Vietnam Labor Law: An Employer's Guide to the Labour Code and Employment Law 2025

If you’re planning to expand to Vietnam or employ remote staff in the country, you will have to adhere to two key laws. The Labour Code 2019 sets the terms of engagement between employers and employees. The Employment Law 2025, in force since January 2026, sets the rules for operating in Vietnam's broader labour market.

Both laws establish clear obligations for employers while defining the legal rights of both parties. Non-compliance can lead to administrative fines, back pay, compensation, or invalid contract terms.

This guide breaks down the core provisions of these two laws and how they govern hiring in Vietnam. We’ll also cover other related compliance requirements for insurance, tax, and data protection for employees. 

Key Provisions Under The Labour Code 2019 (Law No. 45/2019/QH14)

The Labour Code 2019 is the foundational law governing the employment relationship in Vietnam. It covers contracts, working hours, wages, leave, discipline, and termination for every worker in the country, Vietnamese or foreign, regardless of industry. Everything in this section traces back to this one law, along with the decrees that implement it.

1. Employment Contracts

Contracts, wages, hours, discipline, and termination in Vietnam are governed by the Labour Code 2019 (Law No. 45/2019/QH14). Written contracts are the default requirement under this law. Vietnam recognizes two contract types:

• Indefinite-term: Contracts that run without a fixed end date and offer the most job security. 
• Definite-term: Contracts run for 12 to 36 months and can be renewed once. If work continues past the second term without a new contract signed within 30 days, the law automatically converts it to indefinite-term. This can happen whether the employer intended that or not.

Every written contract has to spell out the job description, work location, contract length, hours, salary and payment method, safety conditions, and social insurance obligations. If a contract offers an employee less than what the law guarantees, those clauses are automatically void, and a labour inspector can force the employer to fix them.

2. Minimum Wage in Vietnam

Vietnam sets minimum wages by region rather than nationally, based on cost of living across four zones. The rates below took effect January 1, 2026, under Decree 293/2025/ND-CP.

Workers who've completed vocational training or hold a recognized skill certificate are entitled to at least 7% more than the regional minimum, even in entry-level roles. If a business operates across zones (e.g. industrial park spanning two regions) the highest applicable rate wins.

For the most current breakdown by specific districts and provinces, see our Vietnam Minimum Wage guide.

3. Overtime Rules and Pay Rates

Standard working hours cap out at 8 hours a day and 48 hours a week, though most office employers run a 40 or 44-hour week voluntarily. Workers are entitled to at least one full day off a week, or an average of four rest days a month if the nature of the job makes a fixed weekly day off impractical.

Overtime pay scales up depending on when the work happens:

Overtime is capped at 4 hours a day, 40 hours a month, and 200 hours a year. However, industries like manufacturing and electronics can stretch to 300 hours annually with government approval and employee consent. 

However, there are employees who are not allowed to work overtime under Vietnam Law: 

• Pregnant employees
• Workers raising children under 12 months
• Employees under 18
• Workers with a disability rated at 51% or higher work-capacity reduction cannot be required to work overtime at all.

4. Statutory Leaves and Public Holidays

Leave entitlements are statutory minimums as part of an employee’s basic protection rather than a negotiable benefit. Under Vietnam Labour Law, every employee is entitled to the following leaves:

• Annual leave: starts at 12 working days a year for employees in normal conditions after 12 months of service. Every five years with the same employer adds another day. For employees working under hazardous, toxic work, or employees under 18, leave entitlements starts at 14 days. If deemed extremely hazardous, it can be up to 16 days. Unused leave has to be paid out if an employee departs before taking it.
• Maternity leave: runs 6 months, paid at 100% of the employee's average insured salary over the six months before leave began. Mothers of multiples get an extra 30 days per additional child from the second child onward.
• Paternity leave: ranges from 5 working days for a normal birth up to 14 days for a caesarean birth of twins.
• Sick leave: pays 75% of the previous month's salary through Social Insurance, with entitlement length tied to contribution history. Employees with long-term illnesses can take up to 180 days a year, dropping to a 45-65% payment rate if treatment runs longer.
• Personal leave: fully paid for major life events: 
  • 3 days for the employee's own wedding
  • 1 day for a child's wedding
  • 3 days for the death of a parent, spouse, or child

5. Termination and Severance

In Vietnam, every dismissal needs a documented legal basis. The Labour Code does not permit At-will terminations where you can terminate an employee contract without cause.

