A large and affordable workforce in Vietnam has brought lucrative foreign investment from large companies in the manufacturing, logistics, and tech sectors. Numerous international companies see Vietnam as an opportunity to expand internationally and grow regionally.
Finding employees is only part of the hiring process in Vietnam. Foreign employers must be mindful of numerous Vietnamese labor regulations, including work permits, contracts, salaries, insurance, and an array of compliance issues. Potential business risks may arise if foreign employers are unable to understand and comply with Vietnamese employment regulations.
This document addresses the employment concerns of foreign business owners, including the Vietnamese labor market, employment issues, and the multitude of employment regulations.
Vietnam Labor Market
Access to an affordable workforce is still one of the strongest business advantages of investing in Vietnam. The continued business appeal of Vietnam is the growing access to a large and skilled labor market, whether constructing a manufacturing plant or growing a sales and tech workforce.
As reported by the Vietnam General Statistics Office, the Vietnam labor market will reach over 53 million people by 2025, making it one of the largest labor markets in Southeast Asia. Vietnam’s relatively young workforce and increasing university graduates provide opportunities to access skilled workers from a diversity of business sectors.
A Talent Base for Varied Industries
Vietnam’s labor force is very appealing to companies operating in the manufacturing, logistics, information technology and business process outsourcing (BPO) and retail sectors. Vietnam has gained international experience supporting export-oriented industries, and the country has a rapidly growing technology sector due to investments from international businesses in software, engineering, and digital services.
The country also has a workforce of many potential employees who have experience in manufacturing electronics, textiles, furniture, and general industry related manufacturing work. And, the fast growing cities (Ho Chi Minh City, Hanoi, and Da Nang) have become major settlements of workforce talent related to technology, finance, and marketing, as well as customer related support services.
This workforce diversity enables foreign businesses to form and expand teams of employees that cover multiple business functions without significant reliance on a particular segment of the labor market.
Value and Expectations
Vietnam is still a country with competitive labor costs compared to most of the developed markets and countries, which is a major factor for foreign businesses who want to invest in the country. But, the competitiveness in costs is not the only factor to attract and retain workers.
Higher foreign direct investments means higher competition for talented people, particularly in engineering and software as well as in positions related to the supply chain and finance, and in the middle management level.
Employers say that it is relatively easy to find entry level employees. But, employees with advanced skills, especially technical skills, and management skills have proven much more difficult to find. In addition, there have been many reports of a decrease in the interest of prospective employees in stable long term employment, and an increase in interest in competitive pay, good workplace culture, and career development.
Building a successful team in Vietnam cannot be accomplished by simply publishing an online job request. Workforce planning, employer branding, and retention strategies must be considered for sustainable growth.
Legal Framework: Vietnam Labor Law and Key Regulations
Understanding the Vietnamese legal framework for recruitment, employment, and workforce management is necessary regardless of how robust the labor market is.
The base of the Vietnamese employment system is the Labor Code 2019 that came into effect in 2021. It is applicable to both domestic and foreign-invested businesses in Vietnam. It regulates employment contracts, working hours, and employees’ rights. It also covers disciplinary actions, the terminologies and other aspects of the employer–employee relationship.
For most foreign investors, the real question is not how the law is, but how the law is when it comes to hiring and the operational activities of the business.
Hiring Local Employees
Almost all foreign-invested businesses in Vietnam recruit their employees from the local population. Vietnamese professionals are, in general, the best choice. They understand the local market, are fluent in the language, and appreciate the local culture.
The local employee recruiting process is simple. Businesses must draft compliant employment contracts and register their employees for mandatory social insurance. Businesses must also comply with the requirements for the regulation of wages, working hours, and workplace policies.
Vietnam’s labor laws tend to be employee friendly, and most of the compliance difficulties do not occur during recruitment, but during the management of the work force.
Hiring Foreign Employees
Recruitment of local labor is preferred, however, Vietnam recognizes the need for hiring foreign employees when particular skills are missing in the labor market. Foreign employees are generally recruited for senior/technical management, executive, and expert-level positions. Examples of foreign employees include country managers, engineers, regional directors, and other knowledgeable professionals.
Hiring foreign employees involves more rules and processes. In some situations, companies will be required to provide reasons to justify hiring foreign employees and obtain approval from relevant bodies before foreign employees are hired. Hence, the timeline for hiring foreign employees will be longer compared to hiring local employees.
Application of Work Permits
Foreign employees are required to obtain a work permit to be employed in Vietnam, with some exceptions. To obtain a work permit, it is required to provide evidence that the foreign employee possesses the necessary skills and qualifications, and provide a number of supporting documents, including educational certificates, professional experience certificates, health certificates, and certificates of good conduct.
Generally, work permits are valid for two years and can be renewed.
