Vietnam’s economy continues to expand, attracting a growing number of foreign-invested enterprises and fast-scaling domestic companies. With this growth comes heightened scrutiny from regulators and increasingly complex labor laws. The 2021 Labor Code and its subsequent guidance documents have shifted the compliance landscape, placing greater responsibility on employers to understand and implement detailed legal requirements.

Labor law compliance is no longer just an administrative formality-it is now a strategic necessity. Non-compliance can lead to government inspections, administrative penalties, litigation, and reputational damage. More importantly, a failure to comply with labor laws may undermine employee trust, create instability, and hinder business continuity. In this guide, we examine the key areas of Vietnam’s labor law framework that employers must address in 2025 and beyond into 2026.

Key Labor Laws Employers Must Understand in Vietnam

The foundation of labor compliance lies in understanding the applicable laws and enforcement bodies. The 2021 Labor Code serves as the core legislation, supplemented by decrees and circulars issued by the Ministry of Labor, Invalids and Social Affairs (MOLISA) and enforced at the local level by DOLISA (Departments of Labor, Invalids and Social Affairs).

Labor law applies to both Vietnamese and foreign employees working in Vietnam. It also governs relationships beyond the traditional employment model, including apprentices, interns, and seasonal workers. Businesses must also consider the role of trade unions and the influence of collective labor agreements (CLAs), which may supplement or override certain statutory rights where applicable.

Mandatory Labor Contracts and Contract Types

Vietnamese labor law requires most employment relationships to be governed by written contracts, except for work of under one month in certain cases. Contracts must include key terms such as job description, salary, working hours, benefits, and termination conditions.

There are three main types of contracts:

• Indefinite term contracts: no fixed end date, offering the highest level of employee protection.
• Definite term contracts: up to 36 months, renewable once before transitioning to indefinite.
• Seasonal or short-term contracts: for work lasting under 12 months.

Contracts must be in Vietnamese, or bilingual if involving foreign workers. As of recent guidance, electronic contracts with digital signatures are legally recognized, provided they meet technical and authenticity standards.

Probation, Working Hours, and Overtime Rules

Probation periods vary depending on job classification:

• Up to 6 days for unskilled jobs
• Up to 30 days for most skilled roles
• Up to 60 days for managerial or high-level technical positions

During probation, employees must be paid at least 85% of the agreed wage. If probation is successful, a formal contract must follow immediately.

Vietnamese law limits normal working hours to 8 hours per day or 48 hours per week. Overtime is allowed but cannot exceed 40 hours per month or 200 hours per year (increased to 300 hours for some industries). Overtime pay is calculated as:

• 150% for weekdays
• 200% for weekends
• 300% for public holidays

Employers who fail to observe these limitations may face penalties and compensation claims.

Minimum Wage, Salary Payments, and Payslips

The regional minimum wage is updated periodically by the government. As of 2024–2025, new wage bands apply across four regions depending on economic zones. Employers must ensure that gross salary meets or exceeds the applicable minimum wage after mandatory contributions.

Salaries must be paid in Vietnamese Dong, either in cash or via bank transfer, on a monthly or bi-monthly basis. Employees must receive detailed payslips specifying gross pay, deductions, net pay, and relevant contributions.

Violations include:

• Late payment
• Unauthorized deductions
• Inaccurate wage records

These are common triggers for inspection and employee complaints.

Social Insurance, Health Insurance, and Trade Union Contributions

Vietnam requires mandatory contributions to three state funds:

• Social Insurance (SI)
• Health Insurance (HI)
• Unemployment Insurance (UI)

These apply to all employees under labor contracts of one month or more. The current contribution rates (as of 2025) are:

• Employer: 21.5% of salary
• Employee: 10.5% of salary (withheld from pay)

In addition, employers must pay a trade union fee of 2% of total payroll, regardless of whether the company has an active union.

Non-compliance can result in back-pay orders, late payment interest, and administrative penalties. Accurate registration and timely reporting are essential.