Article 36 of the Labour Code 2019 sets out the grounds to unilaterally terminate a contract. This includes:

• Repeated failure to meet job requirements
• Disciplinary dismissal
• Extended illness or injury (12 consecutive months for indefinite contracts, 6 months for definite-term)
• Force majeure that forces headcount reduction after other options are exhausted, or the business ceasing operations entirely.

When terminating an employee, you are also required to provide notice period and severance pay depending on the length of service per employee. 

6. Dispute Resolution

Vietnam's system is built around resolving conflicts at the lowest possible level first. Most individual disputes start with a labour mediator who tries to broker an arrangement between you and your employee. Certain disputes, like unlawful termination or disagreements over social insurance, can bypass mediation and go straight to the next stage if either party requests it.

If mediation doesn't resolve things, the case moves to either

1. Labour Arbitration Council: a more formal body that can issue binding decisions in some categories of dispute, or 
2. People's Court system: handles labour cases through a specialized track. 

Employees have one year from the date they discover the violation to file, first-instance cases are heard at the district level. Typically, a dispute case runs 2 to 6 months before judgment or longer if either side appeals.

Employees also have a unilateral right to walk away from a contract without notice in specific circumstances. This includes sexual harassment, discrimination, or a serious breach of the contract by the employer. They retain their statutory benefits even though they didn't serve out a notice period. 

7. Foreign Worker Work Permits

Foreign nationals working in Vietnam for three months or longer need a valid work permit under Decree 152/2020/ND-CP (as amended by Decree 70/2023/ND-CP). Work permit must match the duration of the labour contract (capped at 24 months) with one renewal available for another 2 years. 

As an employer, you can't lean on short-term or seasonal contracts to sidestep these requirements. Every foreign hire has to be reported to the local labour authority. Whenever a role requires highly technical or managerial expertise that cannot be filled locally, you can hire a foreigner for a defined period. However, these employees are expected to have a plan in place to train a Vietnamese employee to take over the position. 

Since July 1, 2025, foreign employees have also had the right to join trade unions. This change reshapes how multinational teams handle workplace representation and labour relations at the enterprise level.

Key Provisions Under The Employment Law 2025 (Law No. 74/2025/QH15)

The Employment Law 2025 (Law No. 74/2025/QH15) took effect January 1, 2026, as a separate piece of legislation from the Labour Code. Contrary to popular belief, the Employment Law is not an amendment to the Labour Code. 

Where the Labour Code governs the employer-employee relationship directly, the Employment Law governs the broader labour market. 

The New Employment Law 2025 is part of a national push to modernize governance, and align with domestic law with international labour standards. Here are key changes in 2026 that you should know about:

• Electronic labour contracts are now legally valid, under Decree No. 337/2025/ND-CP, effective January 1, 2026.
• Unemployment insurance now covers far more workers, under the Employment Law 2025.
• Minimum wages rose an average of 7.2%, under Decree 293/2025/ND-CP, effective January 1, 2026.
• The PIT schedule dropped from seven brackets to five, under the Personal Income Tax Law 2025, effective for the 2026 tax year.
• Social and health insurance got new governing laws, replacing the 2014 framework from July 1, 2025.
• A new Personal Data Protection Law took effect, covering how employers handle employee data.
• Foreign worker oversight moved to the Ministry of Home Affairs, replacing the dissolved Ministry of Labour, Invalids and Social Affairs.

1. Unemployment Insurance Expansion

Unemployment Insurance is regulated under the Employment Law rather than the Social Insurance Law, even though it's usually discussed alongside the other payroll contributions. Eligibility widened considerably under the new law, which now includes:

•  Part-time employees
• Workers on contracts as short as one month
• Workers in non-traditional arrangements where one party manages and directs the other's work, even if the paperwork doesn't call it "employment."

