How is Payroll Calculated in the Vietnam?
In Vietnam, payroll calculation, salary payments, deductions, and contributions are regulated by the Labor Code and Social Insurance Law. Employees are subject to monthly withholding taxes (Personal Income Tax - PIT) on their salaries, while employers are not. This ensures that employees contribute to PIT through regular deductions based on their income brackets, employers must still account for several mandatory contributions, deductions, and taxes.
What is the Labor Code in Vietnam?
The Labor Code of Vietnam governs employment terms, payroll calculations, and employee rights. It applies to most employees, whether full-time, part-time, temporary, or on fixed-term contracts. The law applies to both local and foreign employees, ensuring fair treatment in terms of wages, working hours, and benefits.
Certain groups of workers have different regulations or exemptions, such as:- Domestic workers.
- Senior managers or executives with significant decision-making authority.
For these employees, specific agreements may be arranged outside of standard labor laws. Salary and Payments
Vietnamese law requires employers to pay salaries at least once a month, with payments made no later than 7 days after the salary period ends. Salaries refer to any form of remuneration for work under a contract, including bonuses and allowances. In cases of force majeure where the employer is unable to pay the employee on schedule, despite all remedial measures being implemented, the salary must be paid within 30 days. If payment is delayed by more than 15 days, the employer is required to compensate the employee with interest, calculated at the latest 1-month interest rate quoted by the bank where the employee's salary account is held.
Salaries in Vietnam are generally structured as either monthly or hourly/daily payments:- Daily wages: Calculated based on gross pay, which includes salary deductions for social insurance and allowances.
- Monthly wages: Calculated as a portion of the employee’s annual salary, spread evenly across 12 months.
This ensures transparency in payroll calculations and compliance with Vietnamese regulations. Monthly and daily salary: definitions and calculation
In Vietnam, employers have the flexibility to pay their employees based on different methods, including time-based, product-based, or a fixed amount. Time-based payment structures can include hourly, daily, weekly, bi-weekly, or monthly wages. When calculating daily wages, the gross rate is used, which covers elements such as paid public holidays, salary deductions, and overtime rates.
Monthly wages
Monthly wages refer to the salary for any full calendar month of work. If the employee works less than a full month, the salary is adjusted accordingly.
How an incomplete month pay is calculated:
To calculate salary for an incomplete month of work
Monthly gross rate of pay
Total Paid Days in the Month
x
Number of Paid Days Worked
If you take no-pay leave
If full-time monthly-rated employees take unpaid leave during the month, the salary will be prorated based on the number of paid days within that month, including actual working days and any paid leaves.
Definitions
Where an employee:
- Starts work after the first day of the month.
- Leaves employment before the last day of the month.
- Takes no-pay leave of one or more days during the month.
Monthly gross rate of pay
Total amount of money including allowances, payable for one month's work. This excludes:
- Additional payments (e.g., overtime, bonuses).
- Reimbursement of special expenses incurred during employment.
- Productivity incentive payments.
- Travel, food, and housing allowances.
Total no. of working days in the month
Excludes rest days and non-working days, but includes public holidays.
For employees with fixed rest days on Sundays or non-working days on Saturdays, the total number of working days per month for year 2022 to 2024 is shown in this table. Total no. of working days in the month
Excludes rest days and non-working days, but includes public holidays.
For employees with fixed rest days on Sundays or non-working days on Saturdays, the total number of working days per month for year 2022 to 2024 is shown in this table. Total no. of days actually worked in the month
Excludes rest days and non-working days but includes public holidays
Where an employee:
- Starts work after the first day of the month.
- Leaves employment before the last day of the month.
- Takes no-pay leave of one or more days during the month.
Monthly gross rate of pay
Total amount of money including allowances, payable for one month's work. This excludes:
- Additional payments (e.g., overtime, bonuses).
- Reimbursement of special expenses incurred during employment.
- Productivity incentive payments.
- Travel, food, and housing allowances.
Total no. of working days in the month
Excludes rest days and non-working days, but includes public holidays.
For employees with fixed rest days on Sundays or non-working days on Saturdays, the total number of working days per month for year 2022 to 2024 is shown in this table. Total no. of days actually worked in the month
Excludes rest days and non-working days but includes public holidays
Basic rate of pay
For calculating pay for work on a rest day or public holiday.
Basic rate of pay includes wage adjustments and increments that an employee is entitled to under a contract of service. It is also used as the basis for calculating pay for statutory contributions, such as social insurance, health insurance, and other mandatory contributions
Total no. of working days in the month
Excludes rest days and non-working days, but includes public holidays.
