Overview of Labor Contracts in Vietnam: An Introduction

As Vietnam continues to align its labor legislation with international standards, all companies operating in Vietnam must comply with a framework governed by the Labor Code – covering every aspect from contract formation to termination. Non-compliance can result in legal disputes, financial penalties, and reputational damage.

Types of labor contracts in Vietnam

In Vietnam, the legal framework for employment contracts is designed to provide clarity and security for both employers and employees. Vietnam’s legal framework recognizes three types of labor contracts:

• Indefinite-term employment contract: This type of contract does not specify a term or duration.
• Fixed-term employment contract: These contracts are valid for up to 36 months. If the employee continues to work after the contract expires, it can be renewed.
• Contract for specific or seasonal work: This type of contract is used for work lasting less than 12 months.

Under the 2019 Labor Code, all contracts must be executed in writing or electronically, with each party retaining a copy.

The Labor Code allows for labor contracts to be entered into in two forms:

• In writing: A traditional paper contract that is signed by both parties.
• Electronically: A digital contract that is executed online with the same legal validity as a written contract.

Electronic labor contracts – mandatory from 1 July 2026

Decree 337/2025/ND-CP (effective 1 January 2026, with full mandatory application from 1 July 2026) requires all electronic labor contracts to be created, signed, and stored on the National Electronic Labor Contract Platform managed by the Ministry of Home Affairs. Companies may convert existing paper contracts to electronic format on the platform, provided they meet the regulatory conditions. This is a significant change that HR teams need to prepare their systems for before the 1 July 2026 deadline.

Key elements of a Vietnamese labor contract

When drafting a labor contract in Vietnam, several crucial elements must be considered to ensure compliance with the law and to protect the rights and interests of both employers and employees.  

Working hours, break time, and overtime

Vietnam’s Labor Code regulates working hours, break times, and overtime to ensure fair treatment of employees and maintain a healthy work-life balance.

• Working hours cannot exceed 8 hours per day or 48 hours per week.
• Employees are entitled to a 60-minute break within the first 10 normal working hours.
• Overtime is limited to 12 hours a day, 40 hours a month, and 300 hours a year.

Compensation structure in Vietnam

The compensation structure in Vietnam is governed by the Labor Code, which sets minimum wage requirements, salary payment rules, overtime compensation, and social insurance contributions.

Regional minimum wage 2026 (7.2% increase year-on-year, per Decree 293/2025/ND-CP, effective 1 January 2026):

• Salary payments: Salaries must be paid in full and on time, typically monthly. Employers must provide payslips detailing salary, deductions, and overtime pay.
• Overtime compensation: Overtime must be compensated at a higher rate than the regular salary, with the exact rate depending on whether it occurs on weekdays, weekends, or holidays.
• Social insurance contributions: Both employers and employees are required to contribute to social insurance funds.

Mandatory social insurance contributions 2025-2026 (Decree 188/2025/ND-CP, effective 1 July 2025):

Employers should be familiar with the full range of types of employee benefits – both mandatory and supplemental – to avoid compliance risk.

Termination, severance, and payment

Termination, severance pay, and final payments are crucial aspects of the employer-employee relationship in Vietnam. The Labor Code specifies procedures for contract termination, severance pay calculation, and timely payment of all dues upon termination.

Termination of employment is governed by strict procedural requirements under the Labor Code. Contracts may end by mutual agreement; employees may terminate unilaterally at any time, while employers may only do so under specific circumstances defined by law — and must provide advance notice and severance pay.

Advance notice requirements for unilateral termination:

• At least 45 days: indefinite-term contracts
• At least 30 days: fixed-term contracts of 12 to 36 months
• At least 3 working days: contracts of less than 12 months

Severance pay: Severance pay is required when an employment contract is terminated, except in cases such as employee resignation without just cause or dismissal due to disciplinary reasons. It is generally calculated based on half a month’s salary for each year of service.

Payment upon termination: Employers must make all payments due to an employee, including outstanding salary, benefits, and severance pay, within 7 days after the employment contract ends. If the employer unilaterally terminates the contract without proper notice, additional compensation equivalent to at least two months’ salary must be paid.

Retirement age

Under the 2019 Labor Code’s phased schedule, retirement ages applicable from 1 January 2026 are:

For those working in jobs that are considered heavy, hazardous, or dangerous, or for workers with reduced working capacity, there is the possibility of retiring up to 5 or 10 years earlier than the standard retirement age, depending on the specific circumstances.

Hiring foreign employees

Under Decree 219/2025/ND-CP (effective 7 August 2025), the application processing window was reduced from 15 to 10 working days, and the number of work permit exemption categories was reduced from 20 to 15 compared with Decree 70/2023/ND-CP. Employment contracts for foreign workers cannot extend beyond the validity period of the work permit — permits are renewable once for a maximum of 2 years, after which a new permit must be obtained.

One cost consideration to note: foreign employees on contracts of less than 12 months are exempt from unemployment insurance; those on contracts of 12 months or more must contribute in full (total rate: 30.5% of salary, with the employer contributing 20% and the employee 10.5%).

Additional provisions under Vietnam’s Labor Code

Apart from the key elements mentioned above, Vietnam’s Labor Code includes several additional provisions that employers and employees should be aware of. 

Salary

Employers must establish their own pay scale, payroll, and labor productivity norms as the basis for recruitment, negotiation, and payment of salaries. Salaries must be paid in full and on time, and employees should receive payslips that detail their earnings and deductions.

Discrimination

The Labor Code prohibits discrimination on the grounds of race, skin color, nationality, ethnicity, gender, age, pregnancy, marital status, religion, opinion, disability, family responsibility, HIV infection, or participation in trade unions or internal employee organizations.

Sexual harassment

Sexual harassment in the workplace is defined as any sexual act against a person’s will. Employers have a duty to prevent and address sexual harassment, ensuring a safe work environment.

Labor supervision

Trade union organizations work with competent state agencies to facilitate the establishment of progressive, harmonious, and stable industrial relations. They also supervise the implementation of labor laws and protect the lawful and legitimate rights and interests of employees.

Female employees

The Labor Code prohibits night work, overtime, or long trips for female employees under certain conditions related to pregnancy and childcare. Female employees raising a child under 12 months old are entitled to a 60-minute break per day during working hours with full pay, as part of the mandatory employee benefits required under the 2019 Labor Code.

Vietnam’s labor contracts are affected by several significant regulatory changes in 2025–2026, including the mandatory e-contract rollout from 1 July 2026, updated regional minimum wages, and revised social insurance contribution rates. As HR operations grow more complex, companies need partners with deep expertise in Vietnam’s labor framework to ensure contracts remain compliant. With experience advising over 1,000 businesses, Talentnet supports companies through Talentnet’s compliance services – from contract drafting and review to ongoing labor law updates – so they can focus on core business operations.