Vietnam offers a workforce of professional individuals that may assist your firm as it expands globally or hires remote workers. To ensure the success of your working relationship, you must first grasp how each region's employment laws operate and what your rights as an employer are. This article will show you what to consider before hiring Vietnam’s workforce, including how to navigate cultural differences, understand local labor regulations, and find distant talent.
1. Vietnam currently has a large workforce but an inadequate level
With more than 1 million young adults entering the labor market annually, so Vietnam has a large labor force base. And the advantage of Vietnamese workers is due to their versatility in the implementation of new technologies and their application.
However, many companies in Vietnam recognize Vietnam’s workforce has more advantage over neighboring countries in terms of numbers. There’re still substantial talent and skills gaps between the job and the applicants in industries that need more technical skills.
Vietnamese employees often find themselves in less qualified positions, while foreign nationals dominate higher-level management roles, yielding greater productivity. This discrepancy leads to a significant number of Vietnamese workers occupying lower-skilled jobs, while foreign nationals excel in management positions.
2. Distribution of labor force
According to the Government’s Q4 2017 Labor Force Survey, 67.8% of the workforce population is living in rural areas. The Red River Delta and North Central, along with the South Central Coast, have 21,7 % and 21,6 % of the workforce. Mekong River Delta and Southeast are followed by 18.9 and 17.1 %.
The majority of the labor force engaged in agriculture, forestry, and fisheries is concentrated in three regions of Vietnam: the Northern Midland and Mountains, Central Highlands, and the Mekong River Delta. These areas host a significant portion of workers involved in these primary sectors. In the service sector, Ho Chi Minh City, Hanoi, and the Mekong River Delta region emerge as key contributors to Vietnam's workforce. These cities play a prominent role in shaping Vietnam's labor market dynamics, particularly in the service industry. These urban centers serve as hubs for service-oriented occupations, attracting a substantial number of workers in industries like tourism, hospitality,... With this distribution of labor, Vietnam benefits from the agricultural expertise and resources of the rural regions, while its urban centers play a pivotal role in driving economic growth through service-related activities.
3. Average wage and salary of Vietnam’s workforce
In addition to a large number of workers, the Vietnamese low labor cost is another advantage that every investor should consider.
Nowadays, the average worker's salary in Vietnam is much smaller when compared with other regions around the world. For example, in Hanoi and Ho Chi Minh City, the minimum wage should not be less than 180 USD (about 4,180,000 Vietnam Dong), whereas, in many rural areas, the minimum wage is 126 USD. ( about 2,920,000 Vietnam Dong).
And here are some of the areas with the highest average salaries in Vietnam, more than 38% compared to the average salary in Vietnam.:
+ Bach Ninh: 421 USD
+ Binh Duong: 444 USD
+ Da Nang: 452 USD
+ Hanoi: 407 USD
+ Ho Chi Minh City: 456 USD
4. Skill and education level of Vietnam’s workforce
There are so many companies in Vietnam, particularly foreign limited liability companies. They find it difficult to recruit skilled talent in the country.
According to the 2019 Global Talent Competitiveness Index (GTCI) assessed that Vietnam ranks 92 out of 125 countries for being able to attract, cultivate and retain talent. This ranking position shows that Vietnam faces the challenge of not having qualified and talented workers with adequate training qualifications, especially in the field of vocational and technical skills.
So, the shortage of a skilled workforce will affect the economic transition process from labor-intensive industries to high-tech markets. As a result, the slowdown will affect Vietnam’s competitiveness negatively, and finding a suitable employee will become more difficult. Currently, approximately 40% of foreign companies in Vietnam have issues with recruiting skilled employees.
The Vietnamese government wanted to achieve the target to provide vocational training to 2.2 million people in Vietnam in 2018. And the result was positive, as of the first quarter of 2018, Vietnam has already had more than 1,900 vocational training centers, including 545 vocational schools and 395 colleges spreading all over the country.
