How to Hire Employees in Vietnam: A Complete Guide for Foreign Companies (2025)

In 2025, Vietnam has emerged as one of the most attractive destinations for global businesses seeking to expand their teams. For foreign companies, knowing how to hire employees in Vietnam is no longer just an advantage; in fact, tapping into the country’s fast-growing economy and highly skilled talent pool is becoming essential. 

This guide covers everything you need to know about building a team here, from understanding the Vietnam Labor Law and tax requirements to exploring cost-effective hiring options like Employer of Record (EOR) services. With practical insights on employment contracts, compliance, and the local hiring landscape, you will be better equipped to recruit confidently and scale your business in one of Southeast Asia’s most promising markets.

Vietnam's growing economy and strategic location have made it an ideal destination for foreign investment and talent acquisition. 

For companies considering global expansion or planning to open a company in Vietnam, the benefits of hiring teams here extend well beyond cost savings. Businesses gain access to a dynamic talent pool, a supportive business environment, and an economy that continues to show strong, sustainable growth.

1. Lower Labor Costs than Thailand and the Philippines

One of the most significant advantages of hiring teams in Vietnam is the considerable cost efficiency compared to neighboring markets like Thailand and the Philippines. 

2. Abundant and Educated Workforce

Vietnam is home to a large, young, and increasingly well-educated workforce. With a population of over 100 million and a median age of just 33.4, the country adds millions of graduates annually from universities and vocational schools. 

Moreover, a strong focus on STEM education has created a growing pool of skilled professionals in IT, engineering, and manufacturing. As a result, this demographic strength provides businesses with a steady stream of eager, adaptable talent, making the cost of hiring in Vietnam even more attractive when balanced against the quality of the workforce. 

3. Strong Government Support and Favorable Business Environment

Vietnam’s government actively attracts foreign investment through stable policies, streamlined business regulations, and tax incentives. The country has also signed numerous Free Trade Agreements (FTAs), strengthening its position as a regional manufacturing and trade hub. 

Furthermore, recent policy shifts focus on high-tech industries and sustainable development.

4. Rapidly Advancing Digital Infrastructure

Vietnam is making substantial investments in its digital ecosystem. By 2025, it aims to achieve 99% high-speed internet coverage, a nationwide rollout of 5G, and the development of state-of-the-art data centers. 

This strong digital backbone fuels remote work, digital transformation, and the expansion of tech-driven sectors, creating an ideal environment for modern businesses.

5. Strategic Location and Economic Growth

Centrally located within ASEAN, Vietnam offers excellent access to major global markets via well-connected shipping routes. Its economy continues to post impressive GDP growth, ranking among the fastest-growing worldwide. This stable and dynamic economic climate provides fertile ground for business expansion and long-term investment.

For foreign companies, understanding the Vietnam Labor Law is essential for hiring successfully and staying compliant. 

Before building a team or setting up a company in Vietnam, it’s necessary to be familiar with the rules around employment contracts, taxes, payroll, working hours, and social insurance to ensure a smooth and lawful hiring process.

1. Employment contracts

There are only two types of labor contracts as per the new Labor Code, which took effect in January 2021.

• Indefinite-term contracts: These contracts do not specify an end date and are common for long-term employment.
• Definite-term contracts: These contracts have a precise expiration date, typically up to 36 months. After two consecutive definite-term agreements, if the employee continues to work, an indefinite-term contract must be signed.

2. Tax obligation 

In Vietnam, employers are responsible for reconciling and finalizing Personal Income Tax (PIT) for their employees annually. 

This annual tax finalization for income earned in the previous calendar year is typically due by March 31 of the following year (e.g., March 31, 2025, for 2024 income). Individuals who directly finalize their taxes generally have until April 30 of the following year. However, this deadline can be extended if it falls on a weekend or public holiday (e.g., to May 5, 2025, for 2024 income, due to upcoming holidays).

