Running payroll in Vietnam means operating three statutory insurance schemes and progressive income tax withholding on top of salary, through an employer registered in the country. The contribution stack is substantial on the employer side: social insurance, health insurance and unemployment insurance each take a slice of a capped contribution base, and the personal income tax scale for residents climbs steeply enough that gross-to-net conversations matter from the first offer. For a foreign company the practical question is who operates all this: your own Vietnamese entity, a local payroll provider acting for that entity, or an employer of record that employs the person through its own registered entity when you have none. The figures below come from the cited PwC Vietnam summaries.
The employer contribution stack
Vietnamese employers contribute 17.5% of the capped contribution base to social insurance, with employees contributing 8%. Health insurance adds a combined 4.5% of covered income, split 3% employer and 1.5% employee, and applies to Vietnamese and foreign individuals employed under Vietnam labor contracts of at least one month. Unemployment insurance adds 1% from each side but applies to Vietnamese individuals only. The bases are capped, at twenty times the statutory reference level for social and health insurance and twenty times regional minimum salaries for unemployment insurance, so the effective employer load as a share of a high salary falls once pay passes the caps. A payroll quote that ignores the caps overstates the cost of senior hires.
Income tax withholding
Employment income of Vietnamese tax residents is taxed on a progressive scale running from 5% at the bottom band to 35% at the top, and the employer withholds through payroll. Non-residents working in Vietnam are taxed at a flat 20% on their Vietnam-sourced employment income. Residency status therefore changes the payslip materially, and for assignees and part-year cases it needs determining before the first payroll run, not after. Double taxation agreements can modify outcomes for foreign employees, which is one of the places where a payroll operator with real Vietnam practice earns its fee: the treaty position has to be claimed and documented, not assumed.
Foreign employees are a special case
The schemes do not apply uniformly to foreigners. Foreign employees on Vietnam labor contracts fall within health insurance, and within social insurance subject to carve-outs: certain intra-group transferees and those who have reached statutory retirement age, or persons covered by an international treaty, are outside compulsory social insurance, while unemployment insurance does not apply to foreign employees at all. Layer on work permit requirements and the residency-driven tax treatment and the payroll for one expatriate can be more intricate than for a local team of ten. Whoever runs your Vietnam payroll should be able to state, per person, which schemes apply and why, with the legal basis named.
Entity, local provider, or EOR
With your own Vietnamese entity, a local payroll provider can run the calculations and filings while the entity carries the employer registrations. Without an entity, an employer of record is the workable route: its registered Vietnamese company employs your hire, operates the insurance schemes and tax withholding described above, and invoices you monthly for employment costs plus a fee, with per-employee pricing verified against vendor pages in this site's index. The entity route starts to pay once headcount and permanence justify incorporation and ongoing compliance; below that line, the EOR fee is buying you an employer that already exists. Rates and caps change with Vietnamese law; verify current figures with the cited sources or your provider before budgeting.
Questions people ask about payroll vietnam
What does an employer pay on top of salary in Vietnam?
Contributions to social insurance at 17.5%, health insurance at 3% and unemployment insurance at 1% of capped bases, alongside employee-side contributions withheld through payroll, per the cited PwC summary of the current rates.
How is income tax withheld in Vietnam?
Employers withhold monthly: residents on a progressive scale from 5% to 35% on employment income, non-residents at a flat 20% on Vietnam-sourced employment income. Residency status and any tax treaty position should be settled before the first run.
Do the schemes apply to foreign employees?
Partly. Health insurance applies to foreigners on qualifying Vietnam labor contracts; social insurance applies subject to carve-outs for certain intra-group transferees, those past retirement age and treaty cases; unemployment insurance applies to Vietnamese individuals only.
Can I run Vietnam payroll without a Vietnamese entity?
Not directly; the schemes and withholding attach to a registered local employer. An employer of record supplies that employer, hiring your person through its Vietnamese entity and billing a monthly per-employee fee, verified per vendor in the comparison index.