Avoid Costly Mistakes: Payroll Compliance in Vietnam for Foreign Companies – 2025

Payroll Compliance in Vietnam is a crucial aspect for foreign companies in Vietnam seeking to hire local or expatriate talent. For foreign employers in Vietnam, meeting the country’s legal payroll obligations is not just a formality—it’s a strategic necessity to avoid regulatory risks, fines, and operational delays. With increasingly strict enforcement of Vietnam labor laws, understanding each step of the payroll process is essential for international businesses in Vietnam and foreign investors hiring in Vietnam.

This article serves as a comprehensive 2025 guide to legal payroll obligations in Vietnam, focusing on employment contracts, onboarding procedures, and employee registration—core elements of full payroll compliance.

1. Employee Registration and Tax Identification

Employee Onboarding Process: Registering Employees in Vietnam

For foreign employers in Vietnam, every new employee—whether local or foreign—must be officially registered with the Vietnamese Social Insurance Authority within 30 days from the start date stated in their labor contract. This process ensures the employee is eligible for mandatory social insurance contributions in Vietnam, and that the company meets its legal payroll obligations in Vietnam.

Required Documents for Registration:

To remain fully compliant with Vietnam labor laws, the following documents must be prepared and submitted during the onboarding process:

•  Signed labor contract (must clearly state salary, working hours, and insurance entitlements)
• Valid identity documentation (Vietnamese national ID or passport for foreign employees)
• Social insurance declaration forms, including Form TK1-TS (Personal information declaration for social insurance)
•  Any additional documents requested by local Social Insurance offices

These steps are crucial to avoid common payroll errors and reduce payroll compliance risks for foreign investors hiring in Vietnam.

Tax Identification Number (TIN) – Essential for Payroll Tax Compliance

Every employee must obtain a Tax Identification Number (TIN) to ensure proper withholding and reporting of personal income tax for foreign employees and local staff alike. Without a TIN, employers cannot legally submit monthly payroll taxes, resulting in serious payroll mistakes in Vietnam and potential fines.

How Foreign Companies Help Employees Obtain a TIN:

1. Submit a PIT registration form (Form 05-DK-TCT) through the General Department of Taxation
2. Attach valid identification documents (ID/passport and labor contract)
3. Submit either online via the national tax portal or directly at the local tax office
4. Receive TIN within a few business days
5. Store the TIN securely for monthly payroll reporting in Vietnam
   

Employers are legally responsible for guiding both Vietnamese and foreign employees through this process. Inaccurate or delayed registration can result in payroll compliance risks, including overpayment or underpayment of taxes.

2. Minimum Wage and Working Hours

Complying with Vietnam’s minimum wage and working hour regulations is a critical component of payroll compliance in Vietnam for foreign companies. Failing to meet wage requirements or exceeding legal working hour limits can lead to severe payroll penalties in Vietnam and disputes with employees.

Updated Regional Minimum Wages (Effective July 2024)

Vietnam uses a region-based minimum wage system that reflects the cost of living in different areas. These minimum wage levels apply to non-managerial employees working under standard labor contracts.

As of 2025, the minimum monthly wages are:

Region	Examples	Minimum Wage (VND/month)
Region I	Central urban districts in Hanoi, Ho Chi Minh City	VND 4,960,000
Region II	Suburban districts of Hanoi, Da Nang, Can Tho	VND 4,410,000
Region III	Provincial cities and towns	VND 3,860,000
Region IV	Rural and less-developed areas	VND 3,450,000

Foreign companies in Vietnam must ensure that gross salaries meet or exceed the regional minimum wage applicable to their registered office or job site.

Failure to comply with Vietnam’s minimum wage laws can result in back-pay obligations, administrative fines, and labor inspections—posing a real payroll compliance risk for international businesses.

Aligning Salaries with Payroll Tax Regulations in Vietnam

When determining payroll, employers must calculate:

• Gross salary ≥ Regional minimum wage (excluding overtime, bonuses, and allowances not specified in the labor contract)
• Ensure proper withholding for social insurance contributions in Vietnam and personal income tax for foreign employees, based on the total income package

Working Time Regulations

• Under the Labor Code 2019, standard working hours in Vietnam are limited to 8 hours per day and 48 hours per week.
• Employers may arrange working hours by day or by week (up to 10 hours/day if applying a weekly schedule), but the total must not exceed 48 hours/week.
• A common working schedule is Monday to Saturday, with Saturday being either a half or full working day, depending on company policy.
• The government encourages a 40-hour workweek (5 days) where applicable.