Monthly UI payouts are now capped at five times the regional minimum wage, and the waiting period for benefits shrank from 16 working days to 11.

2. Employment Services and Skills Recognition

The Employment Law formally regulates employment services and job placement activity which the older Labour Code touched lightly. It also recognizes practical work experience as a valid basis for assessing a worker's skill level, alongside formal certificates and diplomas. This is crucial for roles where employees learned their trade on the job rather than through vocational training instead of relying on formal education

3. Trade Union Policy Changes

Since July 1, 2025, foreign employees working in Vietnam now have the right to join trade unions and take part in workplace representation. This is significant since this was  something previously reserved for Vietnamese nationals only. 

Furthermore, Vietnamese Employment law now allows workers to set up representative organizations outside the official trade union structure. This setup gives workers  another channel to raise workplace concerns within the organization

Tax, Insurance, and Data Protection Laws in Vietnam

The Labour Code 2019 and Employment Law 2025 generally govern the legal relationship between employers and employees. However, there are other facets of hiring that sit outside that relationship and carry equally important obligations.

Taxes, insurance, and data protection each fall under their own dedicated laws, detailed below.

The Social Insurance Law and Health Insurance Law

Both employer and employee are required to contribute to social security insurance for employees under the Social Insurance Law and the Amended Health Insurance Law. Unemployment Insurance is regulated separately, under the Employment Law 2025. 

Here are the current rates for both employer and employee:

The Personal Income Tax Law 2025

Under the Personal Income Tax Law 2025 (Law No. 109/2025/QH15), effective for the 2026 tax year, the schedule dropped from seven brackets to five.

Vietnam taxes net income and not gross salary. Deductions are subtracted from an employee's monthly income before the tax brackets above are applied. Essentially, higher deduction directly lowers the amount of salary that gets taxed.

Under Resolution No. 110/2025/UBTVQH15 and Decree No. 253/2026/ND-CP, taxable income is now reduced by:

• Personal deduction: VND 15,500,000 a month (up from VND 11,000,000), or VND 186,000,000 a year
• Dependent deduction: VND 6,200,000 a month per registered dependent (up from VND 4,400,000)
• Mandatory insurance contributions: employee-side SI, HI, and UI payments, deductible in full
• Charitable and humanitarian contributions: deductible with proper documentation and invoicing
• Medical and education or training expenses: newly deductible for the employee and their dependents, capped at VND 24,000,000 a year, subject to supporting invoices

To put things into perspective, a single employee earning VND 17 million a month now owes no PIT at all once the personal deduction and insurance contributions apply. 

Employers withhold PIT monthly (moving to quarterly declarations from May 2026) and issue annual income statements. Since there have been plenty of changes, it is worth checking with our experts instead of assuming last year’s calculations still hold. 

For a full breakdown of PIT calculations and filing requirements, see our Vietnam payroll and taxation guide.

The Personal Data Protection Law 2025

Vietnam's Personal Data Protection Law took effect January 1, 2026, which can affect how HR departments operate. It governs how businesses collect, store, process, and transfer personal data, including employee records. The same law also interacts directly with the new electronic labour contract system, since Decree 337 explicitly requires e-contract data to meet personal data protection standards.

As a business, your HR team needs to have written consent from your employee to collect and store their personal data. This includes ID information, health records, salary details, biometric data used for access control or attendance.

If your HR systems were built before this law existed, it's worth an audit specifically focused on where employee data lives and who touches it.

Hire in Vietnam Without the Compliance Risk

Tracking two major labor laws, three decrees, and a complex tax code can be challenging for organizations especially if you are new to the Vietnamese market. Whether you have an existing legal entity or managing a remote team, it’s important that you comply with these Labour Laws. 

To help you manage your HR administration, RecruitGo can act as your Employer of Record in Vietnam. RecruitGo becomes the legal employer of your Vietnamese team, handling all statutory obligations on your behalf: contracts, payroll, social insurance contributions, PIT withholding, leave administration, and compliance with the latest labor regulations.

Fill out the form below to discuss your needs with our team.