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Wages, Personal Income Tax, and Working Hours in Vietnam
1 7 月, 2024
According to the Ministry of Planning and Investment, FDI disbursement in Vietnam is on the upswing — reaching 22.4 billion USD in 2022 — an increase of 13.5% compared to 2021. There are many reasons for this impressive FDI figure, one of which is Vietnam’s young and large labor force — a significant advantage compared to other developing nations in Southeast Asia.
In 2022, Vietnam ranked as the world’s 16th most populous country, with 98 million people with a median age of 32.4 years old and 74% labor force participation.
GENERAL INFORMATION
According to US News and World Report, Vietnam is ranked eighth among the best 29 economies to invest in and is first among ASEAN countries in attracting foreign investment. These rankings are a result of a survey of 7,000 business planners based on eight criteria: economic stability, favorable tax environment, skilled labor force, technological capacity, entrepreneurship, innovation, dynamism, and corruption.
The latest Business Climate Index (BCI) report in Q1/2023 by the European Chamber of Commerce in Vietnam (EuroCham) revealed that 36% of European firms ranked Vietnam either first, within their top 3, or among their top 5 investment destinations on a global scale. This demonstrates investors’ confidence in an emerging market with an abundant labor supply at competitive costs.
In addition to competitive labor costs, the importance of labor quality in attracting FDI is widely acknowledged – especially in high-end industries such as automotive, computers & electronics, electrical equipment, and advanced materials. The BCI report Q1/2023 also emphasized the role of initiatives to enhance workforce productivity and skills as the 4th critical factor to drive European-owned business growth in Vietnam.
The below article provides an overview of Vietnam’s labor law, including minimum wage, personal income tax and working hour regulations.
WAGES
According to Decree 38/2022/NĐ-CP, the regional minimum wage was increased as of July 1, 2022.
| Region | Minimum wage/month (Applicable from 01/07/2022) |
|---|---|
| Region I | VND4,680,000 |
| Region II | VND4,160,000 |
| Region III | VND3,640,000 |
| Region IV | VND3,250,000 |
- Region I consist of cities and provinces with the highest cost of living, such as urban districts in Hanoi and Ho Chi Minh City – or neighboring provinces such as Hai Phong, Quang Ninh, Dong Nai, Binh Duong and Vung Tau.
- Region II includes the outskirts of Hanoi and Ho Chi Minh City as well as other large and medium-sized cities throughout Vietnam such as Da Nang, Nha Trang and Can Tho.
- Region III includes smaller provincial cities and suburban districts.
- Region IV includes all remaining areas.
Vietnam has attractive average wages among other emerging economies. Below is a comparison table according to BW’s market research department.
| Country | Average monthly salary of worker (USD) |
|---|---|
| Thailand | 709 |
| Malaysia | 611 |
| Indonesia | 535 |
| Philippines | 419 |
| Vietnam | 368 |
PERSONAL INCOME TAX (PIT)
According to Circular 111/2013/TT-BTC, dated August 15, 2013, and Circular 92/2015/TT-BTC, dated June 15, 2015, PIT in Vietnam is calculated as follows:
| Level | Monthly Taxable income | PIT) |
| 1 | Up to VND5mm | 5% |
| 2 | Over VND5mm to VND10mm | 10% |
| 3 | Over VND10mm to VND18mm | 15% |
| 4 | Over VND18mm to VND32mm | 20% |
| 5 | Over VND32mm to VND52mm | 25% |
| 6 | Over VND52mm to VND80mm | 30% |
| 7 | Over VND80mm | 35% |
Personal income tax (PIT) is carried out on a withholding basis; employers will withhold the PIT at a required percentage of their employees’ personal income.
Employers are responsible for PIT finalization on behalf of their employees at the end of the year. This is applicable for employees that ear income solely from wages and compensation though a labor contract lasting a minimum of three months are still employed when they request PIT finalization.
Each employee is required to obtain a separate tax number (tax code) and declare their eligible dependents for tax reductions. If the employee’s tax obligation exceeds or falls short of the total taxes paid throughout the year, they have the option to complete their own tax finalization returns or grant permissions to an entity to carry out the tax finalization process on their behalf.
The annual tax finalization for employees’ taxable income must be submitted to the relevant tax authorities no later than 90 days from the last day of the fiscal year.
WORKING HOURS & OVERTIME
Working hours
According to Article 105 of the Labor Law, the normal working time is as follows:
| Working hours per day | 8 hours |
| Working hours per week | 48 hours(Employee is entitled to at least 1 day off) |
| Annual leave | 12 days per year(The annual leave of an employee will be increased 1 day for every 5 years’ working for an employer) |
| Number of public holidays | 11 days per year |
Overtime & Shift Premiums
According to the provisions of Clause 1, Article 98 of the Labor Law
| Overtime on weekdays for the daytime (6:00 – 22:00) | 150% |
| Overtime on Tet or other public holiday for the daytime (6:00 – 22:00) | 300% |
| Overtime on day-off for the daytime – (6:00- 22:00) | 200% |
| Night shift premium (22:00-6:00) | 30% |
*Note: The maximum permitted overtime hours is 300 hours per year; exceptions are subject to the appraisal and approval of relevant authorities.
To know more about the incentives for foreign manufacturers in Vietnam and receive free support (legal consultancy, HR consultancy, …) from BW, feel free to contact us via our hotline (+84) 28 710 29 000 or by email at leasing@bwidjsc.com.
