Payroll policies for FDI companies

DMS Law firm in Vietnam is launching services to advise clients on designing, formulating, deploying payroll policies in accordance with

As of December 31, 2018 the total number of acting Foreign Investment Enterprises (100% FDI companies and joint venture companies) was 16,878 (Source: GSO, 2019). Vietnam was one of developing countries in Asia, the largest recipient region of FDI flows in 2018 (Source: UNCTAD, World Investment Report, 2019). Vietnam’s government is attempting to attract FDI inflows, especially post-covid 19. The development of the FDI sector in Vietnam would bring the need for FDI company’s administrative procedures. Payroll policy is one of these. FDI companies, particularly those involved foreign management or employees who might not thoroughly familiar with Vietnamese’s laws and regulations in respect of payroll issues, might need to consult professionals on their payroll policy to facilitate company’s administration and compliance, ensure employees are fairly paid, tax and other withholding duties are observed.

Therefore, DMS Law firm in Vietnam is launching services to advise clients on designing, formulating, deploying payroll policies in accordance with the Labor Code, Employment Law, Law on Social Insurance, Law on Personal Income Tax. 

Principles of salary, wage payment in Vietnam:

An employee must be paid salary, wage directly, fully and timely. In special cases where an employer cannot pay a salary, wage on time to an employee, the employer may not postpone the payment for more than 01 month and must pay the employee an additional amount at least equal to the deposit interest rate announced by the State Bank of Vietnam at the time of wage payment (Article 96 - The Labor Code No. 52/VBHN-VPQH dated December 10, 2018).

Wage for overtime work in Vietnam:

An employee who performs overtime work must be paid according to the wage unit or wage for his/her current job as follows: 

On normal days, at least equal to 150%; on weekends, at least equal to 200%; on public holidays and paid leave days, at least equal to 300%, excluding the wage for public holidays and paid leave days of employees who receive daily wages (Article 97 - The Labor Code No. 52/VBHN-VPQH dated December 10, 2018).

Employees’ contribution to compulsory insurance in Vietnam:

Employees defined at Points a, b, c, d, dd and h, Clause 1, Article 2 of this Law shall monthly pay 8% of their monthly salary to the retirement and survivorship allowance fund.

Employees who neither work nor receive salary for 14 working days or more in a month are not required to pay social insurance premiums in that month (Article 85 - Law on Social Insurance No. 58/2014/QH13 dated November 20, 2014).

Employees defined at Points 1.1, 1.2, Clause 1, Article 17 of this Decision shall monthly pay 1.5% of their monthly salary for compulsory social insurance contribution to the health insurance fund (Article 13 - Law on Health Insurance; Article 15 - Decision No. 595/QĐ-BHXH dated April 14, 2017).

Employees shall pay 1% of their monthly salary to the unemployment insurance fund (Article 57 - Law on Employment No. 38/2013/QH13, dated November 16, 2013). 

Vietnam’s Personal Income Tax (PIT) withholding from employment income:

Tax withholding is the income payer’s calculating and withholding the tax payable from the taxpayer’s income before paying the income to the taxpayer.

The determination of tax withheld from incomes from wages earned by residents is guided in Article 7 of this Circular; the determination of tax withheld from incomes from wages earned by non-residents is guided in Article 18 of this Circular (Article 25 - Circular No. 05/VBHN-BTC dated March 14, 2016).

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Payroll policies for FDI companies in Vietnam