Hiring in Vietnam: Understanding Vietnam’s Payroll System

Key Takeaways

• Vietnam sets its minimum wage by region, and the rate that applies depends on where the employer, or the branch that employs the worker, operates.
• On top of salary, the employer pays social, health, unemployment, and occupational accident insurance contributions (unemployment insurance for Vietnamese employees only), plus a separate trade union fee.
• You withhold and remit personal income tax for every employee, and both the tax brackets and the family deductions changed for 2026.
• Wages for Vietnamese employees are contracted and paid in Vietnamese dong (VND), while foreign nationals working in Vietnam may be paid in foreign currency.

Managing payroll in Vietnam is complex, but mastering it is crucial for employers aiming to establish or grow their business in this dynamic market. Vietnam’s thriving economy, strategic location, and skilled workforce make it an attractive destination for global companies. To help you navigate Vietnam’s payroll system, here are some key considerations:

Compliance with Vietnamese Labor Laws

Vietnamese labor laws are comprehensive, designed to protect employees and ensure fair treatment. Employers must be well-versed in the Labor Code, which covers wages, working hours, social insurance, health insurance, and more. Here are some important points:

What is the minimum wage in Vietnam, and which region applies?

Vietnam’s minimum wage varies by region, reflecting the cost of living in different areas. It’s essential to ensure your payroll reflects the correct regional minimum wage to avoid legal issues. Regularly reviewing and updating these wages is crucial as they can change based on governmental adjustments.

Under Decree 293/2025/ND-CP, the region is set by where the employer operates, not by where the employee lives. An employer with branches in areas that have different minimum wages applies each area's rate to the branch operating there, and an employer in an industrial zone, export processing zone, high-tech zone, or concentrated digital technology zone that spans areas with different rates applies the highest of them. Where an area's new rate is lower than the rate it had on December 31, 2025, employees hired on or before that date keep the December 31, 2025 rate until the Government rules otherwise.

Working Hours and Overtime

The standard work week in Vietnam is 48 hours, with a maximum of 8 hours per day. Employers must compensate for any additional hours as overtime at the correct rates. Properly managing and documenting overtime is essential to maintain compliance and employee satisfaction.

What does an employer contribute to social insurance?

Both employers and employees are required to contribute to social insurance, health insurance, and unemployment insurance, and the employer alone pays occupational accident and disease insurance. The employer also pays a trade union fee of 2% of the same salary base, under Article 29 of the Law on Trade Unions (Law No. 50/2024/QH15). These rates are updated periodically, so staying current is essential. Employers need to manage these contributions meticulously to ensure compliance and avoid penalties.

Understanding Taxation

Vietnam’s tax system can be complicated, with various taxes applying to employees’ salaries. Employers are responsible for withholding and remitting personal income tax (PIT) on behalf of their employees. Key considerations include:

How much personal income tax do you withhold?

From the 2026 tax period, Vietnam taxes the employment income of tax residents on a five-bracket progressive scale from 5% to 35%, set by the Law on Personal Income Tax (Law No. 109/2025/QH15). Understanding these brackets ensures accurate payroll calculations. Keeping up with changes in tax rates and brackets is vital to avoid discrepancies and potential fines.

Taxable Income

Employers must be clear on what constitutes taxable income, including salary, bonuses, allowances, and benefits. Proper classification and reporting of these components are essential for accurate tax filings.

Tax Deductions and Reliefs

Certain deductions, such as personal and dependent reliefs, can reduce taxable income. Properly accounting for these deductions is crucial for compliance and employee satisfaction. Employers should ensure they are applying the correct deductions to avoid errors.

Handling Payroll in Multiple Currencies

With Vietnam becoming a hub for multinational companies, managing payroll in multiple currencies is common. Employers must ensure their payroll systems can handle different currencies while complying with local regulations. Our roundup of global payroll platforms that support multi-currency payments compares the options. Consider these points:

Currency Conversion

Exchange rates fluctuate, affecting payroll calculations. Establish a consistent method for currency conversion to maintain accuracy. Using reliable and up-to-date exchange rates is crucial to ensure fair compensation.

