Vietnam has become one of Southeast Asia’s most sought-after destinations for foreign companies looking to hire. Strong economic growth, a young and technically skilled workforce, competitive salary expectations, and a strategic location within the ASEAN region make it genuinely attractive. But hiring in Vietnam without a local legal entity is not straightforward, and the compliance requirements are real. An Employer of Record solves this problem directly.
This guide covers Vietnam’s labor market, the key compliance requirements for foreign employers, and how the EOR model works in the Vietnamese context.
Why Companies Are Hiring in Vietnam
Vietnam’s workforce has a number of characteristics that make it particularly appealing for technology, manufacturing, and services companies. The country graduates a large number of engineers and IT professionals annually. Software development, quality assurance, and customer support roles are commonly filled from the local talent pool at competitive rates. The population is young, with a median age in the early thirties, and English proficiency has been improving steadily, particularly in Ho Chi Minh City and Hanoi.
Beyond tech, Vietnam is a major hub for manufacturing and supply chain operations, with a growing business process outsourcing sector. For companies that want a cost-effective base for APAC operations or a development team in a favorable time zone, Vietnam is consistently near the top of the shortlist.
The Legal Challenge for Foreign Employers
Foreign companies that want to hire employees in Vietnam legally need either a local entity (a representative office, branch, or wholly foreign-owned enterprise) or an Employer of Record. Hiring Vietnamese workers directly as a foreign company without any of these structures is not compliant with Vietnamese law and creates significant legal and tax exposure.
Setting up a local entity in Vietnam takes time, typically two to four months for a fully operational structure, and involves ongoing compliance with Vietnamese corporate law, accounting requirements, and tax filings. For companies that want to hire one or two people to test the market, or that need to move quickly, entity setup is disproportionate. That’s where EOR comes in.
Key Features of Vietnamese Labor Law
Employment Contracts
Vietnamese labor law requires written employment contracts for all workers. Contracts can be definite-term (for up to 36 months) or indefinite-term. After a second consecutive definite-term contract, the employee is entitled to an indefinite-term contract if the relationship continues. Contracts must specify the job description, salary, working hours, workplace, and terms of termination.
Working Hours and Overtime
The standard working week in Vietnam is 48 hours, though many companies operate on a 40-hour week in practice. Overtime is capped at 40 hours per month or 300 hours per year (with certain exceptions). Overtime must be compensated at a premium: 150% of the regular rate on weekdays, 200% on weekends, and 300% on public holidays.
Statutory Leave
Employees are entitled to 12 days of annual leave after one year of service, increasing by one day for every additional five years. There are 11 official public holidays. Maternity leave is 6 months for female employees. Sick leave entitlement depends on the employee’s social insurance contribution history.
Social Insurance Contributions
Both employers and employees contribute to Vietnam’s social insurance system, which covers health insurance, unemployment insurance, and social security. The combined employer contribution is significant, currently running at around 21.5% of the employee’s salary (subject to a salary ceiling). These contributions are mandatory and must be registered with and paid to the relevant social insurance authority on time.
Termination
Terminating an employee in Vietnam requires specific grounds and adherence to notice requirements. Wrongful termination claims are taken seriously by Vietnamese labor courts, and severance obligations apply in many cases. The EOR handles termination processes in compliance with Vietnamese law, significantly reducing the risk to your company.
How the EOR Works in Vietnam
When you engage an EOR provider for Vietnam, they become the legal employer of your hire. They draft a Vietnamese-law-compliant employment contract, register the employee with Vietnamese social insurance authorities, process payroll in Vietnamese dong, withhold personal income tax, and make the required social insurance contributions. You retain full operational control of the employee’s work.
The EOR provider’s local entity in Vietnam is what makes this compliant. They have the legal standing to employ workers, the banking infrastructure to process payroll, and the ongoing relationships with Vietnamese tax and social insurance authorities.
Costs to Expect
When budgeting for a hire in Vietnam through an EOR, the total employer cost includes the employee’s gross salary, employer social insurance contributions (around 21.5% of capped salary), and the EOR’s service fee. The service fee varies by provider and typically runs between USD 300 and USD 600 per employee per month, or a percentage of the employee’s salary. Get a full cost breakdown from any EOR you evaluate, not just the headline service fee.
Frequently Asked Questions
Can I hire Vietnamese employees as independent contractors instead? Technically possible, but it carries risk. Vietnamese authorities look at the substance of the working relationship, not just how it’s labeled. If the arrangement looks like employment, it may be treated as employment. Misclassification penalties and back-payment of social insurance contributions can be significant.
Do Vietnamese employees expect additional benefits beyond the statutory minimums? In competitive hiring markets like Ho Chi Minh City and Hanoi, supplemental health insurance and performance bonuses are common expectations, particularly for skilled roles. Your EOR can advise on competitive benefit structures for the roles you’re hiring.
Can we eventually transfer employees to our own Vietnamese entity? Yes. Most EOR providers support a transition process once you’ve established your own local entity.
To start hiring in Vietnam without setting up a local entity, explore the Employer of Record Vietnam service and get a cost estimate for your specific hiring needs.
Vietnamese Labor Law Changes to Know in 2025
Vietnam updated its Labor Code in 2021 and has continued to refine its implementing regulations since. A few developments worth knowing: the regulations on labor leasing (similar to staffing agency arrangements) have been tightened, making compliant EOR arrangements more important for foreign companies. Social insurance salary ceilings have been adjusted upward over recent years, increasing the actual employer contribution amounts for higher-earning employees.
Vietnam is also gradually increasing its minimum wage annually, with regional variations between urban centers and rural provinces. Hanoi and Ho Chi Minh City have the highest regional minimum wages. For skilled technical roles, these minimums are well below market rates, but they set the floor for any employment relationship.
What Employees in Vietnam Value in Their Employment Package
Beyond base salary and statutory benefits, Vietnamese employees in competitive sectors typically value private health insurance (statutory coverage is limited), 13th month salary (a standard market practice, though not legally required for most employers), performance bonuses tied to clear metrics, and professional development support. For technology roles in particular, technical training budgets and certifications are meaningful differentiators. An EOR provider with local market knowledge can advise on competitive benefit structures for specific roles and cities.
Public holidays are another important dimension. Vietnam has 11 official public holidays, and local employees are attentive to these. An EOR ensures employees receive all statutory holiday entitlements, and many companies choose to add additional flexibility around the Tet (Lunar New Year) period, when travel home is culturally important for much of the workforce.