Hiring in Vietnam: EOR Guide & Compliance Overview

Overview

Vietnam is the fastest-growing tech labor market in Southeast Asia, and the cost-to-quality ratio for software engineers is hard to beat anywhere in the world. Average developer salaries run USD 15,000–30,000/year for mid-level talent in Ho Chi Minh City — a fraction of Singapore or Seoul prices — while employer costs add roughly 23–24% on top of gross salary through mandatory social, health, and unemployment insurance. That’s not cheap by regional standards (Thailand is under 6%), but the talent pipeline more than compensates.

The complexity is on the entity side. Foreign-majority ownership of Vietnamese companies is permitted in many sectors, but conditional on investment registration certificates, business registration amendments, and sector-specific foreign ownership caps. Retail, education, media, telecom, and logistics all have restrictions that range from 49% to outright prohibition of foreign control. Even in unrestricted sectors like software development, setting up a Vietnamese LLC (Công ty TNHH) takes 3–6 months from initial application to operational readiness, with investment registration, tax registration, bank account opening, and social insurance registration each requiring separate filings with different authorities. Total setup cost lands between USD 5,000 and USD 15,000 in legal and administrative fees.

EOR sidesteps all of it. The EOR’s existing Vietnamese entity employs your workers, handles the 17.5% employer social insurance contribution, manages personal income tax withholding (progressive rates from 5–35%), and can sponsor work permits for foreign nationals. For companies hiring their first 1–10 employees in Vietnam, EOR is faster by months and cheaper by thousands of dollars compared to entity setup.

Key Employment Facts

Employer Cost

Total mandatory employer cost: approximately 23% of gross salary. The trade union fee catches foreign employers off guard — it’s 2% of total payroll paid to the state union federation, mandatory for all enterprises, and has nothing to do with whether your employees actually belong to a union. Budget for it.

Hiring Through an EOR

Vietnam EOR onboarding for local nationals takes 5–7 business days. The process includes employment contract execution (Vietnamese labor law requires written contracts for all engagements over 1 month), social insurance registration with the local Social Insurance Agency, and personal income tax code registration. Employment contracts must be in Vietnamese; bilingual contracts are standard, but the Vietnamese version governs.

Fixed-term contracts in Vietnam are limited to two consecutive terms of up to 36 months each. After the second renewal, the contract automatically converts to indefinite-term. This is a rigid rule — you can’t reset the clock by changing the EOR or restructuring the role. Your EOR should flag when an employee approaches the second renewal so you can decide whether to convert or offboard before the indefinite-term obligation kicks in.

For foreign nationals, work permit processing takes 15–25 working days after the labor needs assessment is approved. Vietnam requires employers to prove that no Vietnamese worker can fill the role before issuing a foreign work permit — the Sở Lao Động (Department of Labour) reviews the justification. Work permits are valid for up to 2 years and tied to the sponsoring entity. The EOR handles the application, but the candidate needs authenticated degree certificates, police clearance from their home country, and a medical check completed in Vietnam. Budget 6–10 weeks total from offer to first working day for foreign hires.

When to Set Up Your Own Entity

Vietnam’s corporate tax rate is 20% — competitive regionally, and companies in designated economic zones or high-tech parks can qualify for reduced rates (10% for up to 15 years). If you’re building a large engineering center (20+ people), entity setup makes long-term financial sense. But don’t underestimate the ongoing compliance load: monthly social insurance declarations, quarterly PIT filings, annual corporate tax returns, and mandatory annual audits for all foreign-invested companies.

Termination Rules

Vietnam’s Labour Code 2019 (effective 2021) sets out an exhaustive list of grounds on which an employer may unilaterally terminate an employment contract. Terminating outside these grounds is automatically wrongful, regardless of business justification.

Permitted grounds for employer-initiated termination (Article 36):

• Employee “regularly fails to complete assigned work” as defined in the internal labor regulations
• Employee is sick or injured and remains unable to work after 12 consecutive months (indefinite contract) or 6 months (fixed-term contract)
• Natural disaster, fire, or epidemic forcing workforce reduction (and the employer has tried all available remedies)
• Change of technology, organizational restructuring, or merger/division requiring workforce reduction
• Employee is absent without permission for 5+ consecutive days

Notice periods: 45 days for indefinite-term contracts; 30 days for fixed-term 12–36 month contracts; 3 working days for fixed-term under 12 months. No notice required for termination due to Article 36(1)(e) (unauthorized absence).

Severance pay (Trợ cấp thôi việc): 0.5 months’ salary per year of service, for years worked before January 1, 2009. Post-2009 service years are covered by Unemployment Insurance (the employee claims UI benefits through the Social Insurance Agency). In practice, the employer computes the pre-2009 severance and the EOR handles UI contribution compliance for the post-2009 period. Total cost on exit depends heavily on how much pre-2009 tenure the employee has — for most current hires under 40, this is zero.

Wrongful dismissal consequences: Reinstatement plus 2 months’ salary compensation, or if reinstatement is impractical (by court determination), compensation equivalent to 2 months’ salary plus the notice-period salary plus the ordinary severance payment. A botched termination of a 5-year employee earning USD 2,000/month costs a minimum USD 4,000 in compensation plus 30 days’ notice pay plus EOR legal fees to resolve.

Termination prohibited during: Sick leave covered by Social Insurance (up to 6 months), maternity leave, and treatment for occupational disease or injury.

Statutory Benefits

Social Insurance (SI) — 17.5% employer / 8% employee: Covers sick leave (75% of salary from day 1, paid by SI fund after employer covers first 3 days for under 1 year tenure; or from day 1 by SI fund for 1+ year tenure, for up to 30–40 days/year depending on working conditions), maternity (100% of salary for 6 months for women, 5–14 days for men), retirement pension, and survivors’ benefits.