Overtime Regulations (2025)

Overtime Limit	Standard Cap
Monthly limit	40 hours
Annual limit	200 hours
Extended annual limit (specific sectors such as manufacturing, garments, seafood processing)	Up to 300 hours/year

All overtime must be:

• Voluntary
  Documented with employee consent
• Compensated at the correct premium rate (at least 150% of regular wages on weekdays, 200% on weekends, and 300% on holidays)

Exceeding overtime limits is one of the most common payroll mistakes in Vietnam and can trigger labor inspections and fines.

3. Personal Income Tax (PIT) Obligations

Tax Residency Classification in Vietnam

Understanding the employee’s tax residency status is essential for calculating the correct PIT liability. The Vietnamese tax system distinguishes between resident and non-resident individuals.

1. Resident Individuals

Employees are considered tax residents if they:

• Spend 183 days or more in Vietnam within a 12-month period; or
• Have a permanent residence in Vietnam (e.g., long-term lease, household registration)

➡️ Resident employees are subject to progressive PIT rates on worldwide income.

2. Non-Resident Individuals

Employees who do not meet the residency criteria are classified as non-residents.

➡️ Non-residents are taxed at a flat rate of 20% on income earned in Vietnam only.

For foreign employees in Vietnam, determining tax residency early is a critical payroll processing step to avoid miscalculations.

PIT Rates for Resident Individuals (Progressive Table)

Vietnam applies a graduated PIT rate system to tax residents, based on their monthly taxable income after allowable deductions:

Monthly Taxable Income (VND)	PIT Rate
Up to 5,000,000	5%
5,000,001 – 10,000,000	10%
10,000,001 – 18,000,000	15%
18,000,001 – 32,000,000	20%
32,000,001 – 52,000,000	25%
52,000,001 – 80,000,000	30%
Over 80,000,000	35%

Allowable deductions include:

• Personal deduction: VND 11 million/month
  Dependent deduction: VND 4.4 million/month per dependent
• Contributions to mandatory social insurance in Vietnam

PIT Filing and Payment Obligations for Foreign Employers

As part of their legal payroll obligations in Vietnam, employers must handle all PIT-related filings on behalf of employees.

Employer Responsibilities:

1. Withhold PIT from monthly salaries before payment
   Declare and submit PIT either monthly (if monthly revenue > VND 50 billion) or quarterly (if below threshold)
2. Finalize annual PIT for all employees by March 31st of the following year

4. Compulsory Social Insurance Contributions

Who Is Subject to Social Insurance in Vietnam?

Under current regulations, compulsory social insurance contributions apply to:

•  Vietnamese employees working under labor contracts of at least 1 month 
• Foreign employees working under labor contracts of 12 months or longer who do not fall under bilateral exemption agreements

If your company is hiring foreign staff in Vietnam, ensure contracts are reviewed for contribution eligibility and that exemption treaties (if any) are checked.

2025 Social Insurance Contribution Rates in Vietnam

Below is the breakdown of compulsory payroll deductions and employer contributions as of 2025:

Contribution Type	Employer Rate (%)	Employee Rate (%)
Social Insurance (SI)	17.5%	8%
Health Insurance (HI)	3%	1.5%
Unemployment Insurance	1%	1%
Total Contribution	21.5%	10.5%

Important Notes:

• Unemployment Insurance (UI) is only applicable to Vietnamese nationals. Foreign workers are exempt.
• Social Insurance and Health Insurance are mandatory for both Vietnamese and qualifying foreign employees.
• Bilateral social security agreements may exempt foreign workers from some contributions (e.g., between Vietnam and Korea, Germany, etc.).

