Employing Local and Foreign Employees in Vietnam

Posted 26.03. 2019 by Cekindo / Last update on 27.02. 2020

For a successful start in Vietnam, you will need to hire a local team. When it comes to recruitment in Vietnam, it is possible to hire local people as well as bringing foreign talents. We will cover both in this article.

Recruitment in Vietnam: Hiring local talent

As there are 1.5 million young adults entering the labour market every year, the biggest strength of the local labour market is the number of the diligent and resilient employees.

On the other side, there are skills gaps as the technical and language skills that many foreign employers demand are missing.

Tertiary education

Vietnam’s tertiary education is rapidly growing and about 30% of youth go to universities. The quality is still lacking behind the other Asian countries as none of the universities entered top 350 Asian schools (Indonesia has 4, Thailand 1). According to experts, the main problems are that the education focuses only on theory, disconnects from the business sector and shortage of teachers that leads to hiring recent graduates as teachers. As a result,around 200,000 recent graduates with a bachelor degree remained unemployed in 2017. Furthermore, Vietnam has relatively low unemployment of 3.18% (2017).

Among the best public universities are Vietnam National University Hanoi, Hanoi University of Science & Technology and Can Tho University. Foreign investors might also want to consider graduates of the foreign universities such as Raffles University (Singapore), RMIT (Australia) and others that produce graduates with good English skills and more practical education.

English

Despite the mandatory education at primary schools in Vietnam, a very small portion of Vietnam’s population can actually speak English. In addition, the tonal nature of Vietnamese language, cases a rather thick accent in English.

Salaries

Salary level in Vietnam makes the country interesting for the production and also outsourcing some of the activities. The minimum wage depends on the region and can range from USD 125 to USD 180.

RegionMinimum wage (VND)Minimum wage (USD)
1 – Hanoi and HCMC4.18 million180
2 – Da Nang, Can Tho, Hai Phong and  rural areas of Hanoi and HCMC3.71 million160
3 Less urbanized locations3.25 million140
4 Mostly rural areas2.92 million126

2020 Payroll Update: Minimum Wage to Increase in January. Read details here.

Salaries of business professionals will be significantly higher, but still very competitive to the ones in China or Singapore.

Accountant with 2yrs xpHCMC VietnamShanghai

China

Singapore
Monthly Wage (SGD)70020004000

The inflow of foreign investments is driving their price high as not only MNOs but also many international companies will be willing to overpay the market price in order to attract or maintain qualified English speaking staff.

Did you recruit the wrong candidate? You might want to read How to Terminate an Employee in Vietnam? Here’s Your Quick Guide

Recruitment in Vietnam: Hiring foreigners

For some specific skills or technical expertise you might want to employ foreigners. This is relatively easy in Vietnam compared to other countries in the region, particularly for employing people for short term (max 90 days projects).

Short-term employment

If a foreign employee is supposed to work shorter than three months, Vietnam only requires a business visa. For application of business visa a sponsor is required. This can be issued by the employer or by a provider such as Cekindo.

Long-term employment

For employment longer than 3 months, a foreign employee needs to obtain a work permit. The hiring company has to reason employing foreigners, however well accepted reasons are skills unavailable in Vietnam, knowledge of a specific foreign language or even an international experience. The company needs to submit this reason alongside the labor report 30 days prior to hiring a foreigner. Afterwards, the company will submit a labor use report twice a year and a foreign labor report four times a year.

Work permit application

To apply for a work permit, the following documents are required:

  • Medical certificate
  • Work experience certificate (work experience must be verified by your employer)
  • Legalised copy of passport
  • Criminal record not older than six months

You may also be interested in Labour Market and Hiring Process in Vietnam

Temporary residence in Vietnam (TRC)

The work permit alone does not serve as residence permission, an additional visa or residence permit is needed. As such, after successfully obtaining a work permit, a foreign employee will have to apply for the temporary residence card with the same validity as the work permit. The issuance takes about one week.

Vietnam driving license for foreigners

Expats might often utilise local driver who is skilled in driving in the local traffic and specific road rules. However, if you want to drive a car or ride a motorbike in Vietnam, you might want to obtain a local driving license. Only Vietnam residents are allowed to apply for a local driving license. Therefore after receiving temporary residence card (TCR), you will be eligible for the driving license that can be valid until the end of your temporary residence card.

Tax and insurance and the take home pay calculation for local and foreign employees

 LocalForeigner
Social insurance17.5%3.5%
Health insurance3.0%3.0%
Unemployment insurance1.0%0.0%
Total employer burden21.5%6.5%
Personal income tax5-35%5-35%
Social insurance8.0%0.0%
Health insurance1.5%1.5%
Unemployment insurance1.0%0.0%
Trade Union Fee2.0%2.0%
Total employee burden17.5% – 47.5%8.5% – 38.5%
TOTAL BURDEN39% – 69%15% – 45%

Note: If a foreigner is non-resident, there is a flat tax rate of 20%.

The following examples demonstrate the calculation:

For a local employee with gross salary of USD 1,000, the net income will be USD 834 and the total cost for employer will be USD 1,215.

For a foreigner with the same salary, the total cost for employer will be USD 1,065 and the take home pay will USD 911.

Social insurance for foreigners and Decree 143/2018

Decree 143/2018 has come into effect since December 2018 and it requires employer to pay social insurance for foreign employees. Starting January 2022, the rates for local and foreign employees should be equal. The payment of the social insurance will allow foreigners to receive pension allowance after retirement in Vietnam or one-time pension payment upon their leaving Vietnam.

Successful Recruitment in Vietnam with Cekindo

Contact us for further information on both local and foreign employment in Vietnam. Our HR specialists will be happy to answer your questions.