HR Compliance in Vietnam: A Guide for Foreign Investors

Nora Setiawan

April 30, 2021


HR Compliance in Vietnam: A Guide for Foreign Investors

Nora Setiawan

April 30, 2021

When the foreign company has gone through all the legal procedures to complete their business set up in Vietnam, but it still has to deal with the next hurdle of hiring staff and the payroll obligations. These both can be confusing processes, yet the knowledge of HR regulations in Vietnam is also important. Therefore, this article offers information about HR compliance in the country, especially for foreign investors. Let’s read until its end!

READ MORE: Viettonkin Consulting HR service to help you with the HR compliance in Vietnam

HR Compliance Trends in Vietnam

In these recent years, Vietnam has become an attractive place for all businesses. The country also has a fast-growing consumer class, a young and dynamic workforce to build its skillset. Another fact to add, Vietnam’s labor force is growing by more than one million people per year.

There are a number of important HR compliance trends in Vietnam, and the hottest hiring areas are sales, IT & Software, and marketing. Speaking about salary, the labor costs in Vietnam are still low, but wages are steadily increasing. Over these past five years, the increasing salary has come without a corresponding increase in productivity. The associated costs of employing staff in Vietnam are the country’s comparatively high social contribution and income tax rates.

Finding highly skilled employees is rather difficult due to the developing nature of the workforce in Vietnam. Technology and banking are the industries that face severe skills and talent shortages.

Nonetheless, many international companies which are in partnership with the Vietnamese government, are sponsoring training programs to ensure that there will be a growing number of highly skilled employees. For instance, ANZ is looking to attract Vietnamese expatriates back to the country since they have a higher skills set.

Today, the country’s workforce related to HR compliance has continued to grow and it results in a rise in competition within the job market. Additionally, it has increased the rates of turnover at many companies as employees are often shopping their skills around to other potential employers. Fact, it is unusual to see applicants who have worked at a lot of companies over a short span of time.

HR Compliance Workforce in Vietnam

In recent years, the number of foreign workers coming to Vietnam has steadily increased as it surges over 77.000. The huge majority of these workers are employees of foreign contractors, working for, or establishing, and FDI projects. There are things related to hiring and payroll workforce or all about HR compliance you need to understand. 

1. Employment Contracts

A Vietnamese entity is necessary to recruit foreigners to work as managers, executive directors, experts, and skilled labor where local candidates may not meet the business or production requirements. However, it is important to note that in some other Asian countries, such as Vietnamese representative offices are able to hire staff directly.

The company requires to get approval for the employment of foreign workers in each position before the official recruitment. The approval is around 30 to 40 days from the date of application by the President of The People’s Committee of the province. It also includes the work permit, which you need to submit no later than 15 working days before the foreign workers begin to work in Vietnam.

2. Minimum Statutory Employment Rights

Here are the following list of employment rights:

  • Hours of work

In general, employees shall not work more than 8 hours a day and 48 hours a week. Employees who work in a difficult, harsh or hazard condition are not permitted to work more than 6 hours a day. Employees have the right to an hour break each work day. Lastly, employees may work night shifts between the hours of 10pm and 6am.

  • Probation period

Employees with definite and indefinite contracts may be essential on probation at the beginning of their job. The length of probation period depends on the position an employee is employed for and the required qualification. Probation period for employees in the intermediate level is 30 days. Then, employees that require a college level technical or professional may get up to 60 days. However, employees with seasonal contracts of less than one year cannot be on probation.

  • Annual leave

All employees who have worked a minimum of one year in the company should have annual paid leave. Employers must give them 12 days leave if they work in a normal working environment, 14 days leave if they work in difficult, harsh or hazard working conditions, and 16 days in case of extreme difficult working conditions. Lastly, employees are entitled to an extra one-day annual leave for each 5 completed years of work.

  • Parental leave

A female employee is entitled to 4 -6 months of paid maternity leave plus 5 pre-natal check-ups, one day or two days per check-up depending on one specific factor. Employees who have multiple births are entitled to an added one month leave for each child. Maternity benefit is paid to employees who have made payment to the Social Insurance Fund of a minimum of 6 months out of the 12 months preceding the leave.

  • Sick leave

Employees must be given 30 days’ sick leave a year if their total contribution period to the social insurance is not up to 15 years, 40 days’ sick leave a year if their total period of contribution is between 15 and 30 years, and 60 days sick a year if they have made payment to the system for a period of 30 years or more. These conditions only apply to employees who work under normal working conditions.

  • Overtime

The maximum overtime an employee can work during any given working time is 4 hours a day, 30 hours per month, 200 or 300 hours per month. For every overtime worked employees are entitled to be reimbursed at a premium pay, such as 150% of base pay if worked at the normal workday, 180% of base pay if work during night shift, 200% of base pay if worked over the weekend, and 300% of base if worked on holiday.

3. The Minimum Wages

Wages vary depending on the location of employment and the type of skills, also experience to complete the work. There are two kinds of minimum wages. The first one is the common minimum wage of VND1.150.000 or US$55 which is used to calculate salaries for employees in state-owned organizations and enterprises. The second one is for employees in all non-state enterprises based on zones as defined by the government. 

This HR compliance is needed when you start hiring staff for your new business. Remember, you must go through all the processes and regulations in setting up the business, then you can find the talented young people who will contribute to your company. In conclusion, these are the conditions that you have to discern in order to hire employees. Plus, you need to keep an eye out on their needs, or else your recruitment will not come to a success. 

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