Payroll in Vietnam starts with the first employee: from that month the employer pays Social Insurance contributions, withholds Personal Income Tax (PIT), pays a 2% trade union fund and keeps a labour reporting calendar, with no grace period for a new company. This guide shows a foreign investor what to set up before the first salary is paid, what an employee really costs on top of salary, and what an exit costs.
Key takeaways
- A Vietnamese employee costs the employer 21.5% of insured salary in compulsory insurance (17.5% Social Insurance, 3% health, 1% unemployment), plus a 2% trade union fund.
- The Social Insurance and health insurance base is capped at VND 50,600,000 per month from 1 July 2026 (Decree 161/2026/ND-CP). Unemployment insurance has its own cap of VND 106,200,000 in Region I.
- A foreign employee on a contract of 12 months or more pays no unemployment insurance, but the employer pays an equal 1% to the employee with salary (Article 168(3), Labour Code 2019).
- PIT on salary is withheld monthly and declared quarterly from Q2 2026, with a personal deduction of VND 15,500,000 per month from 1 July 2026.
- Severance pay is half a month’s salary per year of service, excluding years covered by unemployment insurance (Article 46, Labour Code 2019).
What payroll in Vietnam involves for a new employer
Payroll in Vietnam is four obligations running on different clocks: compulsory insurance paid monthly to the social security agency, Personal Income Tax withheld monthly and declared quarterly to the tax authority, the trade union fund paid monthly, and labour reports filed twice a year. Each has its own deadline and its own authority, and none of them waits for your headcount to grow.
The first employee triggers all four. There is no grace period for a newly licensed company, and an entity with one employee carries the same filing calendar as one with five hundred. That is the part most investors underestimate: the workload of payroll in Vietnam does not scale down with headcount, only the amounts do.
| Obligation | Who pays | Rate or rule (2026) | Timing |
|---|---|---|---|
| Social Insurance, health insurance, unemployment insurance | Employer and employee | Employer 21.5%, employee 10.5% for Vietnamese staff | Monthly |
| Personal Income Tax | Employee, withheld by employer | Progressive scale for residents, flat 20% for non-residents | Withheld monthly, declared quarterly |
| Trade union fund | Employer only | 2% of the Social Insurance salary fund | Last day of the following month |
| Labour usage report | Employer | Report on headcount changes | 5 June and 5 December |
Almost every expensive mistake we see in a new entity was made before the first salary was paid. The rates in this table are fixed by law. The choices that decide how much you pay under them, and whether the filings are right, are made by the employer in the first few weeks.
What should you set up for payroll in Vietnam before the first hire?
Before the first hire, settle six things in writing: the contract, any probation, the insured salary, each employee’s tax status, the payslip format and a named owner for every filing. Each one is cheap to decide on day one and expensive to correct after a year of payroll in Vietnam has run on the wrong basis.
- Contract type and term: Choose an indefinite or a fixed-term labour contract under Article 20 of the Labour Code 2019. For a foreign employee, keep the term within the work permit term.
- Probation: If you want a probation period, agree it in writing within the limits of Articles 25 and 26, before the employee starts.
- Insured salary: Separate salary and contractual allowances, which carry Social Insurance contributions, from discretionary bonuses, which do not.
- Tax status: Register a tax code for each employee and decide resident or non-resident status for each foreign hire on arrival.
- Payslip format: Build a payslip that shows salary, overtime, deductions and other items, as Article 95(3) of the Labour Code requires.
- Filing owner: Name one person for insurance, PIT, the trade union fund and labour reports, and keep one shared calendar.
The sections below explain the numbers behind each step, starting with the largest cost line.
How much do Social Insurance contributions add on top of salary?
For a Vietnamese employee, Social Insurance contributions and the other compulsory insurance cost the employer 21.5% of the insured salary on top of gross pay, and the employer withholds 10.5% from the employee. With the 2% trade union fund, the real employer load is 23.5% of the insured salary.
The employer side breaks down into 17.5% Social Insurance (14% retirement and survivorship, 3% sickness and maternity, 0.5% occupational accident and disease), 3% health insurance and 1% unemployment insurance. The unemployment insurance rate of 1% for each side is set by Decree 374/2025/ND-CP, effective 1 January 2026, under the Law on Employment 2025 (74/2025/QH15).
