Unemployment insurance for foreign workers in Vietnam: the 1% payment employers owe (2026)

Unemployment insurance for foreign workers in Vietnam does not exist as a contribution: foreign employees are outside the scheme, but the employer must pay them the equivalent of its 1% contribution together with salary. This guide explains why foreign staff are excluded, how much is owed, how the cap works and what the payment changes at the end of the contract.

Updated: October 21, 2026, for the Law on Employment 2025 and the 2026 regional minimum wage.

Are foreign workers in Vietnam covered by unemployment insurance?

No. Unemployment insurance in Vietnam covers Vietnamese citizens only, so foreign workers in Vietnam do not contribute and receive no unemployment benefit, whatever their contract length or salary.

Unemployment insurance is a compulsory scheme that pays benefits, job support and training to Vietnamese workers who lose their jobs. The Law on Employment 2025 (74/2025/QH15) defines a worker in Article 2(1) as a Vietnamese citizen aged 15 or over. Article 31 builds the unemployment insurance scope on that definition.

A foreign national on a Vietnamese labour contract is therefore outside the scheme. The Law on Employment 2025 replaced the Law on Employment 2013 (38/2013/QH13) from 1 January 2026, and the exclusion of foreign nationals did not change.

How this fits with Social Insurance for foreigners

Unemployment insurance is the only line that drops out. A foreign employee with a work permit and a labour contract of 12 months or more contributes to Social Insurance and health insurance, at 9.5% employee and 20.5% employer.

The full breakdown of Social Insurance for foreigners, by component and by cap, is in our guide to Social Insurance rates for foreigners. Contract types that sit outside compulsory cover, such as some intra-company transferees, are covered in who is covered by Social Insurance on short-term contracts.

How does unemployment insurance for foreign workers compare with Vietnamese staff?

For a Vietnamese employee, both sides pay 1% into the unemployment insurance fund. For a foreign employee, nothing goes to the fund and nothing is withheld, but the employer’s 1% moves onto the payslip.

The table shows why unemployment insurance for foreign workers is not a saving. The employer saves nothing on foreign staff; it only changes who receives the money.

What is the 1% payment employers owe instead?

The 1% payment is the amount the employer would have contributed to unemployment insurance, paid directly to the foreign employee with salary each month under Article 168(3) of the Labour Code 2019.

Here is the misconception. Many foreign-invested companies read “foreigners are exempt from unemployment insurance” and conclude that the cost goes away. It does not. The Labour Code 2019 says that for an employee not subject to compulsory Social Insurance, health insurance or unemployment insurance, the employer must pay, at the same time as salary, an amount equivalent to what it would have contributed.

For a foreign employee who already joins Social Insurance and health insurance, the only uncovered line is unemployment insurance. The employer rate for that line is 1% of the monthly salary fund under Article 33(1)(b) of the Law on Employment 2025 and Decree 374/2025/ND-CP.

The Ministry of Home Affairs confirmed this reading in a published answer in April 2026, in a case where the employer had written the payment into the contract, as reported by Lawyers of Vietnam. That is the practice we recommend.

Name the payment in the labour contract and show it as its own line on the payslip. A payment folded silently into gross salary is very hard to prove at audit or in a dispute.

How much is the 1% payment, and is there a cap?

The payment is 1% of the monthly salary used as the unemployment insurance base, capped at 20 times the regional minimum wage. In 2026 that means at most VND 1,062,000 a month in Region I.

The base is the contractual salary, including allowances and other amounts paid regularly each period. Article 34(2) of the same law caps it at 20 times the regional minimum wage. Because the payment is defined as the equivalent of the employer’s contribution, the same cap applies.

This cap is not the Social Insurance cap. Social Insurance and health insurance stop at VND 50,600,000 per month from 1 July 2026, while the unemployment insurance base runs up to the regional figure.

A payroll system that applies one cap to every insurance line will underpay this item for most foreign managers.

