The employment of workers in Vietnam, including both Vietnamese and foreign workers, must comply with legal regulations to ensure the rights of employees and employers. Vietnamese law clearly stipulates conditions for recruitment, labor contracts, tax obligations, social insurance, as well as procedures for obtaining work permits for foreign workers. Below, NPLaw invites readers to explore the legal issues related to foreign companies employing workers in Vietnam.
I. Overview of foreign companies employing workers in Vietnam
Foreign companies employing workers in Vietnam must comply with Vietnamese regulations on labor, taxation, and social insurance. When recruiting Vietnamese workers, enterprises must sign labor contracts, ensuring rights related to wages, working hours, rest regimes, and other benefits as prescribed. Additionally, the company is responsible for fulfilling obligations on personal income tax and paying social insurance, health insurance, and unemployment insurance for employees at the rates specified by the State.
In the case of employing foreign workers, the company must implement procedures to obtain work permits or confirmations of work permit exemption as currently regulated. Full compliance with these legal provisions enables enterprises to operate lawfully, creates a stable working environment, and protects workers' rights in Vietnam.
II. Legal provisions on foreign companies employing workers in Vietnam
1. What is meant by foreign companies employing workers in Vietnam?
Foreign companies employing workers in Vietnam may include enterprises or organizations with foreign capital or those without commercial presence in Vietnam but still hire employees to work on Vietnamese territory. Such employment may take various forms, depending on how the foreign company organizes its operations in Vietnam.
2. Forms of employment by foreign companies in Vietnam
According to Clause 1, Article 11 of the Labor Code 2019, foreign companies may recruit workers in Vietnam in two ways:
- Direct recruitment;
- Through employment service organizations or labor outsourcing enterprises.
Thus, foreign companies in Vietnam have the right to proactively recruit employees according to their needs but must comply with laws aimed at protecting workers’ rights and ensuring a fair and transparent recruitment environment.
3. Which agencies manage foreign companies employing workers in Vietnam?
The employment of workers by foreign companies in Vietnam is supervised by multiple state agencies to ensure compliance with labor, tax, and social insurance laws. According to Clause 1, Article 11 of Decree No. 152/2020/ND-CP, the Ministry of Labor, War Invalids and Social Affairs or the Department of Labor, War Invalids and Social Affairs are the direct agencies receiving and issuing work permits for foreigners working in Vietnam (for foreign workers).
Thus, foreign companies employing workers in Vietnam must comply with regulations under the management of various authorities to ensure lawful operations, protect workers’ rights, and fulfill obligations on taxation, insurance, and labor.
III. Questions about foreign companies employing workers in Vietnam
1. Are employees who sign labor contracts with foreign companies entitled to participate in social insurance?
According to Clause 3, Article 2 of the Law on Social Insurance 2014, foreign organizations operating within Vietnam’s territory are subject to mandatory social insurance participation. Therefore, if a foreign company has a representative office and branch, or is registered to operate in Vietnam and employs workers under labor contracts, it must pay social insurance for those employees as required.
At the same time, under Clause 2, Article 21 of the Law on Social Insurance 2014, employers are responsible for paying social insurance for employees. The contribution level is regulated by Article 86, which includes the portion deducted from employees’ salaries under Clause 1, Article 85. Each month, enterprises deduct a part from employees’ salaries and contribute it together with the employer’s share to the social insurance fund.
Thus, foreign companies operating in Vietnam whose employees sign labor contracts are subject to mandatory social insurance participation.
2. Which country’s laws govern the employment conditions when foreign companies employ workers in Vietnam?
Under Article 2 of the Labor Code 2019, when a foreign company employs workers in Vietnam, the employees’ conditions are governed by Vietnamese law. This article stipulates that the Labor Code applies to employees, employers, foreign workers working in Vietnam, and relevant organizations and individuals.
Accordingly, if a foreign company directly signs labor contracts with workers in Vietnam, it must comply with regulations on labor contracts, wages, social insurance, working hours, rest periods, rights and obligations of employees under Vietnamese law.
