Vietnam employment guide: how to hire and terminate staff legally 

What if the person you hired is not a good match with your team or not suitable for the job? While recruitment is relatively straightforward, termination requires strict compliance with legal procedures and documentation to avoid disputes. After reading this, you will understand the rules, which are essential when hiring employees, but more important when letting them go, while staying compliant and avoiding high expenses. Vietnam’s labor framework balances employee protection with employer flexibility. For companies employing both local and foreign employees, compliance is essential to avoid fines, delays, or disputes. This overview summarises the full employment cycle, from recruitment to termination.

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TL;DR –  — Answer Cards

• To legally hire employees in Vietnam, ensure you have a written contract that is either an indefinite-term or definite-term contract (up to 36 months) and complies with Vietnamese labor laws. 
• To legally terminate a labour contract, you must comply with the law and use the reasons mentioned there, provide the correct written notice period (45 days for indefinite contracts, 30 days for 1-3 year definite contracts, and 3 working days for contracts under 12 months), and handle final payments correctly.

Hiring legally

– Use written contracts: All employment contracts must be in writing and follow the Vietnamese Labor Code.

– Use the correct contract type: You can use indefinite-term contracts or definite-term contracts (up to 36 months). Definite-term contracts can only be renewed once, after which the next contract will be indefinite.

– Include essential information: Contracts should detail job descriptions, salaries, working hours, benefits,  termination conditions and various other things as set out in the Labor Code.

– Foreign employees:  This involves additional steps, including obtaining permission to hire a foreigner and a work permit. It is not possible to offer a separate probation contract or to convert a definite contract into an indefinite labour contract. 

Terminating legally

– Identify legal grounds: Termination is not “at-will” and must be based on specific legal grounds, such as contract expiration (automatic), mutual agreement, employee misconduct, economic restructuring, or imprisonment (if certain conditions are met).

– Provide written notice: Written notice is required for most terminations, with the notice period depending on the contract type:

* Indefinite-term contract: At least 45 days

* Fixed-term contract (12-36 months): At least 30 days

* Fixed-term contract (under 12 months): At least 3 working days

– Consider exceptions: Employees can terminate immediately and unilaterally without notice in cases like mistreatment, sexual harassment, failure to pay wages, or pregnancy if certain requirements are met.

– Settle final payments: Employers must pay all final dues, including unused annual leave, severance allowance, and any other entitlements specified in the contract or company policy.

– Document everything: Maintain thorough records of all steps, including any internal investigations or disciplinary processes.

Hiring a Candidate

Hiring in Vietnam must comply with local labour law. Vietnamese employees may be recruited freely; foreign hires are subject to prior approval and work permit procedures. 

• Evaluate the Requirements: Identify the operational need. Is the role replacing someone, filling a new business area, or adding expertise? For foreign hires, companies must first prove that no qualified Vietnamese candidate is available for the position before applying for a work permit, unless the role is exempt from the work permit requirement.
• Planning to Hire: Strategic workforce and talent planning encompasses the timeline, budget, and compliance requirements. Partnering with a licensed agency such as Sunbytes ensures proper documentation and local representation. 
• Employer of Record (EOR): If you are in the early stages of doing business in Vietnam and without a legal entity, a third-party provider can legally employ staff on behalf of your company established elsewhere. The EOR handles everything, and you do not have to worry about anything.
• Sourcing: For Vietnamese hires, sourcing options may include online portals such as VietnamWorks, referrals, or university connections. For foreigners, sourcing could involve recruitment agencies or internal transfers.
• Evaluating with a Checklist: Use structured evaluation criteria such as experience, skills, and legal eligibility. For foreign candidates, verify degree authentication, professional experience, and criminal background checks. Document all decisions in writing to ensure transparency and compliance with Vietnamese labour standards.
• Work Permit, TRC: Foreigners need a work permit (or exemption certificate) before they can be employed. Once the work permit is issued, they may apply for a Temporary Residence Card (TRC), valid up to two years, or a visa if the duration is shorter. If the passport related to the work permit is changed, the work permit needs to be changed as well. 
• Onboarding: This includes contract signing, tax registration, and social insurance enrolment. In general, new employees receive a workplace orientation covering internal rules, occupational safety, and company policies.

Probation

During probation, both employee and employer can end the labour relation without notice period but with the obligation to pay for the days worked. If performance is satisfactory, the employment converts automatically to a full contract if probation was incorporated into that contract, or signs an employment contract if a stand-alone probation contract had been used. Not converting a probationary contract into a labour contract upon successful completion (without formal notice) can be considered as automatic conversion into a labour contract. 

