HR

Payroll Guidelines in Vietnam 2020

Linh Pham

May 31, 2020

To any businesses and employees, especially employees working in a country, it is important to understand the payroll guideline of the country that they are working for. In Vietnam, according to Decree No.  90/2019/ND/CP, the monthly minimum wage has increased by 5.7% since January 1, 2020.

With a view to providing helpful information about payroll guidelines in Vietnam, this article will update the latest changes in payroll obligation and help foreign workers or companies be clear about the salary system. 


Payroll guidelines for Vietnamese employees

This section will cover minimum wage, overtime pay, and payroll tax. 

Minimum wage 

Since January 2020, the government has amended minimum salaries for Vietnamese employees. The minimum wage varies in each region, 

– Region I: VND 4,420,000 (increase of 5.7% from VND 4,180,000)

– Region II: VND 3,920,000 (increase of 5.7% from VND 3,710,000)

– Region III: VND 3,430,000 (increase of 5.5% from VND 3,250,000)

– Region IV: VND 3,070,000 (increase of 5.1% from VND 2,920,000)

in which, the region I includes Hanoi and Ho Chi Minh City (HCM City), the region II covers rural Hanoi and HCM City, region III covers provincial cities and district of Bac Ninh, Bac Giang, Hai Giang and Binh Phuoc province, the region IV covers the remain localities. 

Regulated Entities

Four points that Vietnamese employees should bear in mind are:

1. Employees who work under the terms and provision of labor contracts as prescribed in the Labor Code.

2. Enterprise established, organized, and operating under the Law on enterprises.

3. Cooperatives, cooperative unions, artels, farms, households and other organizations and individuals in Vietnam that hire employees on the basis of labor contracts.

4. Foreign authorities, foreign organizations, international organizations, and foreigners that lice/ operate in the territory of Vietnam and hire employees under labor contracts (unless otherwise stipulated in international agreements to which the Socialist Republic of Vietnam is a signatory). 

Principles for payroll application of region-based minimum wage

Based on the minimum wages, the Ministry of Labor, Invalids and Social Affair has pointed out four principles for application of region-based minimum wage:

1. An enterprise located in a specific sub-region shall apply the respective minimum wage. In the event of affiliates and branches of the same enterprise located in different sub-regions, they must apply the respective minimum wages.

2. If an enterprise is located in the industrial park or the export processing zone located in the territory containing two or more subregions to which different region-based minimum wages apply, the highest wage shall apply. 

3. If an enterprise is located in the subregion which is renamed or divided, the region-based minimum wage applied to that subregion before it is renamed or divided shall still apply until new regulations promulgated by the Government come into force.

4. If an enterprise is located in the subregion which is converted from a district to which a different region-based minimum wage applies or which is established by mergers of two or more subregions to which different region-based minimum wages apply, it shall apply the highest region-based minimum wage.

In case an enterprise is located in a provincial city which is established from one or more subregions in the region IV, it shall apply the region-based minimum wage applied to the remaining provincial cities of the region III.

Overtime pay

Employees who work overtime or work on national holidays will receive overtime pay according to Article 98 of the Labor Code.

An employee who works overtime will be paid an amount based on the piece rate or actual salary as following: if the worker works overtime on normal days, on weekly days off, and public holidays, he/she will be paid at least 150%, 200% and 300% respectively of his/ her working day.

Besides, employees who work at night will be paid an additional amount of at least 30% normal day. 

Application of payroll region-based minimum wages

The region-based minimum wages stated above are the lowest rates used as the basis for any arrangement between enterprises and employees on salary and salary payment.

The wage paid to an employee who works under normal working conditions, ensures the required monthly working hours, and has fulfilled the predetermined labor productivity norm or agreed-upon duties shall:

– not be lower than the region-based minimum wage paid to an unskilled worker who performs simplest duties; and 

– be at least 7% higher than the region-based minimum wage paid to a skilled worker 

Payroll tax

When a person can earn money, his/ her salary will be deducted partly due to the personal income tax.

Personal income tax in Vietnam

Social Security Contribution

Three types of insurance are compulsory for Vietnamese employees are social insurance, health insurance, and unemployment insurance. 

