When budgeting for personnel in Vietnam, the most common mistake foreign investors make is to add up only the "agreed salary". In reality, the total cost an enterprise bears for one employee is significantly higher. This article analyzes each layer of cost, with a worked calculation so you can budget accurately.
Layer 1: Gross salary, the foundation of every other cost
The salary stated in the contract is usually the gross salary (before personal income tax and the employee's share of insurance). It is the basis for calculating most of the other items. If the parties agree on a net (take-home) salary, the enterprise needs to convert it to gross to learn the real cost.
Layer 2: Compulsory insurance paid by the employer
Under the 2024 Social Insurance Law and current regulations, the employer contributes monthly on the payroll fund used as the basis for insurance contributions:
| Item | Employer | Employee |
|---|---|---|
| Social insurance: sickness and maternity fund | 3% | none |
| Social insurance: retirement and survivorship fund | 14% | 8% |
| Occupational accident and disease insurance | 0.5% (usual rate) | none |
| Health insurance | 3% | 1,5% |
| Unemployment insurance | 1% | 1% |
| Total | 21,5% | 10,5% |
In addition, the employer pays a trade union fee of 2% of the payroll fund used as the basis for social insurance contributions under the 2024 Trade Union Law. The employer therefore bears about 23.5% more on top of the insurable salary.
Layer 3: Common bonuses and benefits
These items are not required to be uniform, but almost every enterprise has to budget for them:
- 13th-month pay or Tet bonus: the common practice is one month's salary, equivalent to about 8.3% of total annual pay.
- Lunch, travel and phone allowances: depending on company policy.
- Supplementary health insurance: often a competitive benefit used to retain people.
- Annual leave (at least 12 days) and Tet and public holidays (11 days under the law): these are paid days off, so they are an opportunity cost.
- Periodic health checks, uniforms, training.
Worked example: an employee with a gross salary of VND 15,000,000 per month
Assume the whole salary is used as the basis for insurance contributions.
| Item | Calculation | Amount (VND per month) |
|---|---|---|
| Gross salary | 15.000.000 | |
| Employer social insurance (17%) | 15.000.000 x 17% | 2.550.000 |
| Occupational accident and disease insurance (0.5%) | 15.000.000 x 0,5% | 75.000 |
| Employer health insurance (3%) | 15.000.000 x 3% | 450.000 |
| Employer unemployment insurance (1%) | 15.000.000 x 1% | 150.000 |
| Trade union fee (2%) | 15.000.000 x 2% | 300.000 |
| 13th-month pay provision (1/12) | 15.000.000 / 12 | 1.250.000 |
| Total cost (excluding other benefits) | 19.775.000 |
So for every VND 15 million of gross salary, the actual outlay is about VND 19.8 million, which is about 32% higher, before allowances, health insurance, work equipment or recruitment costs.
On the employee's side, the insurance deduction is 10.5% = 1,575,000 VND. With the personal family deduction of VND 15.5 million per month under the new rules, the taxable income at this salary is zero, so no personal income tax arises. The employee takes home about VND 13,425,000. Details of personal income tax will be analyzed in a separate article in this series.
Hidden costs that are often forgotten
- Recruitment costs: job posting fees, headhunters, management time.
- Probation period, at a minimum of 85% of the job's wage.
- Accounting and HR costs to run payroll, insurance and tax.
- Compliance costs: labor rules, reports on changes in labor, inspection files.
- Termination costs: severance allowance, job-loss allowance, compensation for unlawful termination.
When does an EOR service help optimize total cost?
For a foreign enterprise without a legal entity, the cost of setting up a company and hiring its own accountants and HR staff is often greater than the EOR service fee in the early stage. The EOR model gathers all of the costs above into one clear invoice covering salary, insurance, tax and the management fee. You can refer to the price list in the article on EOR service costs.
Frequently asked questions
What additional percentage must the employer pay on top of salary? At the usual contribution rates, about 21.5% for compulsory insurance and 2% for the trade union fee, a total of about 23.5% on the payroll fund used as the basis for insurance contributions.
Is 13th-month pay mandatory? Not required by law. However, bonuses are paid under the enterprise's bonus regulations; if the contract or regulations commit to them, the enterprise must pay.
Is every allowance included in the insurance-contribution salary? No. Under the 2024 Social Insurance Law, the insurable salary comprises the wage level, wage allowances and other supplementary amounts agreed to be paid regularly and steadily in each pay period. So the way the contract is written affects cost.
Does the 23.5% cost apply to foreign employees? Foreign employees with a labor contract in Vietnam are subject to compulsory insurance from 01/01/2022. The contribution rates and specific conditions should be checked under the rules applying to each category.
The rates above are the usual levels at the time of writing (10/2026); contribution rates may change under guiding documents. The example figures are illustrative only.