Vietnam is one of Asia's most attractive hiring markets, but its labour law is detailed and protective. This guide walks through how an Employer of Record works, the line between a compliant EOR and labour leasing, work permits for expats, the Labour Code essentials, how severance is calculated, leave, payroll, social insurance and the major 2026 changes to wages, tax and contributions.
An Employer of Record, or EOR, is a Vietnam-licensed company that becomes the legal employer of the people you want to hire. You select the candidate and direct their work; the EOR issues a compliant Labour Code contract, registers the employee for social, health and unemployment insurance, runs payroll in dong, withholds and files personal income tax, sponsors the work permit for expats, and manages renewals and offboarding.
It matters that "Employer of Record" is not a separate legal category in Vietnamese law. Providers operate under the existing Labour Code and enterprise frameworks, which is why the single most important thing to verify about any Vietnam EOR is that it genuinely holds a licensed local entity and employs your people directly. The legal backbone is the Labour Code 2019 (Law 45/2019/QH14, in force since 1 January 2021), supported by Decree 145/2020 and, from 2026, a new minimum-wage decree, a new Social Insurance Law and a reformed Personal Income Tax Law.
Only a properly licensed Vietnamese entity can compliantly employ staff and run statutory payroll. Confirm that your provider owns its local entity, issues its own labour contracts, and registers social insurance in its own name, rather than routing your people through an unverified third party.
This is the most important compliance point in the Vietnamese market. The Labour Code regulates labour leasing, also called labour sub-leasing or dispatch, separately under Articles 52 to 57. Under that regime, a licensed dispatch enterprise employs a worker and assigns them to a client company under the client's day-to-day management, while the employment relationship stays with the dispatcher.
Labour leasing is a conditional, tightly limited activity. It requires a specific licence and a substantial deposit, applies only to around twenty defined job categories, and is capped at a maximum dispatch duration of twelve months. That is not how a compliant EOR should operate.
A genuine EOR directly employs the worker under its own indefinite or fixed-term labour contract, and provides services to the client under a separate business agreement. The worker is integrated into the client's team for direction of work, but in legal substance is the EOR's own employee, not leased headcount. Vietnamese authorities assess substance over form, so the practical points are: use a provider that owns a licensed entity, document the worker as the EOR's genuine employee, and avoid arrangements that resemble open-ended leased headcount. For long-term or sensitive roles, local legal advice is worth taking.
Structuring the engagement as genuine direct employment, rather than disguised labour leasing, is what keeps it outside the twelve-month dispatch cap and the twenty-category restriction. It is the difference between a durable hiring solution and one that can be challenged.
Foreign employees generally need a work permit before they can legally work in Vietnam, unless they qualify for an exemption (for example, short stays under ninety cumulative days a year, certain intra-corporate transferees, or some priority-sector experts). The employer, or the EOR acting as employer, leads the process. The typical sequence is:
Document legalisation in the employee's home country is usually the longest stage, so the full process takes several weeks. Decree 70/2023 and Decree 219/2025 simplified the rules: the foreign-labour-demand approval is now merged into a single work-permit application, job-posting requirements were relaxed, experience thresholds were reduced, and an employee can work in multiple provinces for the same employer with a few days' notice rather than a fresh permit. Expat contracts are fixed-term and aligned to the permit's validity.
Employment is governed by the Labour Code 2019. The headline rules:
| Topic | Rule |
|---|---|
| Contract type | Indefinite-term or fixed-term. A fixed term is capped at 36 months and can be renewed only once; a third consecutive contract must be indefinite. Working on more than 30 days past expiry also converts it to indefinite. |
| Probation | By role: up to 180 days for managers, 60 days for college or technical roles, 30 days for technical workers, 6 working days for others. At least 85% of full salary; no probation under a one-month contract; cannot be extended. |
| Working hours | 8 hours per day and 48 per week. Overtime capped at 4 hours/day, 40 hours/month and 200 hours/year (up to 300 in certain sectors). |
| Notice period | 45 days (indefinite), 30 days (fixed-term 12–36 months), 3 working days (fixed-term under 12 months). Employees may resign with notice without giving a reason. |
| Protected employees | Pregnant employees, those on maternity or parental leave or raising a child under 12 months, and those on certified sick or agreed leave cannot be unilaterally dismissed. |
| Minimum wage | Regional, in four bands. From 1 January 2026 (Decree 293/2025), Region I is VND 5,310,000/month, down to Region IV at VND 3,700,000. |
Contracts must be in writing (oral only for terms under one month); bilingual Vietnamese and English contracts are common for foreign-invested employers, and electronic contracts are valid where a recognised e-signature platform is used.
