Employment Law Essentials for a Company Operating in Vietnam

Hiring your first employees is where a newly formed company becomes a working business. The relationship between employer and worker is governed mainly by the Labour Code 2019, which applies to Vietnamese and foreign-owned employers alike. The Code is protective of employees, but it is also clear and workable once you understand its structure. Three areas deserve attention from the outset: the labour contract itself, the compulsory insurance regime, and the work permit process for any foreign staff you bring in.

The labour contract

Almost every employment relationship should rest on a written labour contract, concluded before the employee starts work. Only very short engagements — work of under a month — may be agreed orally, and even then a written contract is the safer practice. The Labour Code 2019 recognises two main types: an indefinite-term contract, with no fixed end date, and a definite-term contract of up to 36 months.

A definite-term contract can generally be signed at most twice in a row — in other words, one renewal. If a definite-term contract expires and the employee keeps working, the parties have a short window to sign a new one; if they do not, or once that single renewal is used up, the relationship generally becomes indefinite-term by operation of law. This matters, because employers sometimes assume they can keep a worker on rolling fixed terms indefinitely — as a rule, they cannot.

A contract may include a probation period, set out in the labour contract itself or agreed in a separate probation agreement. The Code caps probation by role: up to 180 days for an enterprise manager, 60 days for a position needing a college-level qualification or above, 30 days for an intermediate-level role, and six working days for other, simpler work. During probation, either side may end the arrangement without notice and without compensation.

The contract should set out the job, workplace, working hours, wage and pay cycle, social insurance, and the term. A few points employers most often overlook:

• Wages are generally stated and paid in Vietnamese dong for an employee working in Vietnam.
• Overtime is capped by law, generally requires the employee's consent, and carries premium pay rates.
• The employer may end a contract unilaterally only on specific legal grounds, and usually with advance notice; informal or arbitrary dismissal is a common and costly mistake.

Compulsory insurance and payroll

Vietnam operates a mandatory insurance system to which both employer and employee contribute, calculated on the employee's salary. It has three components: social insurance (covering sickness, maternity, occupational accidents and disease, retirement, and survivorship), health insurance, and unemployment insurance. Registration and monthly contributions are the employer's responsibility, and the employer withholds the employee's share from payroll.

Foreign employees working under a Vietnamese labour contract generally fall within the compulsory social and health insurance system as well, though not unemployment insurance, which applies to Vietnamese employees. Some exceptions apply — for example, certain intra-corporate transferees. Alongside insurance, the employer withholds and remits personal income tax on wages. Getting the payroll mechanics right from the first month avoids arrears, late-payment interest and penalties later — the authorities do reconcile.

Work permits for foreign staff

A foreign national working in Vietnam generally needs a work permit, obtained by the employer before employment begins. The process usually starts with the employer explaining its need for a foreign worker and obtaining approval of that position, then applying for the permit itself, supported by documents such as a criminal-record check, a health certificate, and evidence of the person's qualifications or experience. A work permit is typically valid for up to two years and is tied to a specific employer and role.

Some foreign nationals are exempt — for example certain intra-corporate transferees, and those working for only a short number of days — but an exempt individual usually still needs written confirmation of the exemption. The permit, or that confirmation, in turn underpins the temporary residence card that lets the person live in Vietnam for the length of the assignment. Because the position-approval step has its own lead time, it is wise to begin well before the intended start date.

Getting it right from the start

Employment compliance is not difficult, but it is unforgiving of shortcuts. The problems we see most often are informal or missing contracts, late insurance registration, and foreign staff who begin work before their permit is issued. Each is avoidable with a little planning. Treat the contract, the insurance registration and the work permit as a single onboarding sequence, and keep clean records — the same records the labour and social-insurance authorities may later ask to see.

This article is general information current as of 2026 and is not a substitute for licensed legal advice. Laws and procedures change, and individual situations differ, so please consult a qualified adviser before acting.