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Employment costs and employee benefits in Vietnam in 2019

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Posted by Iris Data Driven Agency

23 days ago

Having a business always comes with human management trouble. You need to find the top candidates working for you and also how to remain them loyal to your business. In some cases, the employments cost and benefits are the reasons why employees leaving. In this article, Navigos Search will help both businesses in Vietnam and foreign investors to calculate how much you can afford for employment costs in Vietnam per month. We also suggest how to deal with the Income Tax and National Insurance Contributions to come to a net salary for your employees.

1. Introduce about Vietnamese labor force statement

The effect of industry 4.0 and FTA commitments brings a high demand for the Vietnam labor workforce. Besides the opportunities, there are some major challenges that the labor in Vietnam must face, include the lack of knowledge and advanced skills. However, the government recently has introduced the solutions to increase the productivity, skills, and quality of labor to remain competitive.

There are two things investors should find out carefully when investing in Vietnam labor market, including:

  • Labor supply - According to Trading Economics, the unemployment rate in Vietnam in the second quarter of 2019 decrease of 0.01 percentage points from the first quarter of 2019. Meanwhile, The number of employed persons in Vietnam increased to 54.36 Million in the second quarter from 54.32 Million in the first quarter of 2019. 

  • Labor force distribution - According to the government’s Q4 2017 labor force survey, 67.8 percent of the labor force residing in the rural areas. The average national labor force participation stood at 76.9 percent. In addition, Ho Chi Minh City, Hanoi, and Mekong River Delta account for the majority of the labor force in services.

2. Employment cost in Vietnam

2.1 Vietnam Average Monthly Wages

Minimum and Maximum wage

A decree issued by the Vietnam government provides a minimum wage/salary applicable to all employers who hire employees under employment contracts from time to time. According to that, the employers are required to pay a salary not lower than the minimum salary level applicable in their region for the untrained employees and much be at least 7% higher than the regional minimum salary for trained employees.

According to Vietnam’s General Statistics Office, the average monthly salary in Vietnam is VND4232.55 Thousand/Month from 2007 until 2018. Then reaching a high of all time at VND5.788 Thousand/Month in the first quarter of 2018.

 

Actual

Previous

Highest

Lowest

Dates

Unit

Frequency

5622.0

5788.0

5788.0

1399.0

2007 - 2018

VND Thousand/Month

Quarterly

 

Currently, there are four regional minimum salary levels applicable to employers, ranging from VND4,181,000 (the lowest level) to VND10,825,600 (the highest level) per month, depending on the locality.

Vietnam Minimum wage - Source: tradingeconomics.com

Cities with the highest average salaries

According to a study by VietnamWorks, a recruitment company in Vietnam, below are the highest average salaries in Vietnam.

 

Cities/Provinces

Average monthly salary (US$)

Ho Chi Minh City

456

Da Nang

452

Binh Duong

444

Hanoi

407

(According to Vietnam Briefing - Labor Market Trends In Vietnam)

2.2. PAYE & National Insurance Contributions

Vietnam income tax law sets out the obligations of income taxpayers in terms of resident or non-resident status, regardless of nationality. Therefore, the basis of taxation of employment income applies equally to foreign nationals working in Vietnam and also who work abroad. Including with that, employers must provide health insurance for their employees, and must provide regular health checks.

Rate of taxation on employment income

The tax rates are progressive, based on the employee's income. The scale of the progressive tax rates on each portion of income is as follows:

  • Up to VND5 million: 5%.

  • Above VND5 million to VND10 million: 10%.

  • Above VND10 million to VND18 million: 15%.

  • Above VND18 million to VND32 million: 20%.

  • Above VND32 million to VND52 million: 25%.

  • Above VND52 million to VND80 million: 30%.

  • Above VND80 million: 35%.

Social security contributions

By law, employment cost in Vietnam will including the fee to contribute to the social, health and unemployment insurance funds. The contributions are calculated as a percentage of the employee's base salary, as follows:

  • Social insurance: employers: 17.5%; employees: 8%.

  • Health insurance: employers: 3%; employees: 1.5%.

  • Unemployment insurance: employers and employees: 1%.

3. Employee benefits

Employers are required to ensure the benefit for the employees above their salary/wages. The employee benefits usually include as below:

  • Social and health insurance.

  • Profit-sharing.

  • Retirement benefits

  • Minimum paid holiday entitlement and Entitlement to paid time off (paid sick leave)

  • Personal protective equipment.

  • Training and skills improvement.

If you want to hire talented employees but still worrying about employment costs, let Navigos Search help you. Navigos Executive Search in Vietnam brings you the best solutions to get access to expert recruiting advice, guidance on the latest hiring trends, and help you improve your company's talent pool. Navigos Search would love to talk to you so please complete an online inquiry to start the conversation.

Conclusion

The ways your business deals with employment costs in Vietnam and how much you can afford for employee benefits will help you maintain the loyal workers. Especially for companies that need to find C level executives, listening to their needs and customizing a benefits package based on their needs is very important. You can also work with Navigos Search Executive Search Firm to find the best C level executive now.