For employees with fixed rest days on Sundays or non-working days on Saturdays, the total number of working days per month for year 2022 to 2024 is shown in this table. Total no. of working days in the month
Excludes rest days and non-working days, but includes public holidays.
For employees with fixed rest days on Sundays or non-working days on Saturdays, the total number of working days per month for year 2022 to 2024 is shown in this table. Total no. of days actually worked in the month
Basic rate of pay excludes:
- Overtime payments, bonus payments and annual wage supplements (AWS).
- Reimbursement of special expenses incurred in the course of employment.
- Productivity incentive payments.
- Any allowance.
For calculating pay for work on a rest day or public holiday.
Basic rate of pay includes wage adjustments and increments that an employee is entitled to under a contract of service. It is also used as the basis for calculating pay for statutory contributions, such as social insurance, health insurance, and other mandatory contributions
Basic rate of pay excludes:
- Overtime payments, bonus payments and annual wage supplements (AWS).
- Reimbursement of special expenses incurred in the course of employment.
- Productivity incentive payments.
- Any allowance.
How it is calculated
For a monthly-rated employee, the basic rate of pay for 1 day is calculated as follows:
Monthly basic rate of pay
Total Working Days in the Month
Gross rate of pay
For calculating pay for work on a rest day or public holiday.
For calculating:
- Salary in lieu of notice of termination of service.
- Salary in lieu of annual leave.
- Salary deduction for unauthorised absence from work.
- Paid public holidays.
- Approved paid leave, including annual leave and hospitalisation leave. Sick leave (with a medical certificate) and maternity leave are paid by the Social Insurance Fund, so employers are not required to cover these payments.
Basic rate of pay includes wage adjustments and increments that an employee is entitled to under a contract of service. It is also used as the basis for calculating pay for statutory contributions, such as social insurance, health insurance, and other mandatory contributions
Gross rate of pay includes allowances that an employee is entitled to under a contract of employment
Total no. of working days in the month
Excludes rest days and non-working days, but includes public holidays.
For employees with fixed rest days on Sundays or non-working days on Saturdays, the total number of working days per month for year 2022 to 2024 is shown in this table. Total no. of working days in the month
Excludes rest days and non-working days, but includes public holidays.
For employees with fixed rest days on Sundays or non-working days on Saturdays, the total number of working days per month for year 2022 to 2024 is shown in this table. Basic rate of pay excludes:
- Overtime payments, bonus payments and annual wage supplements (AWS).
- Reimbursement of special expenses incurred in the course of employment.
- Productivity incentive payments.
- Any allowance.
Gross rate of pay excludes:
- Overtime payments, bonus payments and annual wage supplements (AWS).
- Reimbursement of special expenses incurred in the course of employment.
- Productivity incentive payments.
For calculating:
- Salary in lieu of notice of termination of service.
- Salary in lieu of annual leave.
- Salary deduction for unauthorised absence from work.
- Paid public holidays.
- Approved paid leave, including annual leave and hospitalisation leave. Sick leave (with a medical certificate) and maternity leave are paid by the Social Insurance Fund, so employers are not required to cover these payments.
Gross rate of pay includes allowances that an employee is entitled to under a contract of employment
Gross rate of pay excludes:
- Overtime payments, bonus payments and annual wage supplements (AWS).
- Reimbursement of special expenses incurred in the course of employment.
- Productivity incentive payments.
How it is calculated
For a monthly-rated employee, the gross rate of pay for 1 day is calculated as follows:
Monthly gross rate of pay
Total Working Days in the Month
Hours of work, overtime and rest day
If your employees are covered under Vietnam’s Labor Code, their working hours are regulated, and they’re entitled to breaks, overtime pay, and rest days.
Who is covered
The guidelines for work hours in Vietnam apply to most employees covered under the Labor Code. However, certain employees like managers, executives, and those with special agreements may have different work hour conditions as per their employment contracts.
Definitions
Week: A continuous 7-day period from Monday to Sunday.
Hours of Work: The time during which employees are expected to fulfill their job responsibilities. This excludes intervals for rest or meal breaks.
Break Times: Employees should not work more than 6 consecutive hours without a break. For roles requiring up to 8 hours of continuous work, a meal break of at least 30 minutes must be provided.
Normal hours of work
In Vietnam, the standard workweek is 48 hours, with a maximum of 8 hours per day. The workweek can be divided into 6 days of 8 hours each, or a different schedule as mutually agreed upon between employer and employee.
For employees working shifts of up to 12 hours a day: The average workweek must not exceed 44 hours over a 3-week period.
