Mandatory costs for employees under the laws of Vietnam
Employment related cost is always a fundamental part of corporate operational costs. Some of these employment related costs are mandatory. The following information will provide foreign investors with an overview of the basic costs of an employee in Vietnam.
1. Salary
Basically, the salary of each employee is negotiated and agreed upon by both the employee and the employer, depending on the position, title, professional level, capacity of the employee. Nevertheless, the salary must not be lower than the regional minimum salary prescribed by the Government. The minimum salary level set forth in the table below is applicable on the basis of the locality where the employee works and for the untrained employees. The regional minimum salary for trained employees must be at least 7% higher than the one for the untrained employees.
2. Compulsory Insurance
The employer and the employee are required to contribute to compulsory social insurance, health insurance and unemployment insurance funds. The employers must pay a part of these compulsory insurances and pay the other part that is withheld from the employee’s salary on their behalf to the social insurance authority. The contribution to the compulsory insurance funds is determined by the employee’s monthly salary and under the rate set out below:
3. Health Check
Annually, the employer shall organize health check-ups at least once a year for employees; and health check-ups at least twice a year for employees doing heavy and harmful jobs and disabled, underage and elderly employees. Therefore, the health check-ups expenses will be deemed as a mandatory cost for employees, even though where and how to organize health check-ups is subject to own discretion of the employer. Moreover, employer-paid medical expenses are recognized as deductible expenses when determining taxable income according to the Law on Corporate Income Tax.
Pursuant to Article 22.2 of Decree No. 12/2022/ND-CP promulgated by the Government, if the employer fails to organize health check-ups for employees, the employer may be fined up to VND 3 million per each employee, but not exceeding VND75 million in total, except where the employee does not participate in the health examination.
4. Union Fee
The employer must pay union fees to the Labor Confederation, which is an organization representing the employees of the district where the enterprise is located, even if a trade union is not established in the company. The premium rate is 2% of the salary fund as a basis for paying social insurance for the employees. The union fees shall be paid once a month, at the same time as the compulsory social insurance payment. A fine of up to VND 75 million may be applied to the company if it fails to pay the union fees and payment of the missing union fee is also required.
Along with the other non-mandatory costs for employees such as holiday entitlement, allowances, transportation expenses, bonuses, commissions, etc., the mandatory costs above make up the employment related cost which the foreign investors should pay their attention to ensure legal compliance as well as make an appropriate personnel scheme for doing effective investments in Vietnam.
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