The most important consideration, especially for businesses, is the time. The required documents are to be obtained from different countries and then translated into the Vietnamese language, and then legalized or apostilled. Because of this, businesses interested in hiring foreign employees are encouraged to obtain work permits before the date they want to employ staff.
Foreign investors encountering these stipulations in advance can minimize the impact on the project schedule, the timing of key personnel appointments, or the deadlines relating to the expansion of the business.
Employment Contracts in Vietnam
For foreign companies, doing business in Vietnam means employment contracts also have a legal function rather than simply an administrative one. Careful drafting facilitates the establishment of expectations regarding the employee’s obligations and reduces the likelihood of disputes concerning the employee’s remuneration, their performance, the termination of their employment, and employee benefits.
Contracts of employment in Vietnam’s Labor Code are required to be in writing; however, there are a small number of exceptions for short-term employment contracts of less than one month. For foreign-invested companies, the norm is to draft contracts in both languages. While Vietnamese is the language that the courts will use in the event of a dispute, providing an English version alongside the Vietnamese contract will help in ensuring that both parties are aware of their rights and obligations.
Contracts of Employment
Vietnam recognizes two primary types of contracts of employment.
An indefinite-term contract does not specify an end date and a fixed-term contract does. An employment relationship based on an indefinite-term contract tends to be a long-term one and is preferred by most professionals, as it provides more job security and enhanced protection under the labor laws.
Vietnamese labor legislation considers short-term contracts viable for temporary and seasonal work. The use of short-term contracts for permanent positions could result in elevated compliance risks and disputes on employee benefits and social insurance. These disputes could hinder foreign businesses’ ability to build a permanent and long-term workforce in Vietnam. Dealing with these disputes requires a viable and considerable business strategy focused on the short, medium, and long-term business growth.
Vietnamese Employment Contracts: Mandatory Clauses
For Vietnam Contracts to be binding, they must be signed and contain the core terms of the contract. Vietnamese contracts must contain a number of terms. These include employee’s position and job description, location of work, length of the contract, work schedule and contract benefits and cost. If the employer intends to provide variable compensation in the form of performance bonuses, sales commissions, allowances, and other incentives, these should be carefully constructed and drawn in the contract.
Foreign employers usually include agreements regarding employee confidentiality, ownership of work-related intellectual property, and employee non-disclosure of work-related trade secrets. The agreements should contain the spirit of labor laws of Vietnam.
Contracts should be constructed in a clear, concise, and commercially focused manner, especially in the technology, manufacturing, and professional services sectors where employee turnover presents greater risk.
Probation and Termination of Employment
Probation is an integral part of the hiring process in Vietnam. It gives the employer the opportunity to assess the employee’s suitability to perform the functions of the position for which they were hired. It also creates an opportunity for the employee to determine whether the job meets their employment expectations.
The maximum length of a probation period depends on the position. For many professional and managerial positions, a period of probation is a maximum of 60 days. Shorter periods of probation apply to other groups of employees. During the period of probation, compensation is at least 85% of the employee’s salary as per the employment agreement.
Vietnam also has a system of specific notice periods for the termination of employment contracts. For contracts of employment with an indefinite term, employees must usually provide 45 days’ notice. For contracts with a fixed term, employees must provide 30 days’ notice. Other notice periods apply for short term contracts and situations specified in the labor code.
It should also be noted that the termination of employment contracts is more regulated in Vietnam than in many common law systems. In Vietnam, the system of procedures, the system of documents, and the timing of events all affect the legality of the termination of employment.
For foreign companies, investing in compliant HR processes and employment contracts from the outset will help diminish legal risk as the company expands.
Mandatory Benefits, Salary, and Social Insurance
For foreign employers, expanding into Vietnam means designing competitive compensation and benefits packages. Statutory benefits, social insurance, regulation of compulsory overtime, annual leave, and compliance with the minimum wage are all factors that impact the total cost of employment in Vietnam. Understanding the impact of these employee benefits and insurance on your Vietnam operations is critical for an accurate assessment of your employment costs, forecasts, and employee resource planning.
Mandatory employee benefits and insurance means total employment costs can be significantly greater than in other cost competitive countries
Vietnam Wages Overview
Vietnam employs a system of regional minimum wages. This means that different areas of the country have different minimum wage laws. As a general rule of thumb, wages are higher in urban, developed areas compared to rural areas.
By the year of 2025, the minimum wages across the different regions of Vietnam will be: Region IV, at VND 3.45 Million, and Region I, at VND 4.96 Million (Ho Chi Minh City, as well as the capital, Hanoi).
Minimum wage will not be a concern for the majority of foreign invested businesses in Vietnam. Because of the increasing competition for labor, salaries of skilled employees (technicians, engineers, accountants and supervisors) are many times the minimum wage.
Minimum wage should only be viewed by businesses as a baseline for regulatory compliance.