Worked example

A foreign plant manager working in central Ho Chi Minh City (Region I) earns a contractual salary of VND 85,000,000 a month, plus a fixed VND 5,000,000 monthly allowance written into the contract.

• Unemployment insurance base: 85,000,000 + 5,000,000 = VND 90,000,000, under the Region I cap of VND 106,200,000.
• Payment in lieu: 1% x 90,000,000 = VND 900,000 per month, paid with salary.
• Social Insurance and health insurance in the same month are calculated on the VND 50,600,000 cap, not on VND 90,000,000.

If the same manager earned VND 150,000,000, the payment would stop at VND 1,062,000, the Region I maximum. Over a year, that is VND 12,744,000 per senior foreign employee, small next to the severance it removes.

Which rules apply in 2026 under the Law on Employment 2025?

Five documents set the rule in 2026: the Labour Code 2019 creates the payment, Decree 145/2020/ND-CP links it to severance, and the 2025 employment law with two decrees fixes the rate, base and cap.

For months before 2026, the same payment applied under the Labour Code 2019 and the Law on Employment 2013. If you are checking past years, use the rate and regional minimum wage in force in each month, not the 2026 figures.

What does the 1% payment change at the end of the contract?

It reduces severance. Months in which the employer paid the 1% with salary count as unemployment insurance time, so they are excluded from the service period used to calculate severance.

Under Article 46 of the Labour Code 2019, an employee with at least 12 months of regular work receives half a month’s salary for each year of service, minus the years covered by unemployment insurance. Decree 145/2020/ND-CP, Article 8(3), counts the months in which the employer paid the equivalent amount with salary as covered time.

The practical result is simple. If the employer paid the 1% every month, a foreign employee’s severance for that period is zero. If it never paid, the full period counts at half a month’s salary per year, based on the average salary of the last six months.

For a foreign manager on VND 90,000,000 after four years, that is roughly VND 180,000,000 owed on exit instead of nothing. Skipping VND 900,000 a month is the more expensive choice.

Exits for foreign workers in Vietnam also involve closing the Social Insurance book, returning the work permit and, for many, a one-time Social Insurance withdrawal. Our exit procedures guide for foreign employees lists each step, the payroll guide for expats in Vietnam shows how these items sit in the final pay run, and the general rules are in how severance pay is calculated.

When the 1% rule does not apply

The rule follows the labour contract with the Vietnamese employer. It does not cover foreign workers in Vietnam who are seconded by a parent company, stay on the overseas payroll and have no Vietnamese labour contract, because there is no Vietnamese salary for the payment to sit on.

It also does not change the position for Vietnamese employees on probation contracts. They are outside unemployment insurance under Article 31(2) of the 2025 law, but that is a separate question from foreign staff.

How to fix a missed 1% payment

Errors in unemployment insurance for foreign workers usually surface at audit or at exit. Where a company has missed the payment, the fix is to rebuild the shortfall month by month, pay it, and make the item explicit from the next pay run. A practical sequence:

1. List every foreign employee on a Vietnamese labour contract and the months they have worked.
2. Rebuild the monthly unemployment insurance base for each person: contractual salary plus regular allowances, capped at 20 times the regional minimum wage in force that month.
3. Calculate 1% of each base and compare it with what was actually paid.
4. Pay the shortfall in one pay run as a separate, labelled line, and agree the Personal Income Tax (PIT) treatment with your tax adviser first.
5. Sign a contract annex that names the payment, so every later month is documented.
6. Keep the calculation file with the payroll records for audit and for the exit settlement.

We would not recommend waiting for the exit to settle it. By then, the employee can claim severance for the whole uncovered period instead.

Conclusion

Unemployment insurance for foreign workers is not a cost that disappears; it moves from the fund to the payslip as a 1% line. Paying it every month, capped correctly, also removes severance for that period. If you want your foreign payroll checked against the 2026 rules, talk to the terra payroll team.