Vietnam is known for scenic beaches, spectacular landscapes, rice terraces, and beguiling cities. The country's major economic contributor is the services sector, occupying 41.63% of their GDP. Vietnam holds the position of 18th among 39 countries in the Asia–Pacific region for its economic development.
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All residents and non-residents in Vietnam are subject to Personal Income Tax.
Personal income tax for residents in Vietnam is progressive up to 35%. The tax on nonresidents is at a flat rate of 20%.
It is mandatory for individuals to self-declare and pay income taxes. Personal income tax rates in Vietnam are as below:
Vietnam has three obligatory social security systems:
Employers must enroll their employees in Vietnam’s social security system after signing an employment contract. However, the employment contract must be for an indefinite term, i.e., exceeding 3 months.
Employers must consider that social and unemployment insurance are currently applicable only to employees residing in Vietnam. In contrast, health insurance must be provided to both Vietnamese and foreign employees with whom a Vietnamese employment contract is signed. Although, this provision does not apply to employees working overseas and then posted to Vietnam. To enroll an employee with health insurance under Vietnamese social security, an employer must have a valid employment contract.
However, from 1 January 2018, if a foreigner has a work permit or other appropriate certifications from the authorities, they will join the social insurance program.
The employer and the employee's contribution toward Vietnamese social security are calculated on an employee's base salary plus other monthly fixed allowances. There is no cap or maximum to the contributions
All employees, including foreign employees who have worked in Vietnam for over six months, must participate in the social security program.
Contributions to social security in Vietnam are as below
Employees eligible for old age allowance include
However, individuals paying towards social insurance for more than 20 years are eligible to
get an old-age allowance. Employees who do not are eligible for a lower old-age allowance provided they meet secondary requirements as laid by provisions under Vietnamese social security
The monthly old-age allowance is calculated according
The monthly maximum payment amount for the old-age allowance is 75% of the average salary stipulated by the government. In contrast, the minimum payment amount for the old-age allowance is the minimum salary standard set by the government.
Male employees whose payment period for social insurance exceeds 30 years and female employees, 25 years, are entitled to 0.5% of the average salary multiplied by the old-age allowance for the extra contribution years. For example, the old-age allowance for a male employee who retires after working for 34 years is 0.5% of the average salary * four years.
Fail to provide the above, the employer shall be fined from VND 1,000,000 to VND 3,000,000 per each employee, but not exceeding VND 75,000,000.
As per employment law in Vietnam, there are a few statutory benefits entitled to the
employees in Vietnam. These benefits include
All employers must provide insurance for all employees. The labor law prescribes three major types of insurance that include
Employers in Vietnam must contribute towards retirement benefits, especially pensions.
Employers must do this through the state pension scheme called social and private life
insurance. The Social Insurance Agency (SIA) administers the state pension scheme.
In Vietnam, it is customary to pay a 13th-month salary at the Lunar New Year or the end of the year.
In Viet Nam, fringes benefits are given to employees. These can be either monetary or non-monetary depending on the business requirements and budgets set for providing them as well as what goals one might want their company reach through this practice of offering perks that help attract quality staff members who will work hard towards achieving those objectives.
Employers provide fringe benefits as a part of an employee's salary to process payroll.
Although employers don't need to provide fringe benefits as a part of their compensation in Vietnam, it is a solution commonly used to incentivize their employees.
Companies in Vietnam provide benefits that consist of in-kind compensation and flexible work agreements.
Companies know that incentivizing their employees is not always paying more but paying better. In this regard, companies established in Vietnam use different types of in-kind elements as a part of employees’ compensation to cater to every employee’s needs. In Vietnam, employers and payroll policies have favorable tax treatment that focuses on increasing the net salaried employees receive.
Although a few fringe benefits are exempt, these include
Employers in Vietnam also offer private health insurance that includes private insurance plans, group insurance plans, accident & dental covers, etc. as a part of their employees’ compensation. This is because of the following reasons:
The mandatory long-term incentives listed in the above sections include best market practice benefits or benefits provided in collective bargaining agreements.
Long-term benefits are offered to executives at this position or employees with exceptional talent, while their compensation may be too massive to be delivered in cash. It is common for employees who hold strategic management positions (such as members of the board of directors, executive officers, non-statutory officers, general managers, and high-level managers) and non-employed statutory officers to participate in an employee share plan.
Long-term incentives provided to employees and senior executives in Vietnam are stock options. The most commonly provided stock options include
Vehicle types commonly used when providing stock options include
Lastly, long-term incentive plans can be customized as per business requirements and the company's budget to measure and motivate the performance goals, objectives, and outcomes most strongly connected to a company’s long-term success. Regardless of a company’s size, ownership, or stage in its lifecycle, a long-term incentive plan can be designed to address all relevant facts and circumstances.
The immediate increase in targeted compensation (while saving on short-term cash flow), multi-year retention, and connection to long-term value drivers make long-term incentives interesting. These are attractive options for all organizations as they enter an uncertain landscape.
The termination process would include a reasonable notice period to be given by either of the terminating party. Some instances, such as enterprise operation cessation, do not need a filing. Below are some other requirements base on the reason for dismissal
Vietnamese employees that are under their probationary period are to observe a notice period of up to 30 days when terminating their contract. For employees after their probationary period, the notice period will be up to 45 days.
The severance allowance of 1/2 month worth of salary for each year of employment.
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