What Is The Structure Of Payroll For Expat In Vietnam?

Key Takeaways

• Expat payroll in Vietnam consists of three layers: gross salary, mandatory deductions (SI 9.5%, HI 1.5%, Personal Income Tax) and supplementary allowances. Net take-home pay is typically 15-25% lower than gross depending on income level and tax residency status.
• Businesses are permitted to pay foreign employees in foreign currency if agreed upon in the employment contract, but must still declare taxes and pay insurance contributions in VND at the applicable exchange rate.
• Foreign employees with contracts of 12 months or more are required to participate in Social Insurance (9.5%) and Health Insurance (1.5%), and are exempt from unemployment insurance. From July 1, 2025, the employer SI contribution rate increased to 20.5% under Decree 158/2025/ND-CP.
• Housing, children’s tuition fees and home leave airfare are fully exempt from PIT if the employer pays the third party directly, delivering more real value to employees from the same budget.

The foundation of all payroll rules for foreign employees in Vietnam is the regional minimum wage structure. Notably, Vietnamese law applies the same minimum wage system for both local and foreign workers, with no difference based on nationality. The 2025 minimum wage rates are split into four regions:

• Region I: VND 5,310,000/month (VND 25,500/hour)
• Region II: VND 4,730,000/month (VND 22,700/hour)
• Region III: VND 4,140,000/month (VND 20,000/hour)
• Region IV: VND 3,700,000/month (VND 17,800/hour)

Companies must accurately determine their operational location to apply the correct regional minimum wage. For businesses with branches in multiple locations, the minimum wage for each specific region where employees actually work must be applied.

Beyond this required minimum wage floor, Vietnam’s payroll rules for foreign employees include gross salary, required deductions, and extra allowances—components that form a complete salary structure, which will be analyzed in detail below.

1. Gross salary

The gross salary is the base amount agreed upon in the employment contract between the expat employee and the employer. When negotiating salary, expats should consider factors such as their qualifications, experience, and the cost of living in Vietnam.

Salary negotiations for expats may differ from those of local employees due to several factors. Expats often have unique skills and experience that are in high demand, which can give them leverage in salary discussions. Additionally, expats may require cost of living adjustments, housing allowances, and other expatriate-specific benefits that can influence the final agreed-upon salary.

Companies in Vietnam can pay foreign employees in foreign currencies (such as USD, EUR), as long as this arrangement is clearly written in the employment contract and follows foreign exchange management rules. According to Clause 2, Article 95 of the Labor Code 2019, salaries for foreign workers in Vietnam may be paid in foreign currency through bank transfer or cash, based on agreement with the employee (Circular 32/2013/TT-NHNN). However, companies must ensure legitimate foreign currency sources, follow State Bank of Vietnam’s foreign exchange rules, and still report income and pay taxes and insurance contributions in Vietnamese dong according to the legal exchange rate. Foreign currency salary payments apply only to foreign employees and do not extend to Vietnamese workers.To negotiate payroll for international employees effectively need researching and understanding the standard compensation for their role and industry in Vietnam. This information can be obtained through online resources, professional networks, and discussions with other expats working in similar positions.

2. Mandatory deductions for expatriate employees in Vietnam

The salary structure for expat employees in Vietnam consists of their gross salary, which is subject to several mandatory deductions. These deductions include personal income tax, mandatory insurance contributions, and health and unemployment insurance, which are fully reflected in the overall salary structure for expatriates working in the country.

One figure that FDI companies often overlook when budgeting: total employment cost is not the same as gross salary. For an expat earning VND 50 million gross per month, the employer’s actual outlay is closer to VND 61 million once Social Insurance (20.5%) and Health Insurance (3%) employer contributions are added. Getting this number right is what makes headcount planning accurate.

2.1 Personal income tax

Vietnam’s Personal Income Tax (PIT) system for income from salaries and wages features rates that depend on an individual’s tax residency status: either a progressive scale from 5% to 35% or a flat rate of 20% on taxable income. In recent years, the Vietnamese government has introduced significant changes to regulations concerning the recruitment and management of foreign labor, as well as requirements for mandatory insurance and other contributions. These changes directly impact permitted deductions, which can in turn reduce both the taxable income and net take-home pay of expatriates.

For example, expatriates may now be able to deduct certain expenses related to housing, education, and charitable contributions. These deductions can significantly impact an expat’s overall Vietnam payroll tax liability, making it essential for them to stay informed about the latest changes and work with a qualified tax professional to optimize their tax strategy.

Tax residency status is a variable that directly affects how competitive the compensation package feels to the employee. For the same VND 50 million gross, a tax resident pays approximately VND 4.2 million in PIT per month while a non-resident pays nearly VND 9 million, a difference of VND 4.75 million per month or VND 57 million per year. This needs to be determined at the contract design stage, not after signing.