Vietnam has two distinct end-of-employment payments, and a crucial nuance ties them both to unemployment insurance.
Severance allowance is 0.5 month's salary for each year of service, for employees who worked regularly for twelve months or more, based on the average salary of the last six months. Job-loss (retrenchment) allowance is 1 month's salary per year of service, with a minimum of two months, and applies when the termination is due to structural or technological change, economic reasons, or a merger.
Both allowances exclude the period during which the employee participated in unemployment insurance. Because unemployment insurance has been mandatory since 2009, statutory severance in practice often only covers pre-2009 service or gaps in contributions. For most modern hires the employer's direct severance liability is small, with the income-replacement role played instead by unemployment-insurance benefits. We calculate this correctly so the right amount, and only the right amount, is paid.
Severance is generally due on resignation, lawful employer termination, contract expiry and mutual termination, but not on disciplinary dismissal. Statutory severance is exempt from personal income tax; amounts above the statutory level are taxable.
Statutory leave is structured and, in places, generous. The core entitlements:
| Leave type | Entitlement |
|---|---|
| Annual leave | 12 working days minimum, plus 1 extra day per 5 years with the same employer; pro-rated in the first year |
| Public holidays | 11 paid days for locals; foreigners also get their home country's traditional new year and national day |
| Sick leave | 30, 40 or 60 days a year depending on years of insurance contributions, paid at about 75% by social insurance |
| Maternity leave | 6 months, paid by social insurance; up to 2 months may be taken before the birth |
| Paternity leave | 5 to 14 working days depending on the circumstances of the birth, paid by social insurance |
| Overtime pay | Weekday 150%, weekly rest day 200%, public holiday 300%, plus a 30% night premium |
Marriage leave is three paid days, marriage of a child one day, and bereavement of an immediate relative three days. Unpaid leave is by agreement.
Salaries are paid monthly in Vietnamese dong. A 13th-month salary or Tet bonus is customary and widely expected, but is not legally mandatory.
Personal income tax is progressive. Tax residents (183 days or more in Vietnam) are taxed on worldwide employment income at rates from 5% to 35%; non-residents pay a flat 20% on Vietnam-sourced employment income. From the 2026 tax year, the reformed Personal Income Tax Law restructures the brackets and lifts the personal deduction to VND 15.5 million a month, with a dependant deduction of VND 6.2 million a month, so PIT only begins above the personal deduction after insurance.
Statutory contributions are split between employer and employee:
| Contribution | Employer | Employee |
|---|---|---|
| Social insurance | 17.5% | 8% |
| Health insurance | 3% | 1.5% |
| Unemployment insurance | 1% | 1% |
| Trade-union fee | 2% | — |
| Total | ~23.5% | 10.5% |
Employer statutory insurance comes to about 21.5% of gross, with the 2% trade-union fee on top. Social and health insurance are capped at twenty times the official reference level (VND 46.8 million a month, rising to VND 50.6 million from mid-2026), while unemployment insurance is capped at twenty times the regional minimum wage. The new Social Insurance Law 2024, effective from 1 July 2025, expanded compulsory coverage, replaced the "base salary" with a "reference level," and reduced the minimum pension-contribution period from twenty to fifteen years.
Expats and social insurance: foreign employees on labour contracts of twelve months or more, holding a work permit, are generally subject to compulsory social and health insurance, with some exemptions, and are usually exempt from unemployment insurance. A foreign client whose people work in Vietnam can create a permanent establishment and corporate-tax exposure; using an EOR reduces that risk because the worker is legally employed by the EOR's Vietnamese entity, but it does not fully eliminate it, so specialist advice is worth taking for revenue-generating roles.
Termination is the highest-risk area of Vietnamese employment. The procedure requires written notice, a confirmation and return of the social-insurance book, and payment of all final amounts within fourteen working days (extendable to thirty in limited cases). Protected employees cannot be unilaterally dismissed.
A key change under the 2019 Labour Code is that employees may now resign unilaterally with the required notice without giving a reason. Employers, by contrast, may only terminate unilaterally on defined lawful grounds, such as regular poor performance against criteria, prolonged illness beyond the protected window, business reasons like restructuring or merger, force majeure, or absence without valid reason for five or more consecutive working days. Unlawful termination is expensive: the remedy is reinstatement plus payment of wages and contributions for the period out of work, plus at least two months' salary in compensation. Mutual termination by written agreement is a common, low-risk route.
For a small Vietnamese headcount, per-employee EOR fees usually beat the cost and effort of setting up and running a licensed entity. Once the team is larger, typically beyond twelve to twenty-five employees, or you need to invoice and contract locally, your own entity often becomes more economical. A common path is to start with an EOR and transition to an entity later.
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