Accurate payroll calculation in Vietnam is crucial as it connects to your business’s accounting system and will affect your employee’s pay and tax outcome. A precise payroll is also related to eliminating unethical issues, ensuring consistency, cutting down costs and resources, enhancing organizational performance, and most importantly complying with Vietnamese payroll and tax legislations. Here is a handy guide to navigating Vietnam’s payroll regulations with income tax rates, calculation formulas, and added advice.
Things to Consider
Before going further into payroll options in Vietnam, it is important to know that other than basic wage and salary for Vietnam payroll calculation, there are other elements to consider:
Employee Insurance Deductions
As per Vietnamese Law, employees in Vietnam are entitled to three kinds of insurance with contributions from both employers and employees which is deducted from their pay:
- Social security insurance (17.5% from employers; 8% from employees),
- Health insurance (3% from employers; 1.5% from employees)
- Unemployment insurance for Vietnamese (1% from employers; 1% from employees)
- Unemployment insurance for expats: 0%
It is also possible that organizations provide additional benefits such as supplementary life and health insurance to their employees. Companies on a smaller scale, they don’t usually provide supplementary health insurance but an allowance instead. Other extra benefits include vacation time and an annual trip.
Bonuses and Leave
Giving employees a bonus is common practice for almost all companies in Vietnam due to the tradition of the Lunar New Year Holiday. The 13-month bonus provided by employers is not required by law but most organizations have it, and it is expected. If they don’t, they will at least have a commission-plan for their employees. 13-month bonuses are calculated based on an employee’s service duration in the company and are paid at the end of the lunar calendar.
Other than the nine public holidays, there are three major types of leave in Vietnam: maternity and paternity leave, sick leave, and annual leave.
The female staff is eligible for 6-month maternity leave with full salary for a newborn and an extra 30 days for each additional child. Male employees are also qualified for 5 to 14-day paternity leave with full wage. Sick leave ranges from 30-60 days depending on the employment length, and each employee will have at least 12-day annual leave.
Personal Income Tax Rates in Vietnam
|Monthly Taxable Income||Yearly Taxable Income||Income Tax|
|0 – 5,000,000VND||0 – 60,000,000VND||5%|
|5,000,000 – 10,000,000VND||60,000,000 – 120,000,000VND||10%|
|10,000,000 – 18,000,000VND||120,000,000-216,000,000VND||15%|
|18,000,000 – 32,000,000VND||216,000,000 – 384,000VND||20%|
|32,000,000 – 52,000,000VND||384,000,000 – 624,000,000VND||25%|
|52,000,000 – 80,000,000VND||624,000,000 – 960,000,000VND||30%|
How to Calculate Your Personal Income Tax
Payable Personal Income Tax = Taxable Income X Tax Rate
How to Handle Payroll in Vietnam
For foreigners interested in starting businesses in Vietnam, there are four payroll options they can consider to deal with their Vietnam payroll calculation and compliance, follow this guide:
This option is ideal for large organizations in Vietnam that have a long-term vision. Internal payroll requires higher expenses to hire more full-time employees.
A parent company overseas will carry out the remote payroll for your company in Vietnam via a service provider, also known as an EOR (Employer of Record). One thing to keep in mind is that the payroll regulations differ in the parent company’s country and Vietnam – something that your HR professional must take notice of.
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