3. What are the legal requirements on work permits for foreigners working at foreign companies in Vietnam?
According to Article 151 of the Labor Code 2019, foreign workers employed in Vietnam must meet the following conditions:
- Be at least 18 years old and have full civil act capacity;
- Have professional qualifications, skills, and experience appropriate to the job position; and meet health standards as prescribed by the Minister of Health;
- Have no criminal records affecting Vietnam’s national security, social order, and safety;
- Possess a valid work permit, except in cases exempted by law.
Under Article 151 of the Labor Code 2019, foreigners working in Vietnam must have a work permit issued by the Department of Labor, War Invalids and Social Affairs, except for cases exempted under Article 154 of the Labor Code and Article 7 of Decree No. 152/2020/ND-CP.
Validity of work permits: A work permit is valid for up to 2 years as prescribed in Article 155 of the Labor Code. It may be extended once for a maximum of 2 years.
Thus, foreigners working at foreign companies in Vietnam are required to have a work permit, unless exempted by law.
4. What are the tax and social insurance obligations of foreign companies employing Vietnamese workers?
When foreign companies employ workers in Vietnam, they are responsible for withholding, declaring, and paying personal income tax on behalf of employees in accordance with law. Under Articles 1 and 2 of Circular No. 111/2013/TT-BTC (amended by Article 2 of Circular No. 119/2014/TT-BTC), individuals working in Vietnam, whether residents or non-residents, are subject to personal income tax on income from salaries and wages.
- For resident individuals: Personal income tax is calculated on worldwide income, including income earned inside and outside Vietnam;
- For non-resident individuals: Personal income tax is only calculated on income arising in Vietnam, regardless of where the payer is located.
Additionally, under Article 8 of Decree No. 126/2020/ND-CP, Personal income tax may be declared monthly or quarterly depending on the enterprise’s scale. If the enterprise meets criteria in Article 9 of this Decree, it may opt for quarterly declaration. However, if no taxable income arises in a month or quarter, the enterprise is not required to submit tax declarations (Clause 3, Article 7 of Decree No. 126/2020/ND-CP, supplemented by Clause 2, Article 1 of Decree No. 91/2022/ND-CP).
Regarding social insurance: According to Clause 2, Article 21 of the Law on Social Insurance 2014, employers must pay social insurance for employees. The contribution level is determined by Articles 85 and 86 of this Law, whereby employees contribute a portion of their salaries, and employers pay the remainder. Each month, the enterprise deducts from the employee’s salary and pays together with the employer’s share into social insurance, health insurance, and unemployment insurance funds.
Thus, foreign companies employing Vietnamese workers are responsible for withholding personal income tax, declaring and paying taxes as required, and fully paying social insurance for employees. Compliance with these regulations not only ensures lawful operations but also protects employees’ rights and mitigates risks of administrative and legal fines.
5. What protections exist for employees if a foreign company terminates a labor contract in Vietnam?
According to Clause 2, Article 36 of the Labor Code 2019, if a company unilaterally terminates a labor contract, it must give advance notice to the employee:
- At least 45 days for indefinite-term contracts;
- At least 30 days for definite-term contracts from 12 to 36 months;
- At least 3 days for contracts under 12 months.
When a labor contract is lawfully terminated, the company must fully pay termination benefits if employees meet eligibility conditions:
- Severance allowance (Article 46, Labor Code 2019): Employees working for 12 months or more are entitled to half a month’s salary for each year of work;
- Job-loss allowance (Article 47, Labor Code 2019): If the foreign company restructures, changes technology, or faces economic difficulties leading to mass layoffs, employees are entitled to at least one month’s salary per year of work (but not less than two months’ salary).
According to Article 48 of the Labor Code 2019, within 14 days from the termination date, the company must complete:
- Payment of outstanding wages;
- Payment of severance or job-loss allowances;
- Return of social insurance books to employees.
Thus, these policies protect employees against unlawful terminations and ensure they receive their lawful entitlements.
IV. Legal consultancy services related to foreign companies employing workers in Vietnam
The above is NPLaw’s article on foreign companies employing workers in Vietnam. With a team of experienced lawyers and legal experts, NPLaw is always willing to accompany, advise, and support clients on legal matters related to foreign companies hiring employees in Vietnam. If you need assistance on other legal issues, please contact NPLaw via:
