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In Vietnam’s fast-changing business landscape, staying on top of HR compliance is more critical than ever, especially to foreign direct investment (FDI) businesses operating in the country. This guide unpacks what it takes to stay compliant in 2025. 

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HR compliance refers to the process of ensuring that a business adheres to applicable human resources laws, regulations, and guidelines. More than just following rules, it’s about developing and implementing policies and procedures that align with legal standards to promote fair labor practices, protect employee rights, and maintain a positive organizational reputation.

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In Vietnam, this revolves around the Labor Code of 2019, which governs everything from labor standards, hiring to wages and workplace conditions. Key HR compliance areas also include employment contracts, payroll compliance and employee benefits, working hours, overtime and rest days, all of which will be discussed in the article below.

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At the heart of HR Compliance in Vietnam lies the employment contract,a legal pact between employer and employee outlining paid work, wages, conditions, and mutual obligations. Under the Labor Code of 2019, any agreement meeting these criteria – regardless of its title – qualifies as a labor contract. 

which delineates specific types, mandatory terms, and termination procedures to ensure both employer and employee rights are protected.

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The Labour Code 2019 (Law No. 45/2019/QH14) defines a labour contract as an agreement between an employee and an employer regarding paid work, wages, working conditions, and the rights and obligations of both parties in industrial relations. Even if the agreement is given a different name, as long as it includes elements such as paid employment, salary, and the management, administration, and supervision by one party, it is still recognized as a labour contract under Vietnamese law.

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Article 20 of the Labor Code 2019 defines two main types of employment contracts:

• Indefinite-term contract – No specified expiration date, providing long-term employment stability.

• Definite-term contract – Valid for a maximum of 36 months, renewable once before converting to an indefinite-term contract.

Seasonal contracts (short-term) and probationary contracts exist for specific needs but are not considered formal labor contracts. For more information, here is a comparison table for different types of contracts:

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Under Article 21 of the Labor Code 2019, every employment contract in Vietnam requires:

• Job description & work location

• Salary, benefits, and allowances

• Working hours, rest periods, and leave entitlements

• Occupational safety, social insurance, and health insurance obligations

• Terms for contract modification, suspension, and termination

Additionally, employers must provide two signed copies, with each party retaining one.

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In Vietnam, the termination of employment contracts is governed by the Labor Code of 2019, which outlines specific procedures and obligations to ensure lawful and fair practices.

• Employer-Initiated Termination (Article 36): Employers can terminate contracts due to employee misconduct, prolonged illness, or restructuring, with 30-45 days' notice depending on contract type.

• Employee-Initiated Termination (Article 35 and 37): Employees can resign by giving 30-45 days’ notice based on contract type, if they are not assigned the agreed job, workplace, or working conditions; are not paid in full or on time; are maltreated, sexually harassed, or forced to work; or are unable to work due to illness or injury after 90 consecutive days (for definite-term contracts) or a quarter of the contract term for contracts under 12 months (article 37).

Choose the right contract with experts consultancy

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The probation period in Vietnam serves as an initial evaluation phase where both employers and employees test the fit before committing to a formal employment contract. Governed by the Labor Code 2019 (Law No. 45/2019/QH14), Article 25, the probationary period varies based on job complexity and skill level shall not exceeds:

• 180 days for managerial positions

• 60 days for roles requiring college-level or higher qualifications

• 30 days for positions necessitating intermediate-level qualifications or for technical worker

• 6 working days for all other jobs. 

During probation, employees must receive at least 85% of the full wage, and a formal contract follows successful completion.

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Ensuring HR compliance in Vietnam requires strict adherence to labor laws governing working hours, overtime, and rest periods.Vietnam’s labor laws set clear boundaries to protect workers while giving employers flexibility. 

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Article 105 of the Labor Code caps the regular working hours at 8 hours per day and 48 hours per week. Employers are encouraged to implement a 40-hour workweek to promote work-life balance.

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Employers may request overtime as overtime is allowed but regulated (Article 107).

• Daily cap: must not exceed 50% of the regular daily working hours, and total working time does not surpass 12 hours in a single day

• Monthly cap: at 40 hours, with an annual limit of 200 hours, extendable to 300 hours in specific sectors such as textiles, garments, and electronics. 

Overtime compensation rates are mandated as follows

• 150% of the standard hourly wage for overtime on regular days. 

• 200% for overtime on weekly days off.

• 300% for overtime on public holidays or paid leave days.

• Night shift*: a bonus with at least 20% of their base salary, calculated based on their normal working hour rates, weekends, or public holidays, with a minimum of 130% of their regular hourly wage.

*Note: According to the provisions of Article 106 of the Labor Code 2019, night working hours are calculated from 10:00 PM to 6:00 AM the following day.

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Employees are entitled to at least one weekly day off(usually Sunday, as per Article 111). Additionally, they are granted 11 paid public holidays annually (Article 112), including New Year's Day and National Day. Annual leave entitlements start at 12 working days for those with less than 5 years of service, increasing proportionally with tenure.

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Vietnam’s minimum wage varies by region and is determined by the National Wage Council, an official body responsible for evaluating and proposing adjustments based on economic conditions. This council meets at least once a year to assess factors such as inflation, labor productivity, and cost of living. Once a new wage proposal is finalized, it is submitted to the government for approval.

Vietnam applies a tiered regional minimum wage system, recognizing variations in the cost of living across different areas. These classifications are outlined in Conclusion 83-KL/TW, which came into effect on July 1, 2024. The wage regions are structured as follows:

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USD to VND exchangerate standing at 25.804 on April 2025

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Aside from conforming to salary compliance, businesses should also know the market benchmark and key players’ offerings to optimize and balance profitability and employee satisfaction by checking the latest 2025 Salary Guide in Vietnam.

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In Vietnam, Social Insurance (SI), Health Insurance (HI), and Unemployment Insurance (UI) are required by both employers and employees (Labor Code 2019, (Law No. 45/2019/QH14). These contributions ensure social security, medical coverage, and financial support for workers in case of unemployment.

Both employers and employees contribute a percentage of the employee’s monthly  basesalary to the relevant insurance funds. The contribution is capped at 20 times the minimum wage, currently set at VND 46,800,000 per month (as of April 2024).

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For businesses in high-risk industries:

• UI is set at 0.3%, provided they meet eligibility criteria and receive approval from the Ministry of Labor, Invalids, and Social Affairs, with a cap of 20 times the regional minimum wage

• SI and HI: contributions are calculated based on the employees' monthly salary as specified in their employment contract, with a cap of 20 times the base salary

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Vietnam applies a progressive tax system to personal income,governed by the Vietnam Labor Code 2019, the Law on Personal Income Tax (Law No. 04/2007/QH12, amended in 2012), and tax regulations issued by the General Department of Taxation (GDT), meaning that the tax rate increases as taxable income rises. 

Taxable Income Includes:

• Salaries and wages

• Bonuses and allowances (except those specifically exempt)

• Rental income, capital investments, dividends, and other personal earnings

Both residents and non-residents are subject to PIT, but at different rates and conditions.

• Tax Residents: Individuals who stay in Vietnam for 183 days or more within a 12-month period or have a permanent residence are taxed on worldwide income at progressive tax rates (5% - 35%).

• Non-Residents: Individuals who stay for less than 183 days are taxed at a flat rate of 20% on income earned in Vietnam.

PIT Rates for Tax Residents

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Many businesses, especially foreign-invested enterprises, struggle with payroll and tax complexities, increasing the risk of miscalculations and penalties. To reduce compliance risks and streamline payroll management, businesses can leverage professional payroll outsourcing solutions.

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A well-defined Code of Conduct is essential for maintaining professionalism and discipline in the workplace. According to Article 118 of the Labor Code, businesses must develop internal work regulations that outline expected behaviors, disciplinary measures, and ethical standards. These rules should:

• Prevent harassment, discrimination, and unethical behavior in the workplace.

• Ensure employees respect company policies, including confidentiality and performance expectations.

• Establish grievance mechanisms for employees to report workplace misconduct without fear of retaliation.

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Vietnamese labor laws emphasize workplace safety, hygiene, and employee well-being:

• All employers, workers, and related parties must comply with Vietnam’s occupational safety and health laws (Article 132).

• The Government and provincial authorities are responsible for implementing national and local OSH programs (Article 133).

• Employers must ensure workplace safety, while employees must follow safety rules and procedures (Article 134).

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Foreign employees must obtain a work permit (Article 151) before starting employment unless they qualify for an exemption, requiring:

• Age 18+ years old and in good health.

• Have technical, managerial, or expert-level skills required for the position.

• Have no criminal record affecting national security.

Exemptions (Article 154): Some foreign workers do not require a work permit, including intra-company transferees, heads of representative offices, and foreign investors. However, they must still obtain a Work Permit Exemption Certificate.

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Decree No. 152/2020/ND-CP limits foreign hires in certain industries:

• Government and public administration (reserved for Vietnamese citizens).

• Certain roles in banking & finance (subject to strict approval).

• Security & defense industries (restricted for national security reasons).

• Pharmaceutical and medical sectors (requires special licensing).

For other sectors, employers must prove local talent shortages before hiring foreign workers. To simplify foreign workforce management and bypass permit complexities, businesses can use an Employer of Record (EOR) service to legally hire foreign employees without direct sponsorship.

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1. What do employers need to know about work permits in Vietnam?
   Foreign workers require work permits or exemption certificates unless qualified for exemption under specific laws (Article 154). 

2. What are the standard working hours and overtime rules in Vietnam?
   8 hours/day, 48 hours/week, with overtime capped and paid at premium rates on holidays and night shifts (150% - 300%).

3. How long can probation last in Vietnam?
   Depending on the role, probation periods in Vietnam can last up to 180 days, with a minimum 85% wage. Businesses can streamline this process and ensure legal compliance by leveragingRecruitment Process Outsourcing services.

4. What is the social insurance contribution rate for Vietnamese and foreign employees?

   For Vietnamese: 10.5% from employees and 21.5% from employers.

For foreigners: 9.5% from employees and 20.5% from employers.

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Businesses must manage salaries, social insurance, and tax contributions correctly to avoid penalties. Since Vietnam's labor laws in these areas change frequently, companies can save time and reduce compliance risks by using professional Payroll Services..

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