Payroll processes and regulations are complicated in Vietnam and they have made many HR departments want to scream out of frustration. This is especially true for companies that rely on their internal HR employees.
Payroll in Vietnam is often a nightmare for most companies and there are many areas where errors can occur easily and make your business suffer from serious legal backlash. Also, depending on your company size and the number of locations your business is involved in, the possibility of making mistakes is beyond your imagination.
Cekindo often goes through payroll compliance review for our clients. Therefore, in this article, we have identified some of the most common payroll errors made by our clients in Vietnam. Then, you can decide if outsourcing your payroll process is right for you.
Payroll in Vietnam: Common Errors
Records of Payroll and Accounting Don’t Match
The company’s HR team is often responsible for payroll in terms of calculations such as wages and salaries, insurance, and personal income taxes. Then, the accounting team is obliged to put these figures into the financial records.
The problem is, the HR team and the accounting team may have different interpretations that will lead to the discrepancy between the two records. As a result, a standard process is necessary within an organization to ensure that both records match. Otherwise, this irreconciliation will lead to errors and these errors will result in serious penalties.
Long Probation Duration that Isn’t Allowed
Vietnam has set their probation period for employees to 30 days for almost all jobs and 60 days for positions requiring a higher tertiary degree.
Probations longer than the mentioned duration aren’t allowed and employees will enter into the employment contract automatically. Employees under probation will have salaries with a maximum of 15% reduction and therefore this error will definitely cause the financial effect on the business.
Problem with Gross Salaries and Net Salaries
Gross salaries are used under the Vietnamese tax law for employers. Employee’s withholding taxes and insurance are all based on gross salaries.
Therefore, if employers use net salaries in employee contracts, it will complicate the calculation for the payroll.
No Update on Insurance and Tax Rates
It is very common in Vietnam that insurance rates, personal income tax rates, and minimum wages change a maximum of two times every year.
Since most Vietnamese companies still make use of Microsoft Excel as their major software to process their payroll, errors could happen unexpectedly. This is because most HR staff tends to forget to update the formulas due to the rate changes manually.
Tax on benefits not included in the payroll calculations
Employee’s personal income tax involves certain benefits given by companies as well. So there will be implications and they should also be included in the payroll calculation.
For instance, whenever an employer pays for a foreign employee’s Vietnam visa, the amount is subject to personal income tax and must be put in to the payroll process.
Foreign Workers Don’t Have Work Permits
Under Vietnamese Labour Law, it is stated that no foreigner can enter an employment contract without a work permit or a work permit exemption certificate in Vietnam.
By employing a foreigner without a work permit in Vietnam, payments that are made to the foreigner will be non-tax deductible. Even worse, this foreigner may have to face deportation and there will also be severe penalties for the employer.
You might also want to read: Top Reasons for Payroll Outsourcing in Vietnam
How Cekindo can Help
Cekindo is a professional payroll service provider in Vietnam with many international client portfolios under our belt. Our team of experts and legal consultants will apply the custom approach to make sure that your payroll process is in compliance with Vietnamese Law.
Get in touch with us now to discuss how Cekindo can provide assistance to cater for your payroll and human resource needs. Fill in the form below.