1. What Is a Contract of Employment in Vietnam?
A contract of employment is a legally binding agreement between an employer and an employee that defines:
- Job role and responsibilities
- Salary and benefits
- Working hours and location
- Rights and obligations of both parties
Under the 2019 Vietnam Labor Code, any agreement involving paid work, management, or supervision is considered an employment contract, regardless of its title (including service or cooperation agreements).
2. Types of Employment Contracts in Vietnam
Vietnam recognizes two official types of employment contracts. This simplified structure was introduced to reduce misuse and improve employee protection.
| Contract Type | Indefinite-term contract | Fixed-term employment contract |
| Duration | No fixed end date | Up to 36 months |
| Renewability | N/A | Once only |
| Common Use Case | Long-term core employees | Project-based or probationary roles |
Employment contracts in Vietnam are governed by the 2019 Labor Code, which applies to both local and foreign-invested companies. The law emphasizes employee protection, strict termination rules, and precise classification of contract terms. Choosing the correct contract type is critical for legal compliance, cost control, and workforce stability.
2.1. Indefinite-Term Employment Contract
An indefinite-term employment contract has no defined end date and continues until legally terminated by either party. This contract type offers the highest level of protection for employees and imposes stricter procedural and legal requirements on employers when terminating employment.
Key characteristics:
- No expiration date
- Strong employee protection
- Strict termination requirements
- Higher severance and compliance obligations
Notice period:
- Minimum 45 days’ notice from either party, unless a longer period is agreed
- Immediate termination is allowed only in limited statutory cases
Employer considerations:
- Higher long-term employment cost
- More complex workforce restructuring
- Termination without proper grounds may result in reinstatement orders or compensation
This contract type is often unavoidable for companies planning long-term operations in Vietnam.
2.2. Fixed-Term Employment Contract
A fixed-term employment contract has a clearly defined duration, with a maximum length of 36 months. This is the most commonly used contract type for new hires, project-based roles, and workforce scaling during market entry.
Key characteristics:
- The term must be explicitly stated
- Renewal is limited to one additional fixed-term contract
- Continued employment after the second fixed-term contract automatically converts into an indefinite-term contract
Notice period:
- 30 days for contracts from 12 to 36 months
- 3 working days for contracts under 12 months
Legal risks:
- Repeated renewals beyond the legal limit
- Artificial breaks between contracts to avoid conversion
- Misuse of fixed-term contracts for permanent roles
3. Common Contracts in Vietnam Employers Should Know
While Vietnamese labor law recognizes only two legal types of employment contracts (indefinite-term and fixed-term), employers commonly encounter several contract forms and arrangements in practice. Understanding the differences is essential to avoid misclassification and compliance risks.
3.1. Probationary Contracts
Probation is not recognized as a separate employment contract type under Vietnamese law. Instead, it is a trial period that allows employers to evaluate an employee’s suitability before formal confirmation.
- Can be a standalone agreement or a clause within a labor contract
- Probation salary must be at least 85% of the official salary
- Either party may terminate during probation without notice
- 180 days: Enterprise managers
- 60 days: Roles requiring college-level or higher professional or technical qualifications
- 30 days: Positions requiring intermediate-level vocational or professional qualifications, including technical and skilled roles
- 6 working days: Other jobs
3.2. Part-Time Employment Contract
Part-time employment is defined by working hours, not by the type of employment contract. Employees working fewer hours than the standard full-time schedule are still considered employees under labor law. Despite reduced hours, part-time employees are entitled to the same statutory rights and protections as full-time employees, with salary and benefits calculated on a proportional basis. This arrangement is commonly used to support flexible staffing needs.
3.3. Project-Based or Seasonal Employment
Project-based or seasonal employment is often misunderstood as a separate contract category. In reality, these arrangements must still be structured as fixed-term employment contracts. Employers may not repeatedly use such contracts for permanent or ongoing business activities, and all labor law obligations, including social insurance, continue to apply.
3.4. Service or Consultancy Contracts (Non-Employment)
Service or consultancy contracts are governed by the Civil Code, not the Labor Code, and do not establish an employer–employee relationship. These contracts are frequently misused by companies attempting to avoid employment obligations. A legitimate service contract should not involve:
- Fixed working hours
- Direct supervision or internal reporting lines
- Integration into the company’s organizational structure
4. Employment Contract Sample
An employment contract in Vietnam must be made in writing (including electronic form) and include specific mandatory terms to be legally valid and enforceable. Missing mandatory terms or unclear clauses can render parts of the contract unenforceable and expose employers to labor disputes and penalties.
