Companies typically use an Employer of Record for fast, flexible entry, payroll management once a local entity exists, and entity setup for firms building a manufacturing or long-term operations base. Vietnam's regional minimum wage zones and mandatory social insurance structure are the features most likely to require local expertise.

Employer of Record in Vietnam

An EOR allows companies to hire in Vietnam without establishing a licensed local entity or registering directly for compulsory social, health, and unemployment insurance. It suits companies testing the market, building small technology or operations teams, or hiring ahead of a longer-term manufacturing or entity investment decision. It is less suited to companies establishing manufacturing operations or larger workforces where direct entity ownership, land use rights, and local licensing are typically required regardless of hiring route.

How payroll works in Vietnam

Vietnamese payroll withholds personal income tax (PIT) at progressive rates and requires both employer and employee contributions to compulsory social insurance, health insurance, and unemployment insurance, collected through the Vietnam Social Security system. Payroll is monthly, and a Tet (Lunar New Year) bonus, while not universally a strict legal mandate, is deeply embedded market practice and effectively expected by virtually all employees, similar in spirit to China's year-end bonus norm. Salary caps for social insurance contribution purposes are set relative to a regional statutory base, requiring correct regional classification.

Payroll frequency and reporting obligations

Monthly payroll is standard, with PIT and social/health/unemployment insurance contributions remitted monthly to the relevant authorities. Annual PIT finalisation is required for employees, either self-filed or, in many cases, handled by the employer on the employee's behalf where permitted. The Tet bonus, while not a strict universal legal requirement, needs to be budgeted and planned for around the Lunar New Year period given how embedded the practice is in employee expectations and, in many cases, company policy or collective agreements.

Key payroll nuances

The Tet bonus is the standout nuance — while formally more of an entrenched practice than a strict universal statutory mandate in all cases, failing to provide a competitive Tet bonus creates a genuine retention risk and is treated by most employees as a near-guaranteed entitlement. Regional minimum wage zones (Vietnam divides regions into wage zones with different statutory minimums) affect both minimum pay and the base used for social insurance contribution caps, so correct regional classification of the workplace matters. Statutory severance allowance applies in specific termination circumstances and is calculated based on tenure. Compulsory insurance contribution rates and caps are reviewed periodically.

Pay components and employer costs

Typical pay components include base salary and the market-standard Tet bonus. Employer costs beyond salary include the employer share of social, health, and unemployment insurance, which together commonly add over 20 percent on top of the contribution-base salary (subject to caps), making Vietnam's employer on-cost load moderate relative to other Southeast Asian markets but still requiring explicit budgeting.

Benefits and leave entitlements

Statutory annual leave is 12 days per year for standard working conditions, with additional days for hazardous or difficult working conditions and for extended tenure. Sick leave is covered through social insurance, with duration and pay percentage depending on tenure and the nature of the illness. Maternity leave is a strong statutory entitlement of six months, funded through social insurance, reflecting a notably generous framework by regional standards. Public holidays include Tet, which is typically observed for multiple consecutive days and significantly affects business planning and payroll timing around that period.

Hiring and employment contracts

Written labour contracts are a legal requirement and must specify whether the contract is indefinite-term or definite-term, with definite-term contracts restricted in maximum duration and renewal count before conversion to indefinite status becomes effectively required. Probation periods are capped by law based on role complexity, generally ranging from a number of days for simple roles up to 60 days for roles requiring professional or technical qualifications. Termination requires following statutory notice and, in many cases, severance allowance payment, and unilateral termination without proper statutory grounds and process carries compliance risk.

Entity setup in Vietnam

Foreign companies typically establish a limited liability company with an Investment Registration Certificate and Enterprise Registration Certificate, both required before commencing operations, with the process varying somewhat by sector and whether the activity is on Vietnam's conditional investment list. Minimum capital requirements are generally assessed based on the feasibility of the proposed business activity rather than a fixed statutory figure in most sectors. Post-incorporation, the entity registers for tax and social insurance before hiring. End-to-end setup typically takes eight to twelve weeks, with sector-specific conditions sometimes extending the timeline further.

EOR vs Payroll Management vs Entity Setup — Vietnam

Frequently asked questions