Health Insurance (HI) — 3% employer / 1.5% employee: Provides coverage through the public hospital system. Benefit level is limited; most tech companies add private health insurance (PVI, Bao Viet, Prudential) at VND 3,000,000–10,000,000/employee/year. Not legally required above the HI contribution, but expected in competitive hiring.

Unemployment Insurance (UI) — 1% employer / 1% employee: Employees who contribute for 12+ months receive UI benefits of 60% of average salary over the previous 6 months, for 3–12 months depending on contribution duration, on involuntary termination.

Annual leave: Minimum 12 days/year for standard roles; 14 days for employees in hazardous conditions; 16 days for severely hazardous roles. Increases by 1 day per 5 years of service with the same employer. Leave must be taken or paid out; carryover is permitted by agreement but payment on termination is mandatory.

Public holidays: 11 days/year including Tet (5 days, dates shift annually with the lunar calendar). If a public holiday falls on a weekend, the following Monday is substituted.

Maternity leave: 6 months for women (all paid at 100% salary by the Social Insurance Fund, not by the employer — this is a meaningful difference from countries where employers carry the cost). Paternity leave: 5–14 days depending on birth circumstances, paid by SI Fund.

13th-month / Tet bonus: Not statutory, but functionally mandatory. Most companies pay 1–2 months’ salary before Tet; omitting it will cause immediate retention damage. If specified in the employment contract or internal labor regulations, it becomes contractually binding and legally owed.

Work Visas and Immigration

Vietnam requires a work permit for almost all foreign nationals employed in Vietnam, regardless of role seniority. The Department of Labour, War Invalids and Social Affairs (Sở Lao Động — SLĐTBXH) at the provincial level administers work permits. Exemptions are narrow: foreign nationals investing capital or owning 50%+ of the enterprise, diplomatic personnel, and intra-company transfers under certain short-term conditions (under 30 days, no more than 3 times/year).

Labour needs assessment (Báo cáo nhu cầu sử dụng người lao động nước ngoài): The EOR entity must file this with the provincial Department of Labour, explaining why the role cannot be filled by a Vietnamese national. Approval typically takes 5–10 working days. This step must be completed before the work permit application begins.

Work permit application: Requires authenticated educational credentials (degree equivalency must be certified by the Ministry of Education or competent authority in the issuing country), a clean criminal record from the applicant’s home country (authenticated and translated), a medical check completed at a designated Vietnamese facility, passport photos, and a copy of the signed employment contract. Processing: 15–25 working days. Work permits are valid for up to 2 years and are tied to the employer (EOR entity).

E-visa and entry: Foreign nationals applying for work permits typically enter Vietnam on a business visa (DN) and convert to a work permit + temporary residence card (TRC) after arrival. The TRC is valid for the duration of the work permit.

Total timeline for foreign national onboarding: 6–10 weeks from offer acceptance to first working day (1–2 weeks for document preparation, 1–2 weeks for labour needs assessment, 3–4 weeks for work permit, 1 week for TRC). Build this into your offer timeline.

Frequently Asked Questions

Can I terminate an employee in Vietnam for poor performance?

Not easily. Vietnamese labor law requires “legal grounds” for employer-initiated termination, and poor performance doesn’t automatically qualify. The employer must prove the employee “regularly fails to complete tasks” as defined in the internal labor regulations — which must be registered with the local labor authority. In practice, this means you need documented performance improvement plans, written warnings, and evidence that the employee was given reasonable opportunity to improve. Without this paper trail, the termination is wrongful, and the employee is entitled to reinstatement or at least 2 months’ wages in compensation plus any accrued severance. Your EOR should manage the documentation process, but it takes 2–3 months minimum to build a defensible case.

Why is the trade union fee mandatory even if no employees are union members?

The 2% trade union fee is levied on all enterprises under the Trade Union Law, regardless of whether a trade union exists at the workplace. It funds the Vietnam General Confederation of Labour (VGCL), the sole legally recognized trade union federation. If employees do form a grassroots union (which the revised Labour Code 2019 now permits), 1% of the 2% stays with the enterprise-level union. If no union exists, the full 2% goes to the VGCL. There’s no opt-out. Think of it as a payroll tax with a different name.

How does Tet bonus work — is it legally required?

The Tet (Lunar New Year) bonus is not legally mandated, but it’s so deeply expected that failing to pay it creates serious retention risk. Most companies pay 1 month’s salary as a Tet bonus; senior employees and high performers typically receive 2–3 months. The Labour Code requires employers to publish their bonus policy in the internal labor regulations. If your employment contract or internal regulations specify a Tet bonus, it becomes contractually binding. Many EOR providers include Tet bonus provisions in the standard employment contract — check whether the amount is fixed or discretionary before you sign.

To connect this guidance with live hiring demand, see hiring your first international employee and remote jobs by country.

Further Reading

• Deel EOR Review — Vietnam coverage and onboarding speed across Southeast Asia
• Remote EOR Review — Owned-entity compliance model and how it applies in Vietnam
• Multiplier EOR Review — Southeast Asia specialization from a Singapore-headquartered provider
• Hiring in Thailand — Lower employer costs but stricter foreign ownership rules
• Hiring in Philippines — Alternative APAC talent market with English-speaking workforce
• Compare EOR providers
• Best EOR by country
• Hiring your first international employee

Anchal Katyal · Founder, eorHQ

Anchal has spent over a decade in product strategy and market expansion across Asia and the Middle East. She evaluates EOR providers on compliance depth, entity ownership, payroll accuracy, and in-country support quality.

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