Two caps limit the base. Social Insurance and health insurance stop at VND 50,600,000 per month from 1 July 2026, which is 20 times the VND 2,530,000 reference level set by Decree 161/2026/ND-CP. Unemployment insurance has a separate cap of 20 times the regional minimum wage under Article 34(2) of the Law on Employment 2025, which is VND 106,200,000 in Region I under Decree 293/2025/ND-CP. Payroll systems built on a single cap get the unemployment line wrong for every high earner.
Worked example
A Vietnamese finance manager in Ho Chi Minh City earns VND 60,000,000 gross per month, all of it insurable. Social Insurance and health insurance are calculated on the VND 50,600,000 cap, unemployment insurance on the full VND 60,000,000 because it sits under the Region I cap.
- Employer: 20.5% x 50,600,000 = VND 10,373,000, plus 1% x 60,000,000 = VND 600,000, plus trade union fund 2% x 50,600,000 = VND 1,012,000. Total VND 11,985,000.
- Employee: 9.5% x 50,600,000 = VND 4,807,000, plus 1% x 60,000,000 = VND 600,000. Total VND 5,407,000 withheld before PIT.
Whether the trade union fund base follows the Social Insurance cap is worth confirming with your provincial labour confederation, since practice differs. The figure above uses the capped base.
Social Insurance contributions for foreign employees
A foreign employee on a labour contract of 12 months or more with a valid work permit joins Social Insurance and health insurance, at 20.5% employer and 9.5% employee. Unemployment insurance does not apply, because the Law on Employment 2025 defines a worker as a Vietnamese citizen.
The employer is not off the hook for that 1%, though. Article 168(3) of the Labour Code 2019 (45/2019/QH14) requires the employer to pay an equivalent amount to the employee together with salary. Our guide to Social Insurance rates for foreigners covers enrolment conditions in detail.
| Item (2026) | Vietnamese employee | Foreign employee (contract of 12 months or more, work permit) |
|---|---|---|
| Social Insurance and health insurance | Employer 20.5%, employee 9.5% | Employer 20.5%, employee 9.5% |
| Unemployment insurance | Employer 1%, employee 1% | Not applicable |
| Payment in lieu of unemployment insurance | Not applicable | Employer pays the employee an amount equal to 1%, with salary |
| Contribution base cap | VND 50,600,000 (Social and health insurance); VND 106,200,000 in Region I (unemployment) | VND 50,600,000 |
| Effect on severance | Years with unemployment insurance are excluded | Qualifying years usually all count |
Setting up your first payroll in Vietnam?
terra runs payroll, insurance and PIT for foreign-invested companies from the first employee, with one monthly calendar covering every filing in this guide.
Who handles Personal Income Tax on salary?
The employee owns the tax, but the employer does the work: registering the employee’s tax code, withholding monthly, declaring and paying, and running the annual finalisation for staff who authorise it. From Q2 2026, PIT on salary is declared quarterly rather than monthly, though it is still calculated and withheld every month.
Residents pay Personal Income Tax on a progressive scale, with a personal deduction of VND 15,500,000 per month and VND 6,200,000 per dependant from 1 July 2026 under the PIT Law 2025 (109/2025/QH15) and Decree 253/2026/ND-CP. Non-residents pay a flat 20% on Vietnam-sourced employment income. Our summary of payroll, tax and Social Insurance changes from July 2026 lists the other changes that took effect on the same date.
Residency is decided by days in Vietnam and accommodation, not by the contract, so a foreign manager who arrives mid-year can change status partway through. Getting that switch wrong is the most common PIT error we correct in a first-year entity.
Tax-exempt allowances are narrower than many investors assume. A meal allowance is exempt up to VND 1,200,000 per month from 1 July 2026. Housing, school fees and most other expatriate benefits remain subject to Personal Income Tax in whole or in part, and they need to be in the contract before the first payslip, not added later.
Allowances and bonuses: what goes in the contract
Vietnamese law does not require any specific allowance or bonus. A 13th-month salary is common practice, not a legal duty. What the law does care about is the line between salary and discretionary pay, because that line sets the insurance base.
