Payroll Compliance in Vietnam For Foreign Businesses

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Compliance with payroll regulations in Vietnam can be challenging due to complex legislation spread across multiple laws and decrees. Understanding these requirements is crucial for businesses to monitor and review their processes, procedures, and calculations, thereby avoiding legal issues and fines.

In addition to legal requirements, cultural traditions also influence payroll practices.

Payroll compliance supports businesses’ growth by helping you to avoid fines, maintain a responsible employer reputation, and foster employee trust.

TL;DR

Payroll compliance in Vietnam is complex, requiring foreign businesses to navigate strict labor law requirements, statutory contributions, tax obligations, and detailed reporting requirements to avoid penalties and maintain employee trust.
Vietnam-specific factors, such as regional minimum wages and mandatory insurance, make accurate payroll management essential for sustainable operations and workforce retention.
Moreover, it is important to take Vietnamese culture into consideration and what Vietnamese employees expect. For a foreigner, it is not always easy to know these cultural nuances because they are not covered in legal texts. Topics that are relevant and important are, for example, the Tet bonus or 13th-month salary. This bonus is not only what people expect, but it can also be used as a retention tool.
To manage these challenges effectively, foreign employers can partner with Sunbytes, whose local expertise and integrated HR services (recruitment, payroll, and administration) help ensure full compliance and smooth payroll operations in Vietnam.

II. Key Components of Payroll Compliance in Vietnam

Employee Onboarding & Contract

Employment contracts can be in Vietnamese or bilingual. There are also some mandatory clauses to be included, such as working hours, workplace, job description, duration of the contract, and probation time.

Wage Regulations & Payment

Salaries are in Vietnamese dong, but can be in USD for foreigners. Salary should be paid maximum 15 days after the end of the month and, in principle, via bank transfer. The exact time of payment depends on the company, but it is usually at the end of the month.

Employee Classification Standards

Employees need to pay mandatory Social, Health, and Unemployment Insurance (SHUI) contributions. This is approximately 21.5% for the employer for Vietnamese employees; for foreigners, the unemployment insurance does not apply. Social Insurance premium is 17.5% of the salary, for Health Insurance it is 3% and for Unemployment Insurance it is 1%.
Note that the premium for SHUI is not based on the total salary, but the salary for calculating contributions is capped. The capped salary for social and health insurance is 20 times the statutory base salary, which is currently VND 46,800,000/month. The unemployment salary cap is 20 times the regional minimum salary, which is VND 106,200,000 for region I, VND 94,600,000 for region II, VND 82,800,000 for region III and VND 74,000,000 for region IV.
The employee also pays a part: 8% for retirement and 1.5% for health insurance, so 9.5% in total.
Before you set up an entity, you might consider hiring an Independent Contractor, which allows flexibility and lower perceived cost. However, it might not be easy to find and hire one or a team of contractors that will support you in your business strategy and will act in your best interest. This is regardless of the complication of payments and drafting contracts.
Note that once you have an entity set up here, it is important to distinguish between an employee and a contractor, because a different tax tariff would apply. Furthermore, if you hire a contractor, you need to take some precautions to prevent they would be considered as an employee, at the risk of violating various rules. This might result in severe legal and financial penalties.

Statutory Contributions Deep Dive (The Biggest Risk Area)

Vietnam’s Mandatory Social, Health, and Unemployment Insurance (SHUI):

Note that the premium for SHUI is not based on the total salary, but the salary for calculating contributions is capped. The capped salary for social and health insurance is 20 times the statutory base salary, which is currently VND 46,800,000/month. The unemployment salary cap is 20 times the regional minimum salary, which is VND 106,200,000 for region I, VND 94,600,000 for region II, VND 82,800,000 for region III and VND 74,000,000 for region IV.
The regional salaries are obtained by the division of Vietnam into four regions, which is based on the level of economic development, cost of living and concentration of industry. This means that there is a distinction between cities and the countryside, and is based on the assumption that the cost of living in a city is higher than in the countryside. As a result, the salary in big cities is higher than in smaller ones or the countryside. The regional salaries will, in principle, be amended every year.

