organization's needs. They offer templates for defining key performance indicators (KPIs) and competencies relevant to each role. This data-driven approach ensures that performance evaluations are objective and aligned with the company's goals.

Performance management features within HR systems allow managers to track employee progress, provide feedback, and set development goals. This continuous feedback loop fosters employee growth and identifies high-potential individuals who can contribute significantly to the organization's success.

Training and Development

Investing in employee training and development is crucial for building a skilled and adaptable workforce. HR systems support these initiatives by streamlining the planning, tracking, and evaluation of training programs.

HR systems can help businesses identify skills gaps within their workforce, enabling them to tailor training programs to address specific needs. This ensures that training efforts are targeted and result in a more competent workforce.

Additionally, HR systems can automate training registration, track attendance, and manage training records. They also facilitate e-learning and online course management, allowing employees to access training materials conveniently. A well-structured training and development strategy, supported by HR systems, enhances employee engagement and reduces turnover.

Labor Relations and Compliance

Maintaining positive employee relations and ensuring compliance with labor laws are essential for long-term success in Vietnam's competitive labor market. HR systems provide tools to foster effective communication, manage employee grievances, and ensure legal compliance.

Effective communication is crucial for resolving workplace issues and promoting a healthy work environment. HR systems often include features such as employee self-service portals, where employees can access information, submit leave requests, and communicate with HR departments. This transparency and accessibility improve employee satisfaction and engagement.

Additionally, HR systems facilitate grievance management by allowing employees to report issues and track their resolution. These systems maintain a record of grievances and resolutions, which can be invaluable for preventing similar issues in the future and demonstrating compliance with labor regulations.

Moreover, HR systems help companies adhere to labor regulations through automated compliance checks and alerts. They can generate reports to ensure that employment contracts/agreements, working hours, and other labor-related matters comply with Vietnamese law. This reduces the risk of legal issues and penalties, safeguarding a company's reputation and financial stability.

Final Thoughts

In the rapidly evolving business landscape of Vietnam, establishing a robust human resource system is not just a necessity; it's a competitive advantage. Overcoming challenges in compliance, talent acquisition, cultural adaptation, and more is essential for success.

Viettonkin specializes in helping businesses set up comprehensive HR systems in Vietnam. With our expertise and experience, we empower organizations to navigate the complexities, ensuring seamless operations and compliance with local regulations.

Are you ready to elevate your company's HR in Vietnam? Contact Viettonkin today, and let's embark on a journey of efficiency, compliance, and growth together.