An allowance agreed in the labour contract and paid regularly each pay period is part of the insured salary. A bonus that depends on business results and is paid at the employer’s discretion is not. Investors often label a fixed monthly payment as a bonus to keep the insurance base low.
The social security agency looks at how the payment behaves, not what it is called, and back-charges Social Insurance contributions with late interest when the two do not match. Our payroll compliance calendar shows where these audits usually land in the year.
Write down four things for each allowance: who is eligible, the amount, when it is paid, and whether it is guaranteed or discretionary. That one page decides the tax and insurance treatment for years.
Can you pay salary more than once a month?
Yes. The Labour Code allows the employer and employee to agree on the pay period, and many companies pay an advance mid-month and the balance at month end. What does not change is the monthly calculation: insurance, PIT and the trade union fund are all computed on the month’s total, so two payments still produce one reconciliation.
Every payment must come with a payslip showing salary, overtime, deductions and other items, under Article 95(3) of the Labour Code 2019. An email with a single net figure is not enough. If you are deciding between a payroll tool and an outsourced team, our comparison of payroll outsourcing and in-house cost lays out where each breaks even.
What reports does an employer file?
Payroll records are not filed monthly, but they must be kept and produced on request. The filings that do run on a calendar are labour reports: the labour usage report under Decree 145/2020/ND-CP by 5 June and 5 December, insurance registration for each new contract, and annual occupational safety reporting. A new company also declares its workforce when it starts operating.
None of these is complicated on its own. The risk is ownership. Insurance sits with HR, tax with accounting, labour reports with whoever remembers them, and the trade union fund with nobody.
In most first-year reviews, the trade union fund is the first gap we find, because many investors assume it only applies once a union exists. It applies from the first month with an insured salary, union or not.
Ending employment: notice periods and severance pay
A notice period and a generous payment do not make a termination lawful in Vietnam. The ground for termination must be one the Labour Code recognises, the procedure must follow the internal labour rules, and the paperwork must be complete.
An employee who resigns must give notice under Article 35 of the Labour Code 2019. The period depends on the contract:
| Contract type | Notice when the employee resigns |
|---|---|
| Indefinite-term contract | 45 days |
| Fixed-term contract of 12 to 36 months | 30 days |
| Fixed-term contract of under 12 months | 3 working days |
Severance pay under Article 46 is half a month’s salary for each year of service, for employees with at least 12 months of regular work. Years in which the employer paid unemployment insurance are excluded from severance pay, which is why it is usually small for Vietnamese staff and larger for foreign staff.
The employer also closes the Social Insurance book and returns the work permit for foreign employees. Mutual termination agreements, signed by both parties, are the safest route for an exit you want to keep simple. Our guide to exit procedures for foreign employees walks through the full sequence.
One structural point to settle before hiring: a foreign employee’s contract term cannot exceed the work permit term. Draft the first contract to the permit, and plan renewals together.
How terra helps employers set up payroll in Vietnam
Most of the risk in this guide comes from ownership gaps in the first year, not from the rates themselves. terra closes those gaps by running the full monthly cycle of payroll in Vietnam for foreign-invested companies from the first employee, with payroll software and a dedicated specialist team delivered as one service.
- Calculates gross-to-net salary, Social Insurance contributions and the trade union fund on the correct capped bases every month.
- Withholds and declares Personal Income Tax, and runs the annual finalisation for employees who authorise it.
- Files Social Insurance, health insurance and unemployment insurance with the authority on deadline, and keeps the labour reporting calendar.
- Issues payslips that meet Article 95(3), which employees open in the free terra HR System app.
Each month’s payroll is calculated, checked and ready for your approval within three working days, with bilingual support for FDI teams. See how terra Payroll outsourcing for foreign-invested companies works.
Hiring your first employee in Vietnam?
terra sets the insured salary, tax status and filing calendar before the first payslip, then runs payroll every month. Book a free payroll consultation
The payroll in Vietnam setup that works is the one decided before the first hire: contract wording, insurance base, tax status and a named owner for each filing. Settle those four and the monthly cycle becomes routine rather than a source of back-charges.