Payroll Processing Steps for Insurance Compliance

For full payroll compliance in Vietnam, foreign companies must:

1. Register employees with the local Social Insurance Authority (usually done during onboarding)
2. Calculate monthly contributions based on gross salary
3. Deduct employee contributions directly from salary
   Submit employer and employee contributions to the relevant insurance fund by the last day of each month
4.  File monthly social insurance reports via the Vietnam Social Security e-portal
   

5. Trade Union Contributions

Mandatory Trade Union Contributions for Employers

All companies, including foreign-invested enterprises, are legally required to pay a trade union fee of 2% of the salary base used for social insurance contributions.

• This 2% employer contribution is compulsory, regardless of whether a trade union has been established at the workplace.
• The contribution must be made monthly, along with other payroll processing steps such as social insurance and PIT filings.

Example: If an employee’s monthly salary base for social insurance is VND 20,000,000, the employer must contribute VND 400,000 to the trade union fund.

Employee Trade Union Contributions (If Applicable)

If your company has officially established a grassroots (internal) trade union, then employees are also required to make a contribution:

Employee Trade Union Fee	Rate	Cap
Employee Contribution	1% of monthly salary	Capped at 10% of government-regulated base salary (currently VND 1.8 million, i.e., max VND 180,000/month)

• This 1% is withheld from the employee’s salary and paid together with the employer’s portion.

If your company has not set up a union, employees are not subject to the 1% deduction, but the 2% employer contribution still applies.

6. Labor Reports and Compliance Audits

Mandatory Labor Reporting Requirements

Under Vietnamese labor regulations, foreign-invested companies must submit the following labor reports to the Department of Labor, Invalids and Social Affairs (DoLISA):

1. Monthly Labor Reports

• Scope: Report new hires, contract changes, and employee terminations
• Deadline: Submitted by the 5th of each month
• Format: Use local templates via the online government portal or directly to local labor authorities

 2. Bi-Annual and Annual Reports

• Mid-year report (by June 15) and year-end report (by December 15)
• Content includes:
  • Workforce structure (e.g., gender, nationality, job categories)
  • Salary statistics
  • Labor training and safety records
  • Use of foreign employees in Vietnam

These reports are vital for demonstrating workforce compliance and maintaining work permit quotas for foreign staff.

Labor Compliance Audits for Foreign Employers

International businesses in Vietnam are subject to periodic or ad-hoc labor inspections by Vietnamese authorities. These audits may cover:

• Proper employee registration with social insurance
• Accuracy of personal income tax (PIT) filings
• Evidence of contract compliance and payroll record-keeping
• Verification of social insurance contributions in Vietnam

A failed audit may lead to hefty payroll penalties and delayed administrative procedures such as work permit renewals.

Common Payroll Compliance Violations and Penalties

Violation	Potential Penalty (VND)
Late or missing PIT submissions	2,000,000 – 25,000,000
Failure to register new employees	5,000,000 – 75,000,000
Incorrect or falsified social insurance reports	10,000,000 – 100,000,000

These fines can multiply per employee or per month of violation, creating serious payroll compliance risks for foreign businesses in Vietnam.

7. Foreign Employees: Special Considerations

Work Permits

All foreign employees working in Vietnam must hold a valid Work Permit, unless they qualify for one of the legally accepted exemptions.

Who Needs a Work Permit?

• Foreign nationals working in Vietnam for more than 30 consecutive days
• Individuals on employment contracts with Vietnam-based entities

Work Permit Exemptions

Some foreign workers may be exempt from the permit requirement under specific conditions, including:

• Intra-corporate transferees from foreign parent companies
• Short-term assignments (under 30 days per trip and under 90 days/year)
• Experts and specialists falling under special treaties or decrees

Note: Even in exemption cases, employers must still notify local labor authorities before onboarding the employee.

Final Thoughts: Best Practices for Compliance

To ensure smooth operations and avoid costly penalties, foreign companies should adopt the following practices:

• Engage local payroll experts
• Use compliant HR software systems
• Train HR and accounting staff regularly
• Conduct periodic internal audits
• Keep updated with legal changes

Need Help with Payroll Compliance in Vietnam?

At Green NRJ, we specialize in helping foreign companies establish and operate smoothly in Vietnam—ensuring full compliance with local labor, tax, and payroll regulations. Whether you’re setting up a new entity or expanding your workforce, our experts can guide you every step of the way.

📩 Contact us today to streamline your payroll operations in Vietnam and stay compliant in 2025 and beyond.