[2020 Update] Payroll Obligations in Vietnam in 2019

Posted 11.02. 2019 by Cekindo / Last update on 22.12. 2020

In 2018, the government of Vietnam issued a new decree 143/2018/ND-CP in regards to the mandatory social insurance payments and payroll for foreign workers employed in Vietnam.

In 2019, the government released Decree No. 90/2019/ND/CP, announcing that starting in January 1, 2020, the monthly minimum wage in Vietnam would be increased by approximately 5.7%.

There are several important regulatory changes took place according to this decree and will have lasting impacts on the payroll in companies and organisation.

In this article, we will list out the major changes in payroll in Vietnam that you should take note of, as well as some of the basic information in regards to payroll in the country.

What are the Changes in Payroll in Vietnam?

1. Foreign Employee’s Social Insurance in Vietnam

Three types of employee insurances available in Vietnam are:

  • Health insurance (HI)
  • Social insurance (SI)
  • Unemployment insurance (UI)

Foreign employees are only eligible for one of the three insurances, which is health insurance. Hence, foreigner’s employment taxes are much lower than the domestic employee’s.

However, from January 1, 2018, all foreign workers and expatriate will be eligible for social insurance contributions, regulated by the 2014 Social Insurance Law. According to Decree 44/2017/ND-CP and Decision 595/QD-BHXH issued on April 14, 2017, the social insurance payments are only applicable to foreign employees hired in Vietnam with a work permit.

In addition, the Vietnamese government further strengthened the regulation by making social insurance contributions from employers compulsory effective from December 1, 2018.

As of 2020, employees are required to contribute 8% and employers are required to contribute 17.5% for the social insurance. The deduction is based on the employee’s gross salary.

Related article: Top Reasons for Payroll Outsourcing in Vietnam

Compensation Benefits

The change of social insurance law also brings foreign nationals the same benefits as local employees, including compensations for occupational diseases, maternity leave, sick leave, accidents, death and retirement.

Besides, a one-off pension payment will be granted to foreign workers when they leave Vietnam. However, foreign workers are excluded from the unemployment insurance benefit.

Eligibility

Social insurance contributions from employers only apply to foreign employees that meet the following conditions:

  • an employment contract for a minimum of one year
  • a work permit, or a practising license/certificate

Under the below circumstances, foreign employees will not be granted the social insurance (SI) scheme even when they fulfil the above criteria:

  • transferred to Vietnam from an overseas company and the transfer is done internally
  • In retirement age as set in Vietnam — 55 for women and 60 for men

Furthermore, the social insurance payment is only made to the first employment contract, if a foreign employee has more than one employers in Vietnam at the same time. However, all employers of that foreign employee are responsible for occupational diseases insurance and labour accidents insurance which is only 0.5%.

2. Employment Taxes in Vietnam

Local Employees

Payroll taxes in Vietnam for local employees are detailed as follows:

  • Personal Income Tax: 5-35% (employee)
  • Trade Union Fee: 2% (employee)
  • Social Security Contributions
    • Social Insurance: 8% (employee); 17.5% (employer)
    • Health Insurance: 1.5% (employee); 3% (employer)
    • Unemployment Insurance: 1% (each from both employee and employer)

Foreign Employees

Based on the new law effective from December 1, 2018, payroll taxes for foreign employees in Vietnam are:

  • Personal Income Tax: 5-35% (resident); 20% (non-resident)
  • Trade Union Fee: 2% (employee)
  • Social Security Contributions
    • Social Insurance: 0% (employee); 3.5% (employer)
    • Health Insurance: 1.5% (employee); 3% (employer)

These taxes described for foreign employees will be valid until December 31, 2021. Starting from January 1, 2022, certain taxes for foreign employees are adjusted to the following percentages:

  • Social Insurance: 17.5% (employee); 8% (employer)
  • Health Insurance: 3% (employee); 1.5% (employer)
  • Trade Union Fee: 2% (employer)

Death and retirement benefits for foreign employees will also come into force at the beginning of January 2022.

Personal Income Tax (PIT)

Personal Income Tax rates in Vietnam range from 5-35% for all resident taxpayers (both domestic and international). The following table further specifies the tax percentage deducted based on the monthly taxable income.

Tax Rate Monthly Taxable Income (VND)
5% < 5,000,000
10% 5,000,001 – 10,000,000
15% 10,000,001 – 18,000,000
20% 18,000,001 – 32,000,000
25% 32,000,001 – 52,000,000
30% 52,000,001 – 80,000,000
35% > 80,000,001

 

Related article: Your Simple Guide to Payroll in Vietnam: Compensation, Benefits and Bonuses

3. Increase of Minimum Wages

As legislated by the government of Vietnam the General Minimum Wage (GMW) in Vietnam has increased by 5.3% in 2019 to 1,490,000 VND per month for the minimum basic wage.

As of July 2020, the minimum basic wage will be not less than 1,600,000 VND per month. Read the full update.

Types of Minimum Wages in Vietnam in 2019

There are two kinds of minimum wages in Vietnam. They are common minimum wage and regional minimum wage.

Common minimum wage is used for employees working in state-owned organisations and enterprises.

The second type of minimum wage is a regional minimum wage. It applies to all employees of non-state enterprises. The government defines this type of minimum wage based on region.

Vietnam is now split into four regions to reflect the socio-economic conditions of the country. The first region covers urban areas of Hanoi, and Ho Chi Minh City and the fourth region includes the most rural areas in Vietnam.


Cekindo’s professionals provide comprehensive support to your business concerning payroll, insurance, tax and other market entry strategies. Get in touch with us today and outsource payroll in Vietnam.