Vietnam has entered a new phase of employment regulation.
For several years, investors could see the direction of travel: broader social protection, tighter regulation of employment relationships, greater digitalization of government administration and progressively stronger enforcement. In 2025 and 2026, that direction has become operational reality.
The Law on Social Insurance 2024, effective from 1 July 2025, and the Employment Law 2025, effective from 1 January 2026, significantly expand the categories of individuals falling within Vietnam’s compulsory social and unemployment insurance regimes. At the same time, Decree No. 293/2025/ND-CP, effective from 1 January 2026, increases regional minimum wages, while the Government is rapidly improving its ability to compare employment, tax and social insurance information electronically.
For foreign investors, the important message is therefore not simply that Vietnam has enacted new employment legislation.
The real change is that employment compliance is becoming increasingly difficult to compartmentalize.
A company’s labor contracts, contractor arrangements, payroll records, personal income tax declarations, social insurance filings and corporate management structure increasingly need to tell the same story.
If they do not, what previously might have remained an internal HR inconsistency can become an identifiable regulatory exposure.
This has direct consequences for operating costs, HR strategy, investment due diligence, M&A transactions, corporate governance and management of foreign personnel.
Foreign-invested enterprises should therefore treat 2026 as a compliance reset.
- The First Major Change: More People Are Inside the Insurance System
One of the most commercially important developments is the expansion of compulsory insurance coverage.
Historically, companies could encounter categories of workers whose employment arrangements fell outside compulsory social insurance or unemployment insurance, particularly certain short-term, part-time or non-standard arrangements.
That space has narrowed substantially.
Under the Law on Social Insurance 2024, compulsory social insurance generally extends to employees working under contracts of at least one month and also captures qualifying part-time employees.
Importantly for foreign-invested enterprises, the legislation also expands coverage concerning certain enterprise managers and controllers, including circumstances where remuneration structures may previously have resulted in different treatment.
The Employment Law 2025 similarly broadens participation in unemployment insurance, including relevant short-term and part-time employees and salaried enterprise managers falling within the statutory categories.
What does this mean commercially?
Foreign investors should assume that simply changing the title or form of an agreement will not necessarily change the regulatory characterization of the underlying relationship.
Calling somebody a:
- consultant;
- freelancer;
- independent contractor;
- service provider; or
- project-based adviser
does not by itself determine whether Vietnamese authorities will regard that person as an employee.
The substance of the relationship matters.
Where an individual personally performs work, receives remuneration and operates under the direction, management or supervision of another party, an agreement labelled a “service contract” may still create employment-related exposure.
Investor action point
Do not audit contracts by title. Audit relationships by substance.
A foreign-invested company should map its entire workforce—not merely employees appearing on the formal payroll—and identify:
- permanent employees;
- fixed-term employees;
- employees engaged for short periods;
- part-time personnel;
- consultants and freelancers;
- outsourced personnel;
- enterprise managers and controllers; and
- foreign personnel.
Each category should then be tested against the current labor, social insurance, unemployment insurance and tax rules.
- The Contractor Model Is Becoming a Much Higher-Risk Area
For many international businesses, this may be the most important practical issue arising from the reforms.
Companies entering Vietnam frequently begin with a relatively small local footprint. Instead of immediately building a full employee base, they may engage individuals as consultants, independent contractors or representatives.
That model can be commercially attractive.
It can also be dangerous if the contractual documentation does not reflect the actual relationship.
Consider a common example.
A foreign company engages an individual in Vietnam under a “Consultancy Agreement.” The individual:
- works principally for that company;
- reports to a company manager;
- works regular hours;
- uses company systems;
- receives a fixed monthly payment;
- requires approval for leave; and
- performs an ongoing operational role.
The word “consultant” at the top of the agreement does not eliminate the underlying risk.
If the arrangement is subsequently characterized as employment, the company may face consequences extending beyond social insurance. Depending upon the facts, potential exposure can include employment entitlements, insurance arrears, interest or penalties, personal income tax issues and broader questions concerning the company’s employment practices.