Disciplinary Procedures and Termination Rules

Vietnamese labor law sets strict procedures for both disciplinary actions and employment termination. Violations of these rules often lead to reinstatement orders or compensation awards.

Employers may discipline employees for violations such as absenteeism, misconduct, or poor performance, but must follow due process:

• Notify the employee in writing
• Conduct a disciplinary hearing
• Allow the employee to defend themselves
• Issue a decision in writing

Termination is only lawful under specific grounds such as redundancy, incapacity, or violations of workplace rules as defined in the Labor Code. Employers must be able to clearly demonstrate the legal basis for termination, supported by documentation such as performance records, disciplinary minutes, or organizational restructuring plans. Terminating an employee without a valid reason, or without following the proper procedures, can lead to administrative fines or legal claims for reinstatement and compensation.

Depending on the reason for termination, employers must also provide appropriate notice typically 30 days for definite-term contracts and 45 days for indefinite-term contracts. In many cases, severance pay or job-loss allowances are required based on the employee’s years of service and insurance contributions.

For foreign employees, additional administrative steps may be required, including notifying relevant immigration authorities, updating work permit status, and ensuring proper closure of tax and insurance obligations. Failure to follow the correct procedure can delay termination and expose the employer to unnecessary legal risks.

Annual Leave, Public Holidays, and Sick Leave

Employees are entitled to:

• 12 days of annual leave, increasing with seniority
• Public holidays (usually 11 days/year)
• Sick leave, which is paid through the social insurance fund (based on medical certification)

Unused annual leave can be carried over or paid out, depending on the company policy and timing of termination. Employers must track and document all leave accurately, especially when calculating final pay or resolving disputes.

Common Labor Law Violations and How to Avoid Them

Even well-intentioned employers often fall into non-compliance due to misunderstandings, administrative lapses, or outdated HR practices. In a rapidly changing regulatory environment, relying on past norms or informal practices can quickly lead to legal exposure.

Common issues include:

• Failing to issue proper labor contracts or repeatedly extending probation periods in violation of the law
• Delayed or incorrect registration for mandatory insurance schemes
• Misclassifying employees as independent contractors to avoid tax and social security contributions
• Skipping required disciplinary steps, leading to wrongful termination claims
• Exceeding overtime thresholds or miscalculating overtime pay, especially in manufacturing and logistics

Beyond legal penalties, these missteps can damage employee relations, increase turnover, and create reputational risks particularly for foreign-invested enterprises.

To avoid violations:

• Conduct internal labor audits at least once a year, preferably with external legal support
• Stay informed on legal updates and guidance from MOLISA and DOLISA
• Digitize employment records and ensure easy access to payroll, attendance, and leave data
• Offer training sessions for HR teams and line managers on core compliance topics

By making labor compliance part of your broader risk management and HR strategy, your business will be better positioned to operate smoothly, retain employees, and minimize disputes.

Proactive compliance minimizes legal risks and enhances employer reputation.

Related article: Labor Violation in Vietnam: From HR Misstep to Legal Exposure

Staying Compliant, Staying Competitive

Vietnam’s labor laws are evolving quickly, and enforcement is becoming more consistent and robust. For employers, labor compliance is not simply a checklist, it is a foundation for building trust, retaining talent, and avoiding costly legal battles.

A clear understanding of employer obligations, supported by accurate documentation and expert legal advice, will help companies remain compliant while maintaining a productive and loyal workforce.

Le & Tran is recognized as a leader in Vietnam’s legal landscape, earning praise from top legal publications like Chambers, Legal500, and Benchmark Litigation, as well as being highly recommended by AmCham Vietnam and the US Consulate. Our top-ranked Employment Lawyers are known for delivering practical and strategic solutions that protect your rights and interests. Whether navigating complex disputes or resolving sensitive legal challenges, we’re here to guide you every step of the way with precision and professionalism. For professional support in labor law compliance in Vietnam, contact us at info@letranlaw.com.