1. Social Insurance

Social insurance is imposed on employee’s gross salary, in which employers are levied 17.5% and employees are levied 8.0%. The maximum monthly salary that is subject to social insurance is capped at 29,800,000 VND which is 20 times the Minimum Basic Wage, which is currently 1,490,000 VND. One more important thing is that the minimum basic wage will be 1,600,000 VND from 1 July 2020 onward. 

2. Health Insurance

The gross salary of employees is deducted for health insurance as follows: employers pay 3.0% and employees pay 1.5%. 

3. Unemployment Insurance

Unemployment Insurance of employers and employees is levied 1% on the gross salary. The maximum monthly salary that is subject to unemployment insurance is capped at 20 times the minimum monthly wage of the Zone the employer is in. The Zone 1 minimum is 4,420,000 VND, which equates to a cap of 88,400,000 VND per month. 

Payroll guideline in Vietnam

Payroll guideline for foreign employees working in Vietnam

Minimum wage

Similar to Vietnamese employees, foreign workers are eligible to take benefits of new minimum wage since 1 January 2020. The minimum wage varies in each region, 

– Region I: VND 4,420,000 (increase of 5.7% from VND 4,180,000)

– Region II: VND 3,920,000 (increase of 5.7% from VND 3,710,000)

– Region III: VND 3,430,000 (increase of 5.5% from VND 3,250,000)

– Region IV: VND 3,070,000 (increase of 5.1% from VND 2,920,000)

in which, the region I includes Hanoi and Ho Chi Minh City (HCM City), the region II covers rural Hanoi and HCM City, region III covers provincial cities and district of Bac Ninh, Bac Giang, Hai Giang and Binh Phuoc province, the region IV covers the remain localities. 

With regard to regulated entities, principles for application of region-based minimum wage, application for region-based minimum wage, the regulations for foreign employees are the same as Vietnamese employees. Therefore, please go to the previous section to find the information that you need. 

Overtime pay

Foreign employees will be paid at the same rate as Vietnamese workers in case they work overtime. Please find the information in the previous part. 

Insurance

Foreign employees working in Vietnam are supported two types of insurance, including health insurance and social insurance (starting from 1st December 2018)

1. Social Insurance (SI)

For employees, from January 1, 2022, the employee shall, on a monthly basis, make a SI contribution accounting for 8% of his/her monthly pay to the retirement and death benefit fund.

Moreover, the employee who neither works nor receives salaries or wages for a period of at least 14 working days in each month shall not be bound to pay the SI contribution in that month. This month shall not be taken into account to determine entitlement to SI benefits, except for parental leaves.

In the aspect of the employer, employers participating in the compulsory social insurance, including state agencies, public service provider units, political entities, socio-political bodies, socio-political and occupational, socio-occupational and other social organizations; foreign or international bodies or organizations operating within the territory of Vietnam; enterprises, cooperatives, single-person households, cooperative associations, other organizations, and persons who are licensed to do business as per laws, shall be required to participate in the compulsory social insurance if they hire and employ personnel to work under employment contracts. 

In addition, the employer shall, on a monthly basis, make a SI contribution in proportion to the employee’s payroll in the SI payment month as follows: (total: 17.5%)

   (1) 3% of the above-mentioned payroll paid into the sickness and parental insurance benefit fund;

   (2) 0.5% of the above-mentioned payroll paid into the occupational accident and disease benefit fund;

   (3) 14% of the above-mentioned payroll paid into the retirement and death insurance benefit fund, in effect from January 1, 2022.

2. Health Insurance

The employer pays 3.0% of gross salary and the employee pays 15% of gross salary to contribute to the health insurance. The maximum monthly salary that is subject to social insurance is capped at 29,800,000 VND which is 20 times the Minimum Basic Wage, which is currently 1,490,000 VND. One more important thing is that the minimum basic wage will be 1,600,000 VND from 1 July 2020 onward. 

Additionally, you can have further information about the standard salary for tech talents in Vietnam at Viettonkin’s blog. The article helps you know advantages of Vietnamese tech talents and salary standard to attract tech gurus in Vietnam.

In conclusion, it is significant for employees and employers to understand clearly the salary standard and allowances when working and opening businesses in Vietnam.

Regardless of your nationality, Vietnamese or Korean, and so on, understanding law or regulations on payroll assists you in being proactive in dealing with labor-related issues. Hope that this article will provide you helpful information. 

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