The practical rule for investors
If it looks operationally like employment, manage it as a potential employment relationship.
This should become part of every foreign investor’s annual Vietnam HR compliance review.
- Minimum Wage Increases Affect More Than Low-Paid Employees
Decree No. 293/2025/ND-CP increased Vietnam’s regional minimum wages from 1 January 2026 by approximately 7.2% on average.
For Region I, covering major urban areas including relevant parts of Hanoi and Ho Chi Minh City, the monthly minimum wage increased to VND 5,310,000.
At first sight, multinational employers paying salaries substantially above minimum wage may regard this as largely irrelevant.
That would be a mistake.
Minimum wage adjustments can have consequences beyond the salaries of lower-paid employees because statutory contribution ceilings and payroll calculations can be linked to prescribed wage benchmarks.
For unemployment insurance in particular, the maximum salary used for contribution purposes is tied to 20 times the applicable regional minimum wage.
For Region I, this means that employers with higher-paid employees should review the applicable unemployment insurance ceiling and ensure that payroll systems have been updated accordingly.
Investor action point
Finance and HR teams should not simply ask:
“Do we have anybody earning minimum wage?”
They should ask:
“Which payroll calculations, statutory contribution ceilings and employment costs change because the minimum wage changed?”
That is the more useful budgeting question.
- The Cost Is Not Only Higher Contributions—It Is the Cost of Getting Compliance Wrong
Expanded insurance coverage naturally increases direct employment costs.
Businesses may now need to make statutory contributions for personnel who previously fell outside the relevant system. Minimum wage increases can also affect payroll assumptions and statutory contribution calculations.
But the larger financial concern is accumulated non-compliance.
Under the Law on Social Insurance 2024, delayed or insufficient compulsory social insurance contributions can attract a charge calculated at 0.03% per day on relevant overdue amounts.
That matters because employment liabilities rarely remain static.
A classification problem affecting one worker may appear manageable. The same problem affecting dozens or hundreds of workers over an extended period can become material.
This is particularly important in labor-intensive sectors such as:
- manufacturing;
- retail;
- logistics;
- hospitality;
- technology and platform businesses;
- construction;
- professional services; and
- businesses using substantial temporary or outsourced workforces.
The investor lesson
The financial risk is cumulative.
An error that appears small on a monthly payroll can become significant when multiplied across employees and historical periods.
- Vietnam’s Digitalization Changes the Enforcement Equation
One of the most underestimated developments is not contained in any single contribution percentage.
It is data.
Vietnam is progressively building centralized government databases and integrating administrative information across different regulatory functions.
The Employment Law 2025 forms part of this broader movement toward more systematic labor-market information and registration.
For companies, the practical consequence is significant.
Historically, different government filings could sometimes exist in relatively separate administrative environments.
Increasing digitalization makes inconsistencies easier to identify.
A company may, for example, have:
- one headcount appearing in payroll records;
- another reflected in social insurance registrations;
- consultant payments appearing in tax filings;
- labor contracts identifying different remuneration;
- enterprise registration records identifying managers who do not appear in insurance records; and
- foreign personnel appearing in immigration or work-permit systems.
As government information becomes increasingly interconnected, discrepancies become more visible.
This changes the compliance question
The traditional approach was:
“Is each filing technically correct?”
The better 2026 approach is:
“If the authorities placed our labor, payroll, tax, social insurance, corporate and foreign-worker records next to each other tomorrow, would they reconcile?”
If the answer is uncertain, the company has work to do.
- Foreign-Invested Enterprises Need to Look at Their Management Structures
This issue deserves particular attention.
Foreign-invested companies frequently have governance structures that do not resemble those of purely domestic businesses.
They may have:
- expatriate legal representatives;
- locally appointed directors;
- parent-company executives serving on subsidiary management bodies;
- controllers;
- representatives receiving remuneration offshore;
- managers receiving no Vietnamese salary; or
- individuals holding several corporate functions simultaneously.