Obligatory Social, Health and Unemployment Insurance
Vietnam’s insurance system means that all employees, as well as all employers, bear a significant employment cost.
Employers are required to contribute to three main funds.
- Social Insurance (SI): 17.5%
- Health Insurance (HI): 3%
- Unemployment Insurance (UI): 1%
Together, the employer’s contribution as employee insurance comes to 21.5%.
There are also employee contributions that are deducted from payroll.
- Social Insurance (SI): 8%
- Health Insurance (HI): 1.5%
- Unemployment Insurance (UI): 1%
This means that employees have a total contribution of 10.5%.
These requirements pose a risk to foreign investors, as they may increase the overall labor costs. What initially looks like a competitive salary budget may be substantially more after factoring in these requirements.
Depending on the type of work permit and other employment-related arrangements, assigned foreign national employees in Vietnam may have social insurance requirements. As such, companies hiring expatriates must understand insurance requirements as they determine the total employment costs.
Labor working time, overtime, annual leave, and public holidays
Regulations on labor working time, working overtime, annual leave, and public holidays have been established.
A standard work week in Vietnam is 48 hours, typically codified into 6 work days of 8 hours each. Many employers of office workers implement a 5 day work week, along with work policies consistent with international practices.
Overtime work is regulated and must be compensated. Employees may be entitled to a premium for overtime work equal to their normal wage multiplied by a factor ranging from 150% to 300%, depending on the time at which the overtime work is performed.
The law also grants employees the right to paid annual leave of not less than 12 working days per year. Additional paid leave may be granted for exceptional work conditions and continued employment.
There are also a number of federally recognized holidays each year, including Tet, Vietnam’s Lunar New Year celebration, Vietnam National Day and other commemorative celebrations and activities. These holidays also must be factored into labor costs, as employees are granted paid leave.
For international employers, these considerations reveal a critical employment reality: the cost of hiring extends well beyond wages. When planning a budget, employers should include the cost of employment insurance, leave, overtime, and statutory benefits. Integrating these into business plans will help avoid budget shortfalls as business operations expand in Vietnam.
Graduate Talent and Internship Recruitment in Vietnam
Vietnam is teeming with university graduates, making gaps in the workforce harder to fill. The developing finance, technology, and manufacturing sectors make recruitment of graduates and interns a key part of business development.
High-potential graduates will not be flocking to a company just because there is a job posting. Foreign businesses need to understand how to find target graduates, build relationships with the right universities, and comprehend student expectations for internships. Understanding the legal requirements for workplace internships and the perceptions of the employer brand in the country is also important. This guide provides insight on the hiring of graduates and interns in Vietnam to provide a sustainable workforce and help grow business operations.
Vietnam’s Graduate Talent Pool
The development of sustainable business operations in Vietnam requires the recruitment of graduates by foreign businesses. Rapid growth in finance, manufacturing, logistics, information technology, and professional services have prompted the need to address the business talent pipeline. These sectors have a heavy reliance on innovative workforce solutions, such as graduate programs and internships.
Vietnam has a younger population thanks to the development of a rigorous education system. The Ministry of Education and Training states that Vietnam has a workforce of hundreds of thousands in diversified areas of business, technology, engineering, healthcare, and finance. Developing these graduates can further support the growth of business operations in Vietnam.
In Vietnam, knowing where graduates are trained can help businesses improve their hiring.
Key Universities and Academic Hubs
Talented graduates in Vietnam can be found in its major cities. Those cities are known for their own unique strengths.
Ho Chi Minh City is the largest city in Vietnam and its business center. Some major schools in the city are Ho Chi Minh City University of Technology (HCMUT), Ho Chi Minh City University of Economics (UEH), Vietnam National University – Ho Chi Minh City (VNU-HCM), RMIT Vietnam, and FPT University. These schools offer degrees in business related to engineering, information technology, economics, finance, business administration, and digital technology. Ho Chi Minh City’s ties with multinational companies allows students to intern with those companies giving students the opportunity to work in international environments.
The most prestigious universities in Vietnam are located in Hanoi. Graduates from Vietnam National University – Hanoi (VNU), Hanoi University of Science and Technology (HUST), Foreign Trade University (FTU), and National Economics University (NEU) are in high demand. These schools offer engineering degrees and train students in economics, international business, public policy, and finance.
Da Nang is also known for producing skilled engineers and IT graduates. The University of Danang and FPT University Da Nang are key players in supplying graduates for Da Nang’s growing IT outsourcing, software, and digital services. Da Nang’s lower operating costs makes it a good choice for hiring engineers and IT professionals.
An increasing trend is international and bilingual education. Institutions like RMIT Vietnam, British University Vietnam (BUV), and Fulbright University Vietnam provide an education that helps graduates learn English and understand international business, which helps graduates get jobs with multinational companies.