PIT can be settled via bank transfer, with monthly filings generally due by the 20th day of the following month, and quarterly filings by the last day of the first month following the reporting quarter.

3. Payroll cost

The cost of hiring an employee in Vietnam goes far beyond base salary. Employers must also account for mandatory contributions and common benefits. 

Payroll requirements include payments toward social insurance, health insurance, unemployment insurance, and trade union fees, all of which must be calculated carefully to ensure compliance.

4. Overtime pay & working hour limits

The Vietnam Labor Law for foreign companies strictly regulates working hours and overtime.

• Regular Working Hours: Standard working hours are typically 8 hours a day or 48 hours a week. Some specific industries may have different regulations.
• Overtime Limits: Overtime hours are capped at 4 hours per day, 40 hours per month, and 200 hours per year. However, in certain specific cases (e.g., manufacturing, electricity production), the annual limit can be extended to 300 hours with prior approval from the Ministry of Labor, Invalids and Social Affairs.
• Overtime Pay Rates: Overtime compensation is mandated at higher rates:
  • Weekday overtime: at least 150% of the normal hourly wage.
  • Weekend overtime: at least 200% of the normal hourly wage. 
  • Holiday/public holiday overtime: at least 300% of the normal hourly wage (plus the normal daily wage).

5. Social insurance

Mandatory social insurance in Vietnam is critical to employee compensation and employer obligations. Both employers and employees contribute to three main funds: Social Insurance (SI), Health Insurance (HI), and Unemployment Insurance (UI).

• Social Insurance (SI): Covers sickness, maternity, occupational diseases, accidents, retirement, and death benefits.
• Health Insurance (HI): Provides access to medical examination and treatment.
• Unemployment Insurance (UI): Offers unemployment benefits and vocational training support.

When foreign companies look to hire employees in Vietnam, they generally choose between two main approaches: setting up a local entity to hire directly or working through an Employer of Record (EOR) service. 

The right option depends on the company’s long-term goals, how much control they want over operations, and how much administrative complexity it is willing to manage.

Many companies are increasingly turning to Employer of Record (EOR) services to navigate the complexities of hiring and setting up operations in Vietnam. This choice is driven by several clear advantages that align with the realities of the Vietnamese market.

1. Faster, more cost-effective entry into Vietnam

Setting up a legal entity in Vietnam, whether a wholly foreign-owned enterprise or a joint venture, can take months and require significant time, money, and effort. The process often involves navigating legal registrations, obtaining licenses, opening bank accounts, and dealing with extensive paperwork. 

EORs already have established entities and deep local expertise, allowing foreign companies to hire employees in Vietnam within days or weeks. This speed is invaluable for businesses that want to test the market, secure top talent quickly, or launch projects without committing to heavy upfront investments.

2. Guaranteed compliance with the Vietnam Labor Law

Vietnam’s labor regulations are detailed, frequently updated, and can be challenging for newcomers. Companies risk fines, legal disputes, or reputational issues without expert guidance if they fail to comply with wage standards, tax obligations (including personal income tax and mandatory social, health, and unemployment contributions), or termination rules. 

An EOR assumes full legal responsibility for employment, ensuring compliance with payroll, tax withholdings, statutory benefits, and even managing work permits and visas for foreign hires, removing major legal and HR headaches.

3. Streamlined hiring and workforce management

EORs simplify the entire employment process in Vietnam. They draft compliant contracts, manage payroll in VND, oversee benefits, and handle leave management and employee concerns. 

Their scale and local know-how often allow them to offer better benefit packages than a foreign company could arrange alone. This support helps businesses focus on strategy and growth while creating a smooth, compliant experience for their Vietnamese employees, leading to higher retention in a competitive talent market.

4. Financial predictability and reduced risk

EOR services typically bundle all employment costs into a transparent, all-in-one monthly fee per employee. This makes budgeting for Vietnam straightforward and avoids hidden costs or unexpected liabilities. 