The expanded social insurance framework makes it important to examine whether individuals occupying management or control positions now fall within compulsory participation requirements.
A company should not assume that the absence of a conventional Vietnamese salary automatically removes the issue.
Investor action point
Foreign-invested enterprises should conduct a management-status review separately from the ordinary employee payroll review.
For each director, legal representative, manager and controller, determine:
- the individual’s formal corporate position;
- whether an employment relationship also exists;
- where remuneration is paid;
- whether the person falls within compulsory social insurance;
- whether unemployment insurance applies;
- whether a work permit or exemption is required; and
- whether corporate, employment, tax and insurance records are consistent.
This is a relatively simple exercise that can prevent surprisingly complicated problems later.
- Foreign Employees: Vietnam Is Streamlining, but Compliance Still Matters
Vietnam also continues to reform the regulatory framework governing foreign workers.
Decree No. 219/2025/ND-CP, effective from August 2025, consolidated and streamlined aspects of the work-permit regime and replaced the earlier framework under Decrees No. 152/2020/ND-CP and 70/2023/ND-CP.
Further reforms have been under consideration in 2026, including measures aimed at making Vietnam more competitive in attracting specialists and highly skilled personnel in strategic sectors.
Potential reforms concerning recognition of foreign-issued health documentation and experience requirements would be commercially welcome, particularly for companies operating in:
- technology;
- semiconductor and electronics industries;
- financial services;
- advanced manufacturing;
- infrastructure;
- renewable and conventional energy; and
- other high-skill sectors.
However, investors should distinguish between policy direction, draft legislation and rules already in force.
A proposed relaxation should never be treated as available until the relevant legislation has actually been enacted and become effective.
- The M&A Issue: Employment Compliance Is Now a Due-Diligence Issue
The reforms also have consequences for investors acquiring Vietnamese businesses.
A purchaser conducting due diligence should no longer treat employment review primarily as a check of template labor contracts and major disputes.
The more important questions may be hidden in payroll and workforce classification.
An investor acquiring a company should determine:
- whether all employees who should participate in compulsory insurance have been registered;
- whether contractors could be reclassified as employees;
- whether historical social insurance contributions are complete;
- whether payroll and personal income tax records reconcile;
- whether managers and controllers have been treated correctly;
- whether foreign employees have valid work authorization;
- whether minimum wage requirements have been observed; and
- whether historical liabilities have been properly quantified.
Why does this matter?
Because the purchaser may economically inherit the consequences of historical non-compliance even where the relevant conduct occurred before completion.
For M&A transactions, identified exposure should therefore be addressed through appropriate:
- conditions precedent;
- pre-closing remediation;
- purchase-price mechanisms;
- representations and warranties;
- specific indemnities; and
- where appropriate, escrow or retention arrangements.
Employment compliance has become part of transaction valuation.
- A Practical 30-Day Compliance Plan for Foreign Investors
Companies do not need another 100-page legal memorandum.
They need an implementation plan.
We recommend that foreign-invested enterprises undertake the following exercise during the next 30 days.
Days 1–7: Build the Workforce Map
Prepare one consolidated list covering everyone performing services for the Vietnam business.
Include employees, part-time personnel, short-term personnel, contractors, consultants, managers, controllers, expatriates and outsourced workers.
Do not rely solely on the HR employee list.
Days 8–14: Run the Classification Test
Review the legal and operational relationship for each non-standard worker.
Pay particular attention to individuals described as consultants or independent contractors who in practice work under company direction and supervision.
Identify personnel newly captured by compulsory social insurance or unemployment insurance requirements.
Days 15–20: Reconcile the Data
Compare:
Labor contracts ↔ Payroll ↔ PIT filings ↔ Social insurance filings ↔ Corporate records ↔ Work permits
Investigate every material discrepancy.
Days 21–25: Quantify Exposure
Calculate:
- missing contributions;
- potential historical arrears;
- applicable late-payment amounts;
- revised contribution ceilings;
- impact of minimum wage changes; and
- expected annualized 2026 payroll cost.