Gaps in Vietnam’s Graduate Market
Vietnamese graduates have educational training and have been described as having a willingness to learn and adapt. These graduates enter occupations in manufacturing, engineering, software, accounting, finance and business services and are described as having good analytical skills and are able to learn and develop through training programs.
However, like other emerging economies, graduates have gaps and need more training in areas like client facing, work engagement, project management, and teamwork. There are also gaps in communication skills, proficiency in business English, and critical thinking, which are age and country related and are differentiated by institution and discipline.
Graduates are most sought in areas relating to software engineering, artificial intelligence, data analytics and digital marketing as well as traditional fields like logistics, accounting and supply chain management. Competition for graduates is increasing for domestic and foreign employers as they expand their businesses in Vietnam.
For foreign businesses, graduate recruitment is more effective when combined structured onboarding, mentorship and internship programs. Having developed a workforce that is loyal and committed also helps reduce recruitment costs.
Legal Framework for Hiring Interns and Fresh Graduates in Vietnam
In many countries, hiring interns and recent graduates is seen as flexible hiring, but Vietnam Labor Law would still apply to foreign companies depending on the type of relationship they will be engaging them in. Understanding the difference between an internship that is purely educational and an internship that involves the performance of work for employment purposes, is important for businesses to manage labor compliance risks and position themselves favorably in the market to attract and retain young talent.
Internship Agreements and Employment Contracts
Unlike other jurisdictions, Vietnam does not have an internship law. Therefore, the law will depend on whether the internship is part of an educational program or the intern performs work similar to that of a regular employee.
When universities place students for practical training during the school year, companies generally sign internship agreements or memorandums of understanding with the university and, if applicable, an internship agreement with the student. These agreements are for the purpose of educational placement and do not constitute an employment relationship.
The situation changes when graduates or interns start performing actual work, under control of the employer. If that person performs work of a regular employee and that person is paid a salary, then that person has to be covered by an employment contract as required by the Labor Code of Vietnam.
For foreign companies, this distinction is important. Misclassifying full-time employees as “interns” to evade employment obligations would create a labor compliance risk for the company, particularly when the situation would have the characteristics of a regular employment relationship.
In the design of internship programs, there must be provisions for specific learning outcomes, defined supervision, and a time limit. Companies interested in offering regular employment to interns who are good performers may wish to provide conditions for them to transition into full-time employees upon graduation, instead of prolonging the internship.
Complensation and Absorption
Providing stipends for interns, who are completing internships that are a compulsory part of their academic studies, is not a legal requirement for companies in Vietnam. However, many companies provide monthly stipends to improve their programs and assist their interns in covering transportation, meal, and housing costs.
In many sectors, including technology, finance, engineering, and consulting, the market has made provided stipends a standard practice. These monthly stipends vary from VND 2-5 millions in each month.
Wage laws in Vietnam provide stipulations on newly hired employees who were formerly interns. These laws require employers to provide employees with a minimum wage, mandated employee benefits, and social insurance.
When evaluating the internship program, the employer must also evaluate whether the internship program provides the company with the legal right to employ the intern considering the local laws in Vietnam.
Probation Policies on Interns Converted to Employees
Recruiting new employees through internship programs is a common practice, especially among foreign companies. Companies should be aware that hiring employees this way does not eliminate the employee’s right to a probation period.
If a graduate accepts a full-time job offer, a formal contract should be issued, and the Labor Code should be followed regarding a formal probation period. The internship period is typically not considered formal probation, even if the individual has worked several months at the company.
The length of formal probation is determined by the position, and the probation employee is entitled to at least 85% of the salary offered.
From a business consideration, employers should communicate to successful interns prior to the completion of the internship. A written offer letter, with the proposed commencement date, and an explanation of the transition to full-time employment, will help with the employer’s reputation with graduate talent and will assist with the full-time employee onboarding process.
Conclusion
Generally, hiring in Vietnam is simple. However, obtaining talent and signing a contract is not the complete picture. Foreign employers need to analyze the labor market and employment laws, custom tailor contracts, and set aside the requisite insurance and benefit funding.
As Vietnam attracts more investment, especially in manufacturing, technology, and logistics and professional services, the challenge of hiring suitable staff will grow. Businesses that implement effective recruitment strategies along with compliant employment practices will be able to attract and retain their employees, and will be able to grow their operations in the country.
Moreover, graduate recruitment and specifically internship programs provide foreign organizations a way to formalize a long-term talent pipeline in Vietnam. Structured strong partnerships with leading universities and top-tier structured internships strengthen the competitive advantage for the business.
Young talent is the future. Organizations that provide opportunities for young talent through career pathways and a positive experience are more likely to nurture young talent and retain them in the business. Short-term internships viewed as a positive opportunity provide long-term sustainable talent to organizations in Vietnam.