• Duration: It depends on the role. For executive roles, it cannot exceed 180 days, it is 60 days for specialists, or 30 days for regular staff. 
• Payment: During probation, employees must be paid at least 85% of their official salary. Payment is in Vietnamese dong, but foreigners may be paid in foreign currency.
• Contract: For Vietnamese employees, a separate probation contract can be signed, and this means that no social insurance premium will be paid. For foreigners, it is not possible to sign a separate contract, as the contract will need to have the same duration as a work permit. 
• Leave days: If during probation an employee would like to take a leave day, this will often be considered as unpaid leave if there is a separate contract.

Labor Contract

A written labor contract is mandatory for all employees working in Vietnam. The contract must clearly define various things, such as, for example, duration of contract, salary, working hours, place of work, and termination conditions.

• Language: Contracts can be in Vietnamese or in Vietnamese and English. If a dispute arises, the Vietnamese version will prevail.
• Non-compete Clause: This clause should be covered by a separate civil contract so it can be enforced. If it is included in the labor contract, it will, in general, be more difficult to enforce it. 
• Duration Contract: Contracts may be definite-term (up to 36 months) or indefinite-term. For foreigners, the maximum contract duration typically matches the work permit validity, usually up to two years. Renewals require both a work permit extension and a contract renewal. For Vietnamese employees, only two consecutive definite-term contracts are allowed. A third contract must be an indefinite-term contract unless it is for temporary positions. 
• Contract Conversion: If 30 days after a definite-term labor contract expires, the employee continues working, and no new contract is signed, then the contract automatically becomes an indefinite-term labor contract. This is different for foreigners, as no indefinite labor contracts are possible.
• Social Insurance: Vietnamese employees contribute to social, health, and unemployment insurance. Foreign employees with a work permit valid for at least one year must also contribute to social and health insurance, but not the unemployment insurance. The employer also contributes.
• Internal Labor Rules and Trade Union: Companies with ten or more employees must register the Internal Labor Rules (ILRs). The rules apply equally to all staff, including foreigners. Setting up a trade union is not mandatory, but it can be created upon the request of at least five employees and if certain conditions are met. A trade union represents all employees and participates in dispute resolution and workplace consultation. ILRs are also required in case of unilateral termination by the employer, or at least it will make it easier. 

Termination

Termination in Vietnam must strictly follow the Labor Code’s provisions. Unlawful dismissal may result in reinstatement orders or compensation obligations.

• Legal Grounds for Termination: Grounds include contract expiry, mutual agreement, changes in structure, technology or changes due to economic reasons, for medical reasons, being absent for some days or serious misconduct, imprisonment (if certain conditions are met). 
• Notice Period: For indefinite-term contracts, it is 45 days, and for definite-term it is 30 days, unless it is for 12 months, then the notice period will be three days only.
• Unilateral Termination: Employers may unilaterally terminate only for reasons such as repeated poor performance, certain disciplinary reasons, or, under certain circumstances, when the employee is sick or has had an accident. Employees may resign with notice for reasons set out in the Labor Code. 
• Mutual Termination: When both parties agree to end employment, terms can be negotiated and should be laid down in a contract. 
• Termination due to Changes in Structure, Technology or Changes due to Economic Reasons: Specific requirements that need to be applied in these cases are laid down in the Labor Code. 
• Termination Agreement: It is recommended to sign a mutual termination agreement, even if a contract expires. All payments must be settled within 14 days of termination.
• Severance Allowance: Employees who are not covered by the unemployment insurance are entitled to half a month’s salary per year of service unless dismissed for misconduct. This applies if the employee resigns or when the contract expires.
• Illegal Termination: This often requires reinstatement or compensation equal to at least two months’ salary, plus additional damages.
• Protection of Certain Employees: Special protection applies to pregnant women, women raising a child younger than 12 months,  employees who are on annual leave, personal leave, or any other types of leave permitted by the employer. Specific rules apply in case of a trade union member. 

FAQs

1. How long can probation be in Vietnam (and is it paid)?

The duration depends on the role, and the minimum pay is 85%.

2. When can an employer unilaterally terminate a contract?

The employer can only unilaterally terminate the contract in case of repeated poor performance, or under certain circumstances when the employee is sick or has had an accident.

3. What severance allowance is owed upon expiration, resignation or mutual termination?

Half a month’s salary per year of employment needs to be paid if the employee is not covered by the unemployment insurance. 

5. Which employees are protected from termination?

Pregnant women, women raising a child younger than 12 months, an employee who is on annual leave, personal leave, or any other type of leave permitted by the employer, and trade union representatives.

6. Do I need internal labour rules and a trade union?

It depends on the size of the company, but if there are more than ten employees, then it is mandatory.