Tax Compliance – Tax Withholding Requirements

Vietnam has a progressive personal income tax (PIT) system. The more you earn, the more you pay, which means that for a certain salary range you pay 5%, for the next one 10%, etc., until 35% which applies to salaries higher than 80,000,000 VND. The amounts and percentages are under discussion and will likely be changed in 2026.
An amount will be deducted for each employee and also for dependants, and no tax will need to be paid on this amount. These amounts will be amended as of 2026.
You do not only pay PIT on salary, but there are also other payments an employee might receive that can be taxable, such as ESOP, housing allowance, school fees for children, prize money, and interest from shares.
Companies also need to meet tax payment deadlines, which can be monthly or quarterly. They also need to finalise tax for employees on an annual basis before a certain deadline, which currently is the end of March. Employees need to authorise the company to finalise the tax for them. If you get money back, then it is possible to submit later, but if not, you run the risk of penalties. Note that there are exceptions if the employee has worked for another company as well.

Trade Union and Labor Reporting

Employers and employees need to contribute a certain amount to the trade union fund. This amount is capped.

Requirements for periodic labor usage reporting to local authorities (DOLISA).

Termination and Severance Compliance

The notice periods are as follows. 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.
Severance allowance applies to employees who are not covered by the unemployment insurance. They are entitled to half a month’s salary per year of service unless dismissed for misconduct. The amount is the average salary of the last six months.
This applies if the employee resigns or when the contract expires. So in general it will only be for foreigners, as Vietnamese will, in general, fall under the unemployment insurance, unless they have a separate probation contract.

III. Vietnam-Specific Payroll Practices Foreign Employers Often Miss

Regional Minimum Wage Impact

Explanation of Vietnam’s four regional minimum wage zones and how they affect the calculation base for salaries and contributions. The regional salaries are a result of Vietnam being divided into four regions. This division is based on the level of economic development, cost of living and concentration of industry. For the calculation of the amount, this means that there is a distinction between cities and the countryside. The regional (minimum) salary will, in theory, be revised each year. These figures are used to compute SHUI premiums and, for example, the amount given to a woman when she is pregnant and has delivered her baby.

The 13th-Month Salary and Lunar New Year Bonus

Tet is the lunar new year in Vietnam, and it is tradition that a bonus salary is paid. Some companies pay this already in December, some pay half before Tet and half after Tet to incentivise employees to return from their hometown. Note that payment of a Tet bonus is not a legal requirement.
The amounts paid to employees differ too. Some companies pay an amount almost equal to the monthly salary, while others pay more to ensure staff return to work. Some companies pay the Tet bonus also to foreigners, others do not.

Specific Leave Entitlements

The minimum annual leave is 12 days, with eligibility for 14 or 16 days in specific cases. Employers may grant additional leave at their discretion. Employees receive one extra day of annual leave for every five years of service. Part-time employees are also entitled to 12 days of leave. The labour code provides for special leave in circumstances such as weddings or funerals.
There are approximately 11 national holidays each year. If a holiday falls on a weekend, it is typically observed on the following Monday. Foreign employees are entitled to two additional days: one traditional public holiday and one national day from their home country (for example, Christmas or Diwali).
Maternity leave is generally six months, while fathers are entitled to five to fourteen working days, subject to eligibility requirements. Women are entitled to breaks for breastfeeding or menstruation. Mothers with a child under one year may work one hour less per day.

IV. Payroll Process & Compliance Considerations for foreign business

Payroll-process-and-compliance-consideration-for-foreign-business

Payroll Process for New Markets

Managing payroll in Vietnam requires a clear understanding of local regulations and compliance requirements. Our guide on payroll process provides a concise overview of the essential payroll processes, including salary calculations, tax obligations and social insurance contributions.

Compliance Considerations

In Vietnam, common payroll compliance errors include exceeding probation limits, inconsistencies between payroll and accounting records, failing to calculate taxes on benefits, confusion between net and gross salaries, employing foreign staff without work permits, misunderstandings about the capped insurance salary, using outdated tax or insurance rates, and omitting compensation details from contracts.