More importantly, EORs help companies avoid costly mistakes like employee misclassification under Vietnamese law, protecting finances and reputation.

1. What is the minimum wage in Vietnam?

As of July 2025, the minimum wage in Vietnam varies by region. The country is divided into four areas, each with a different minimum wage rate to reflect the cost of living and economic conditions.

• Region I (e.g., Hanoi, Ho Chi Minh City): Expected to be around 4,960,000 VND monthly (approx. USD 195).
• Region II (e.g., Da Nang, Can Tho): Expected to be around 4,410,000 VND monthly (approx. USD 173).
• Region III (e.g., smaller cities): Expected to be around 3,860,000 VND monthly (approx. USD 152).
• Region IV (e.g., rural areas): Expected to be around 3,450,000 VND monthly (approx. USD 135).

2. Can a foreign company legally hire in Vietnam without a local entity?

Yes, a foreign company can legally hire employees in Vietnam without establishing a local entity. However, it requires working with an Employer of Record (EOR) or engaging independent contractors.

3. How do you pay a Vietnamese remote employee?

A straightforward way for foreign companies to handle payroll for remote employees in Vietnam is to work with an Employer of Record (EOR) service, such as Cake. These services manage everything from salary payments and tax filings to ensuring compliance with the Vietnam Labor Law, which removes a significant administrative burden for employers.

Unlike some countries, Vietnam does not impose a rigid payroll schedule. Instead, employers and employees can agree on whether salaries will be paid monthly or twice a month, as long as the arrangement is clearly outlined.

In rare situations involving force majeure events where immediate payment is impossible, salaries may be deferred for up to one month. However, if payment is delayed by over 15 days, the employer must pay interest on the overdue wages.

That interest is calculated based on the amount owed, using the ceiling interest rate for one‑month deposits set by the State Bank of Vietnam (SBV) at the time the payment is eventually made.

4. What are the mandatory benefits employers must provide?

• 13th-month salary or Tet bonus: Although it isn’t legally required, giving a Tet bonus is a long-standing tradition in Vietnam, and most Vietnamese employees will expect it.
• Annual leave: After completing a full year of service, employees in Vietnam become eligible for paid annual leave in addition to public holidays. The number of days depends on their role and working conditions, and they receive one extra day for every five years of service. There are no strict rules on how unused leave should be handled. Some employers allow it to roll over into the following year, while others pay it in cash.
• Sick leave: Sick leave benefits come from the national social insurance fund rather than the employer. Employees usually submit a medical certificate to confirm their absence when taking time off. The length of paid sick leave depends on how long the employee has contributed to the system.
• Maternity leave: Female employees are entitled to six months of maternity leave, plus an extra month for each additional child in the case of twins or multiples. The social insurance fund covers maternity benefits, and women also receive five paid prenatal check-ups, which can be extended to 12 paid days if the fetus is unstable.
• Paternity leave: A male employee whose wife has given birth can take 5-14 days of paid leave, depending on certain factors.
• Other leaves: Vietnamese employees are also entitled to other leaves at the discretion of the employee and employer, including:
  • 3 days for marriage leave
  • 1 day leave for the child’s marriage
  • 3 days of personal leave (including leave for the death of family members)
• Insurance and social security contributions: Under the Vietnam Labor Law, employees and employers must contribute to the social, health, and unemployment insurance funds.
  • The employer contributes 23.5% of the employee’s base salary.
  • The employee contributes 10.5% of the employee’s base salary

5. How do you terminate an employee in Vietnam?

Ending an employment contract in Vietnam is possible, but it follows strict regulations. Employers can terminate staff if the contract has expired, the employee retires, repeatedly fails to meet duties, suffers from long-term illness, or if the business downsizes or closes.

Likewise, employees may also resign if the contract ends, they retire, the employer breaches agreed terms, or they face harassment or mistreatment.

Notice periods depend on the contract type: 

• 30 days for definite-term contracts;
• 45 days for indefinite-term contracts.