2.2 Social security contributions

Expatriates working in Vietnam under labor contracts with a term of at least 12 months are required to participate in the country’s compulsory social insurance system, which provides benefits for sickness, maternity leave, workplace accidents, retirement, and death. As of 2023, the employee contribution rate is set at 8% of their gross salary, while the employer contributes 17.5%. The social insurance system for foreign workers in Vietnam is governed by the Social Insurance Law 2024 and Decree No. 158/2025/ND-CP. From July 1, 2025, foreign employees contribute 9.5% of their monthly salary as the basis for social insurance contributions, while employers must contribute a total of 20.5% on the same salary basis.

It’s important to note that these contributions are subject to caps, which are currently set at 20 times the base salary.

2.3 Health and unemployment insurance

In addition to social security, expatriates in Vietnam under a labor contract with a term of 12 months or more are also required to participate in mandatory Health Insurance. The employee contribution rate for health insurance is 1.5% of their gross salary, while the employer contributes 3%. Under current regulations, foreign workers are not required to contribute to Unemployment Insurance.

These insurances provide valuable coverage for medical expenses and financial support in case of job loss. Social security contributions and health insurance contributions are also subject to caps based on the employee’s income level.

Understanding these mandatory deductions is crucial for expatriates to plan their finances effectively and ensure they are budgeting appropriately for their take-home pay. Employers should also stay up-to-date with these requirements to maintain compliance with Vietnamese regulations and provide accurate payroll processing for their expat employees.

3. Additional allowances (if applicable)

Expatriates working in Vietnam may receive additional allowances as part of their compensation package. These allowances can help offset the cost of living and provide a more attractive overall employment offer. Some common allowances for expats in Vietnam include:

• Housing allowance: This allowance helps cover the cost of rental accommodation in Vietnam. The amount may vary depending on the location and the expat’s position within the company.
• Transportation allowance: This allowance helps cover the cost of commuting to and from work, whether by public transportation or private vehicle.
• Meal allowance: Some companies provide a daily or monthly allowance to help cover the cost of meals.
• Telephone allowance: This allowance helps cover the cost of mobile phone bills, which can be essential for expats to stay connected with colleagues, clients, and family back home.

It’s important to note that these allowances may have tax implications, and expats should be aware of how they impact their overall tax liability. In some cases, allowances may be considered taxable income, while in others, they may be exempt from taxation.

In addition to these common allowances, expatriates in Vietnam may also receive non-taxable benefits, such as:

• One-time relocation allowance: This allowance helps cover the cost of moving to Vietnam, including shipping personal belongings and setting up a new home.
• Airfare: Some companies may provide annual or bi-annual airfare for expats to visit their home country. The non-taxable benefit is specifically for one round-trip flight home per year, which must be paid for directly by the employer.
• Education fees for children: For expatriates with children attending school in Vietnam (from preschool through high school), tuition support is non-taxable if the employer pays the tuition fees directly to the school.

Whether an allowance qualifies as tax-exempt depends on how the company pays it, not what it is. Housing paid directly to the landlord is tax-exempt. Tuition paid directly to the school is tax-exempt. Airfare purchased and paid by the company is tax-exempt. But if those same amounts are added to the employee’s salary for them to handle themselves, the full amount becomes taxable income. The same allowance budget, structured differently, can produce meaningfully different take-home value, a lever many FDI companies have not yet used.

When considering the payroll for foreign employees in Vietnam, it’s essential to be aware of any special considerations or regulations that may apply to allowances and benefits. Working with a knowledgeable payroll provider or tax professional can help ensure compliance and optimize the overall compensation package for expats.

4. Other tax considerations

Beyond salary payment and mandatory insurance, the complexities of tax filing in both the host country and the expatriate’s home country should be considered. This complexity needs to be examined from several angles: residency status, the income package, the ultimate employer for cost calculation, tax filing requirements in various countries, tax credits and deductions, as well as the application of double taxation agreements.

Payroll and tax services for expatriates

Foreign companies operating in Vietnam may find it challenging to navigate the local payroll system. Outsourcing payroll functions to a specialized provider can streamline the process and ensure compliance with Vietnamese regulations. Payroll providers offer expertise in local laws, experience with international employee payroll, and cost savings. When selecting a provider, consider their reputation, range of services, and technology.

Talentnet, with over 20 years of experience in Vietnam, is a reputable choice, offering comprehensive payroll and HR services tailored to foreign companies and their expatriate employees. By outsourcing payroll, companies can focus on their core business while ensuring a smooth and compliant payroll process for their expatriate staff.

Understanding payroll structure for expats in Vietnam and staying informed about recent changes in regulations, expats and their employers can ensure a smooth and compliant payroll process.Talentnet’s full package expat services can help navigate these complexities and ensure that compensation and benefits packages are compliant with local laws and attractive to expatriate employees. With the right knowledge and support in designing compensation and benefits packages, foreign companies can help their expatriate staff thrive in their new work environment while ensuring their financial well-being.