Example:
- If week 1 = 40 hours, week 2 = 44 hours, week 3 = 48 hours:
- Average for weeks 1, 2, and 3 = 44 hours.
Overtime pay
In Vietnam, overtime pay rates are structured based on the time of day and the type of day (weekday, weekend, or holiday). The rates are as follows:- Overtime during the day (6 AM - 10 PM):
- Weekdays: 150% of the regular hourly rate.
- Weekends: 200% of the regular hourly rate.
- Holidays: 300% of the regular hourly rate.
- Overtime at night (10 PM - 6 AM):
- If the employee did not work overtime during the day:
- Weekdays: 200% of the regular hourly rate.
- Weekends: 270% of the regular hourly rate.
- Holidays: 390% of the regular hourly rate.
- If the employee worked overtime during the day and continues into the night:
- Weekdays: 210% of the regular hourly rate.
- Weekends: 270% of the regular hourly rate.
- Holidays: 390% of the regular hourly rate.
Hourly Salary (A) = Monthly Salary ÷ No. of working days in month ÷ 8
Maximum hours of work
In Vietnam, employees are generally not allowed to work more than 12 hours per day, but they can be requested to work beyond this limit in special circumstances, such as:- Emergencies or accidents.
- Work critical to public safety, community welfare, or national security.
- Urgent repairs to machinery or factories.
If more than 12 hours of work per day is required, employers must apply for an overtime exemption. Maximum hours of overtime
Employees in Vietnam can work up to 200 hours of overtime per year, or 300 hours in special cases. Employers must obtain approval from the Department of Labor for exceeding the regular limits.
Work performed on rest days or public holidays is not counted towards the 200-hour or 300-hour overtime limits. However, the employee must be compensated for the extra work.
Overtime on a rest day or public holiday is calculated as follows:
(Hourly basic rate of pay × 1.5 × Number of hours worked overtime) + (Rest day or public holiday pay)
Rest day
Employers must provide employees with at least one rest day per week, which consists of a continuous 24-hour period.- For shift workers, the rest day can be a continuous 30-hour period if the shift ends on a Sunday evening and extends into Monday.
- The employer determines the rest day and must inform the employee of their rest day in advance. The maximum interval between two rest days must not exceed 12 days.
How pay for work on a rest day is calculated
Payment for work on a rest day is calculated as follows:
For up to half normal daily working hours
At the employer’s request
For more than half normal daily working hours
At the employer’s request
Beyond normal daily working hours
At the employer’s request
2 days’ salary + overtime pay
For up to half normal daily working hours
At the employee’s request
For more than half normal daily working hours
At the employee’s request
Beyond normal daily working hours
At the employee’s request
1 day’s salary + overtime pay
For up to half normal daily working hours
For more than half normal daily working hours
Beyond normal daily working hours
At the employer’s request
2 days’ salary + overtime pay
At the employee’s request
1 day’s salary + overtime pay
When it comes to paying your employees, the salary should be given on a working day, during office hours, and at the agreed workplace, or any other location you and your employee have mutually decided.
You can transfer the payment directly into the employee’s bank account or issue a cheque. However, keep in mind that if you opt for a cheque, the payment is only considered complete once the cheque has been cleared.
Does payroll tax apply?
In Vietnam, employees are required to be subject to monthly withholding taxes, including Personal Income Tax (PIT), which is deducted from their salaries and paid to the Vietnam General Department of Taxation. Employers are responsible for calculating, deducting, and filing payroll taxes on behalf of their employees, but they are not subject to these taxes themselves.
What are common salary deductions?
There are clear rules under the Labor Code regarding the deductions employers can make from an employee’s salary. These deductions are typically required for social insurance, health insurance, and union fees. Employers may also be required to make deductions due to court orders, or to recover certain expenses.
It’s important to note that salary deductions should not exceed 30% of an employee’s salary in any given month, and this limit applies only in cases where deductions are made as compensation for damage to the employer's equipment and assets. Common reasons for allowable deductions include:- Social insurance contributions.
- Health insurance contributions.
- Unemployment insurance contributions.
- Union fees.
- Absence from work.
- Damage or loss of goods or property.
- Recovering advances or loans.
- Payments required by legal authorities.
Public holidays and payroll
In Vietnam, full-time employees are entitled to paid public holidays, which are already included in their overall salary package. There are 11 public holidays each year, including Lunar New Year (Tet), National Day, and Independence Day.
For part-time employees, they are also entitled to paid public holidays, but their pay is prorated based on the number of hours worked.