4.1. Mandatory Clauses in Employment Contracts
| Contract Element | What It Includes |
| Employer & Employee Information | • Employer’s legal name, address, business registration number
• Legal representative’s name and title • Employee’s full name, date of birth, nationality • ID/Passport number and permanent address |
| Job Title & Job Description | • Official job title
• Detailed scope of work and responsibilities • Reporting line • Place(s) of work (office, client site, remote, hybrid if applicable) |
| Contract Type & Duration | • Indefinite-term or definite-term contract
• Start date and end date (if applicable) • Probation period (if any) |
| Salary & Compensation | • Basic salary (gross or net)
• Bonuses and performance incentives • Allowances (meal, transport, housing, etc.) • Overtime payment rates |
| Payment Method & Schedule | • Currency (VND or foreign currency if permitted)
• Payment method (bank transfer or cash) • Pay cycle (monthly, biweekly, etc.) |
| Working Hours & Rest Periods | • Standard working hours (max 8 hrs/day; 48 hrs/week)
• Overtime conditions and limits • Breaks, weekly days off, public holidays |
| Social, Health & Unemployment Insurance | • Mandatory insurance enrollment and contribution obligations
• Employee and employer contribution bases • Unemployment insurance eligibility |
| Leave Entitlements | • Annual leave (min 12 days/year) and accrual
• Public holidays with pay • Sick leave, maternity/paternity leave (per law) |
| Occupational Safety | Mandatory contributions for social, health, and unemployment insurance. |
| Training | Provisions for skills development, especially if business secrets are involved. |
| Confidentiality | Clauses for protecting business/technological secrets. |
| Termination | Conditions and procedures for ending the contract. |
| Effectiveness of the Contract | • Effective date
• Number of copies (usually two, equal legal value) • Signatures of both parties |
4.2. Breach of Employment Contract
A breach of employment contract occurs when either party fails to comply with contractual or statutory obligations.
Common Breaches by the Employer
- Failure to pay the salary in full or on time
- Failure to provide safe working conditions
- Unlawful termination
- Failure to pay mandatory insurance contributions
Common Breaches by the Employee
- Working for competitors in violation of valid agreements
- Disclosure of confidential information
- Absence without permission
- Failure to perform duties as agreed
5. Employment Contract Compliance Challenges for Foreign Companies
Foreign companies entering Vietnam often underestimate the complexity of local labor regulations. Unlike some jurisdictions, a contract of employment in Vietnam is governed by strict statutory rules, and any agreement that deviates from the law may be partially or entirely invalid.
5.1. Understanding Local Labor Laws
Vietnam’s labor regulations apply mandatorily to all employers, including foreign-invested enterprises. Challenges commonly arise from frequent legal updates, the principle that Vietnamese law overrides internal global policies, and the fact that Vietnamese-language contracts prevail in disputes. Many foreign companies unknowingly rely on regional or global contract templates that are not fully localized, resulting in clauses that are partially invalid or unenforceable.
Read More: Governance, Risk & Compliance in Vietnam – A Market Entry Guide5.2. Managing Multiple Employment Contracts
Foreign employers frequently manage several employment contracts simultaneously, including definite-term, indefinite-term, and probationary agreements. Without proper controls, inconsistencies arise between a staff member’s employment contract, payroll records, and internal policies. This creates legal risk, especially when contracts are renewed or extended without observing statutory limits.
5.3. Social Insurance and Tax Compliance
Vietnam requires employers to contribute to compulsory social, health, and unemployment insurance based on the salary stated in the employment contract. Errors in defining salary components or allowances often result in under-contributions. These issues are usually discovered during labor inspections, exposing the company to penalties and retrospective payments.
5.4. Contract Renewal and Conversion
In most circumstances, a fixed-term employment contract in Vietnam can be renewed only once. Continued employment beyond this limit may automatically convert the agreement into an indefinite contract of employment. Many foreign companies fail to monitor this conversion threshold, unintentionally losing flexibility in workforce management.