Management should understand the financial number—not merely the legal issue.
Days 26–30: Remediate
Correct classifications and registrations where necessary.
Update:
- labor contracts;
- contractor templates;
- payroll software;
- HR policies;
- onboarding procedures;
- manager/director records;
- work-permit tracking; and
- internal compliance controls.
Document the remediation exercise.
A documented compliance review can be valuable evidence of responsible corporate governance if questions subsequently arise.
- Five Questions Every Vietnam CEO or CFO Should Ask This Month
A foreign investor’s senior management should be able to answer five questions:
- Do we know everybody performing work for our Vietnam business—not merely everybody appearing on payroll?
- Could any of our consultants or contractors legally be regarded as employees?
- Have we checked whether directors, managers, controllers and legal representatives are correctly treated for compulsory insurance purposes?
- Do our payroll, PIT, social insurance, labor-contract and corporate records reconcile?
- Have we quantified the additional 2026 employment cost and any historical exposure?
If management cannot confidently answer all five, a targeted compliance review is warranted.
- What Should New Investors Build Into Their Vietnam Business Plan?
Companies entering Vietnam in 2026 should incorporate the new environment into the investment model from the beginning.
Employment compliance should form part of the market-entry workstream alongside licensing, tax, land, corporate structuring and investment incentives.
Before commencing operations, investors should establish:
- A compliant workforce model
Determine which functions will be performed by employees, expatriates, contractors and outsourced service providers—and test the model legally before implementation.
- A realistic employment-cost model
Budget not only gross salaries but employer insurance contributions, minimum wage developments, benefits, foreign-worker costs and compliance administration.
- Integrated payroll and compliance systems
The company’s payroll, tax, insurance and HR systems should be designed to produce consistent data.
- Contractor controls
No department should be able to engage long-term “consultants” without HR or legal review merely because the individual will not appear on payroll.
- Foreign-worker planning
Work-permit requirements and exemptions should be analyzed before expatriates commence work, not after they arrive in Vietnam.
- The Bigger Picture: Vietnam Is Becoming More Investable—and Less Forgiving
Foreign investors should not interpret these developments simply as Vietnam becoming more burdensome for employers.
There is another side to the story.
Vietnam is professionalizing its labor market.
Greater insurance coverage, clearer employment rules, more systematic workforce information and digital government administration are part of the country’s evolution into a more sophisticated investment destination.
For serious long-term investors, regulatory modernization can be positive. Greater transparency and more consistent administration ultimately contribute to a more predictable business environment.
But there is a trade-off.
A more sophisticated regulatory system is also a less forgiving regulatory system.
Business practices that survived because information was fragmented, classifications were rarely tested or administrative systems did not communicate effectively with each other are becoming progressively more difficult to maintain.
That is why the 2025–2026 reforms should not be left exclusively to HR departments.
They belong on the agenda of:
CEOs, CFOs, general counsel, investment committees, compliance officers and M&A teams.
Conclusion: Audit Before the Government Does
Vietnam remains one of Asia’s most attractive destinations for manufacturing, services, technology, infrastructure and long-term foreign investment.
But the country’s employment framework is moving rapidly toward broader coverage, digital administration and stronger enforcement.
The practical response for investors is straightforward:
Map. Classify. Reconcile. Quantify. Remediate.
Map everyone working for the business.
Classify each relationship correctly.
Reconcile employment, tax, payroll and insurance data.
Quantify the financial exposure.
Remediate problems before they become enforcement cases or transaction liabilities.
The companies best positioned for Vietnam’s next phase will not necessarily be those that spend the least on employment compliance.
They will be those that understand the true cost of their workforce, build compliance into their operating model from day one, and identify problems before increasingly sophisticated government systems identify them first.
For foreign investors in Vietnam in 2026, that is no longer simply good HR practice.
It is good investment strategy.
***
For more information on the above, please do not hesitate to contact the author Dr. Oliver Massmann under [email protected]. Dr. Oliver Massmann is the General Director of Duane Morris Vietnam LLC.