Tax is declared and calculated in Vietnamese dong under Article 12(7) of the Law on Tax Administration (Law No. 108/2025/QH15), so foreign currency pay has to be converted. For personal income tax, Article 17(1) of Decree 253/2026/ND-CP sets the rate: the buying rate of the commercial bank where the employee holds a transaction account, or where the employer pays from, at the time the income arises. If neither holds an account in Vietnam, use the State Bank of Vietnam’s published central rate against the US dollar, or its cross rate for other currencies, at the time the income arises.

Can you pay a Vietnamese employee in a foreign currency?

Not if they are Vietnamese. Under Article 95(2) of the Labor Code, wages for Vietnamese employees are set out in the contract and paid in Vietnamese dong (VND). Foreign nationals working in Vietnam may be paid in foreign currency.

Employee Benefits and Allowances

Vietnamese law mandates some benefits, such as annual leave and paid public holidays, and employers commonly add allowances and bonuses on top. Both need to be reflected in the payroll system:

Annual Leave

Under Article 113 of the Labor Code, an employee who has worked 12 full months for the same employer gets paid annual leave based on the type of work, and Article 114 adds seniority on top:

• 12 working days for normal work; 14 for minors, workers with disabilities, and heavy, toxic, or dangerous work; 16 for especially heavy, toxic, or dangerous work.
• One extra day for every five full years with the same employer.

Accurate tracking and compensation for unused leave are necessary. Employers should ensure that leave policies are clearly communicated and properly documented.

Public Holidays

Vietnam has 12 paid public holidays in 2026. Article 112 of the Labor Code sets 11: 1 day for New Year, 5 for Lunar New Year, 1 each for Reunification Day (April 30), International Labor Day (May 1), and Hung Kings’ Commemoration Day, and 2 for National Day. Resolution No. 28/2026/QH16, in force from July 1, 2026, adds Vietnam Culture Day on November 24 as a paid day off. Foreign employees also get one day each for their own traditional New Year and National Day. For this year’s dates and holiday pay rules, see our Vietnam public holiday guide.

Allowances and Bonuses

Common allowances include transportation, meals, and housing. Bonuses, especially the Lunar New Year bonus, are customary and should be planned for in the payroll system. Employers must account for these allowances and bonuses accurately to ensure fair compensation and compliance.

Using Technology for Payroll Management

By using our services, you can simplify the complexities of handling payroll and employment in Vietnam. Our advanced service ensures compliance with local regulations and enhances overall efficiency. Here’s how leveraging our technology can transform your payroll processes:

Frequently Asked Questions

What does it cost to employ someone in Vietnam on top of salary?

For a Vietnamese employee, the employer pays statutory contributions of 21.5% of the salary used for social insurance, plus a 2% trade union fee on the same base. The employer also withholds the employee’s own 10.5% and their personal income tax from gross pay.

Can an employer pay a Vietnamese employee in US dollars?

No. Under Article 95 of the Labor Code, wages for Vietnamese employees are paid in Vietnamese dong. Foreign nationals working in Vietnam may be paid in foreign currency.

Does a company need a legal entity in Vietnam to hire someone there?

Not necessarily. A company without its own entity can hire through an Employer of Record (EOR), which employs the worker through its local entity and runs payroll, contributions, and filings.

How much annual leave does an employee in Vietnam get?

After 12 full months with the same employer, 12 working days a year for normal work, rising to 14 or 16 days for minors, workers with disabilities, and heavy, toxic, or dangerous jobs. One extra day is added for every five years with the same employer.

How many paid public holidays are there in Vietnam?

Twelve in 2026. Article 112 of the Labor Code sets 11 days, and Resolution No. 28/2026/QH16 added Vietnam Culture Day on November 24 as a paid day off from July 1, 2026. Foreign employees also get one day each for their own traditional New Year and National Day.

Conclusion

Mastering Vietnam’s payroll system is crucial for any employer operating in this dynamic market. By adhering to local labor laws, understanding the tax system, managing multiple currencies, and providing employee benefits, employers can ensure a smooth and compliant payroll process. As Vietnam continues to grow as a global business hub, these practices will position your company for success.

Using our services can further simplify this process. Our advanced payroll management systems handle these complexities with ease, ensuring your business remains compliant, efficient, and focused on growth in the vibrant Vietnamese market. Contact us today to learn how we can support your payroll management needs in Vietnam.

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