V. Strategic Recommendations for Foreign Employers

Strategies to Prevent Payroll Mistakes

What should you do as an FDI employer in the short term? It depends on whether you have a new business or bought one, and whether you use EOR or not. If your company is new and you do not use an EOR, you must ensure all contracts comply with Vietnamese labour law and other relevant legislation. If you use an EOR, this responsibility shifts to the EOR. For acquired companies, review all contracts to confirm compliance.

For long-term strategies, you might outsource payroll or integrate all relevant regulations directly into the relevant system, such as HRIS/Payroll systems.

Best Practices for Maintaining Payroll Compliance

To maintain a compliant payroll and human resource system, it is recommended to build robust payroll management systems and conduct frequent internal Audits and compliance inspections. This can be done internally if you have qualified personnel, but otherwise, you may employ an external consultant or organization to conduct the audit. This might save you a lot of issues in the future, time and money-wise.
It is also important that you stay updated with the various changes which impact Payroll and HR practices.

Addressing Payroll Compliance Challenges in Global Expansion

Addressing cultural and legal disparities is critical, as not all needs are explicitly stated in legislation. We recommend partnering with a company that has local expertise.

VI. How Sunbytes Can Help

Navigating Vietnam’s regulatory landscape can be challenging for foreign businesses, but you do not have to do it alone. At Sunbytes, we are more than a service provider; we are your dedicated compliance partner, committed to safeguarding your operations and ensuring peace of mind.

We combine the empathy of a local partner with the rigor of international standards to ensure your business thrives without administrative hurdles. Here is how we support you:

Dedicated Local Compliance Expert: We relieve you of HR management burdens. Whether you need consulting for Employer of Record (EOR) services, payroll services, or comprehensive recruitment services, our solutions address all aspects of local compliance. We manage the complexities of Vietnamese labor laws, allowing you to focus on growing your business.
Stability is essential when entering a new market. With over 12 years of experience and support for more than 300 successful projects across various industries and regions, our team has the insight to anticipate challenges before they occur.

We treat your data with the utmost respect and care. Sunbytes is ISO 27001 certified, holding a Cybersecurity Certificate, which ensures that your sensitive information is protected. Our recognition as an FD Gazelle also highlights our financial stability and consistent growth.

As a Dutch-based company, we bridge the gap between Western business expectations and the Vietnamese market. This leadership ensures you receive the clarity, transparency, and high-quality communication you expect, supported by local execution of compliance, so you can lead your business with confidence. Schedule a brief consultation with our expert for seamless payroll operations.

FAQ

What should I do if I discover a payroll compliance issue?

When a payroll compliance issue is discovered, you should first find out the scope of the problem and if it is related to social, health or unemployment insurance contributions, personal income tax or salary calculations. Then you need to recalculate and resubmit if it is for tax or SHUI contributions. It depends on the authorities whether they accept voluntary adjustments when they are made in good faith. However, if some time has passed, you might have to pay late payment interest, administrative penalties. There is also the possibility of a wider inspection of payroll compliance. Employees may also raise concerns if their benefits or tax obligations were affected, and will trust the payroll less. This, of course, does not apply if you have an EOR.

How can I stay updated on payroll compliance laws?

To remain compliant, your team must stay informed about new regulations regarding minimum wage, personal income tax, and social insurance. Compliance errors can create legal risks and damage employee relations. Managing these changes requires a thorough understanding of updated tax calculations, particularly for part-time staff and foreign employees. If needed, consult with experts to assess the impact of these changes. Sunbytes is available to support you with this process. Please note, this does not apply if you use an EOR.

Can outsourcing payroll ensure compliance?

Many companies outsource payroll for cost reasons, but also because it is not easy to stay updated with all the changes. In Vietnam, there is no database where all relevant laws and regulations can be found, as exists in, for example, the Netherlands. Furthermore, if you find the relevant legislation, there is not always an English version for you to check. So yes, outsourcing payroll ensures compliance.