5.5. Termination and Exit Management
Termination is one of the highest-risk areas. Vietnamese law prioritizes employee protection, and termination without proper legal grounds or notice may constitute a breach of the employment contract. Even when business reasons are valid, procedural mistakes can invalidate the termination and trigger compensation obligations.
6. Best Practices for Managing Employment Contracts in Vietnam
Properly managed employment contracts are not only a legal requirement but a foundation for sustainable operations in Vietnam. Here are practical tactics to ensure compliance with employment contract regulations.
6.1. Use Standardized Employment Contract Templates
Employers should implement standardized templates for each employment scenario. This includes templates for definite-term, indefinite-term, and probationary arrangements. A legally reviewed employment contract sample helps ensure consistency and reduces the risk of invalid clauses across the organization.
6.2. Partner with Local HR and Legal Experts
Local advisors play a critical role in translating legal requirements into practical implementation. They help ensure that each employment contract agreement reflects current regulations and local enforcement practices, not just written law.
6.3. Outsource Payroll Providers
Outsourcing payroll and statutory compliance enables employers to maintain accurate salary calculations and insurance contributions, directly linked to the employment contract. This approach reduces administrative burden and compliance risk.
6.4. Refine Internal Policy
Internal procedures should define clear steps for lawful termination, including documentation standards, notice periods, and approval workflows. This minimizes disputes related to alleged breach of employment contract.
7. Reco Manpower – Trusted Employment Compliance Partner in Vietnam
Reco Manpower is an HR and workforce solutions provider supporting companies entering or scaling in Vietnam. With strong local expertise, Reco helps employers navigate Vietnamese labor regulations and provides end-to-end support to alleviate HR administrative burdens.
Our 5 core services:
- Headhunting: Rapid IT recruitment in 7 days. Deliver high-quality candidates with an extensive talent pool of 300,000+ tech professionals.
- Staff Augmentation: Integrate skilled developers into your team to handle IT projects and scale teams without accelerating costs.
- Employer of Record (EOR)/Payroll: Hire legally in Vietnam without establishing a local entity, ensuring full compliance with labor, tax, and statutory contribution regulations.
- BOT (Build – Operate – Transfer): Set up, manage, and stabilize dedicated teams or operations in Vietnam before transferring full ownership to the client.
- HR Outsourcing: Comprehensive HR outsourcing services, including employment contract management, compliance advisory, and HR administration, helping companies focus on growth while reducing legal and operational risks.
8. Conclusion
Understanding and managing employment contracts is a critical compliance requirement for companies in Vietnam. Given the complexity of Vietnam’s laws and regulations, employers must ensure that every employment contract agreement complies with statutory rules and local enforcement practices. Poorly drafted or mismanaged employment contracts can result in disputes, penalties, or breach-of-contract claims, particularly in areas such as contract renewal, termination, and social insurance compliance. Local experts like Reco Manpower can help firms reduce legal risks and save on operational costs by providing customized HR services and industry-specific knowledge.
Looking to hire reliable and highly qualified tech professionals in Vietnam? Reach out to Reco Manpower today for tailored recruitment solutions that match your business needs.
FAQs
Under the current Labor Code, Vietnam no longer recognizes “seasonal contracts” as a separate legal category. Seasonal work must be governed by either a fixed-term employment contract or an indefinite contract of employment, depending on the duration and nature of the work. Mislabeling a seasonal role may result in the contract being treated as a standard employment contract.
Yes, but with caution. Freelancers are typically engaged under a civil service contract rather than an employment contract. If the working relationship shows signs of subordination, such as fixed working hours, direct supervision, or salary-like payments, the arrangement may be reclassified as a contract of employment, exposing the employer to insurance and tax liabilities.
Consultant contracts are generally governed by civil law rather than labor law. However, if a consultant works exclusively for one company, follows internal rules, and receives regular monthly payments, authorities may deem the agreement a disguised employment contract.
No, genuine freelancers and consultants are not subject to mandatory social insurance. However, if the contract is reclassified as an employment contract, the employer may be required to pay backdated social insurance contributions, penalties, and interest.
Freelancers and consultants are generally responsible for their own personal income tax. In some cases, the hiring company must withhold tax at source. Tax treatment depends on residency status and contract structure, so professional advice is recommended.