These institutions offer programs in information technology (IT), beauty services, tourism, fashion, textile and garment, construction, precision mechanics, pharmaceuticals, and hotel management, and all those careers will solve the recruiting problem in Vietnam.
Although Vietnamese is the official language of Vietnam, the country ranks 65th on the worldwide index of English-speaking countries. French, Chinese, Khmer, and several minor languages from the country's mountainous interior are other languages you could hear or see written in formal papers.
If you are unfamiliar with the Vietnamese language, consider employing a competent Vietnamese translation and written interpreter, and remember to provide copies of key papers and information, including employment contracts, in both languages.
6. Working hours and time off
In Vietnam, there are 11 public holidays, including the week-long Tet Lunar New Year festival, and most Vietnamese employees anticipate being off work for the majority of those holidays, in addition to vacation days and other paid or unpaid leave. Every employee is legally entitled to at least one complete day off work each week, usually on a Sunday. Work shifts seldom exceed eight hours a day and 40 hours per week, with those hours typically — but not always — falling between 8 a.m. and 5 p.m. Monday through Friday.
Employees in Vietnam are also entitled to a minimum of 12 days of yearly leave, which includes personal paid time for weddings and bereavement, as well as unpaid leave with continuous permission. Employees who are sick or handicapped may be eligible for leave paid for by the country's social insurance program. Women are entitled to six months of paid maternity leave with no pay loss and an extra 30 days for each child delivered. Paternity leave policies vary by employment, but males are entitled to between five and fourteen paid days off.
7. Compensation and benefits
Vietnam has two types of minimum wage — the common minimum wage for employees in state-owned organizations and the regional minimum salary for all non-state organizations and positions. Minimum wage rates that vary across regions typically fall between 3,070,000 and 4,420,000 Vietnamese dong. Employers must provide health insurance for their employees, including regular annual health checks.
Mandatory employer contributions include social, health, and unemployment insurance, with additional taxable options like housing assistance, transportation allowance, and other benefits to create an enticing employment package. Learn more about compensation considerations as you hire employees in Vietnam.
Individual income tax (IIT) is paid by employees, and all employee wages and bonuses are subject to personal income tax (PIT), which is levied on the whole amount after statutory contributions are deducted. Employers are liable for a percentage of employee social security expenses, VAT on purchases, withholding taxes, company taxes, and all taxes related to a physical site or facility in the nation.
Despite the absence of payroll taxes or state and municipal income taxes, businesses are required to pay a 20% Corporate Income Tax (CIT). The current percentages of health insurance and unemployment insurance that local businesses are liable for covering are 3% and 1%, respectively.
Employers must withhold all necessary employee and federal taxes and report them to the Vietnamese tax authority quarterly on the 30th day of the following month or monthly on the 20th day of the following month.
9. Employment contracts
Each Vietnamese employee must have a formal employment contract with your organization, including copies in both Vietnamese and the person's native tongue. It can be either a fixed-term or an infinite-term contract, with each form having the option to renew or cancel as needed and defined.
The written contract should include all pertinent facts concerning your collaboration, such as:
The employee's salary and other pay are stated in local currency.
Employee benefits and insurance are listed.
Employee and employer termination and severance obligations
Employee and employer rights, duties, and expectations
Specific employment terms and conditions
A summary of the duration, rights, and responsibilities of a probationary period, if appropriate
Job scope and any necessary or voluntary rest and working hours
Expected duration of employment contract and working relationship
Provisions and recommendations for health and safety
If there is no legitimate written contract in existence for each Vietnamese worker, the company faces a penalty cost. Except for changes such as promotions, wage increases, and early termination, the contract should be mutually agreed upon and signed. There are no implicit laws in Vietnamese employment contracts, although employees are entitled to certain statutory rights and benefits even if they are not specified.
The advantage of Vietnam’s workforce is the compelling employee wage, large workforce, and the carefulness, and durability of Vietnam people. Vietnamese people might not have the right skills, but the Vietnamese government already has a policy to improve the situation, which can increase the productivity of foreign businesses.
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