FAQs on Payroll - Labor - Insurance

Crowe Vietnam has compiled a list of frequently asked questions on Payroll, Labor, and Insurance, along with expert answers from our professionals. This resource helps you stay informed with practical insights to ensure your compensation, benefits policies, and payroll operations remain fully compliant with applicable legal regulations.

***Please click on each question below to view the detailed answer.

I. Overview of Payroll Processing

1. What legal regulations govern payroll activities in enterprises in Vietnam, and how are they applied? What are the potential risks in case of non-compliance?

2. Statutory insurance contribution rates

In the course of its operations, an enterprise must ensure full compliance with statutory insurance contribution requirements in Vietnam. Accordingly, Crowe Vietnam has compiled the applicable contribution rates for mandatory insurance schemes for both Vietnamese and foreign employees.
Please refer to the details here.

3. Salary and allowances incurred upon hiring employees in Vietnam

4. How should payroll activities be understood in an enterprise? What are their functions and responsibilities, and how do they differ from accounting tasks?

Payroll processing in an enterprise is a structured procedure that includes: collecting employee working time data, calculating salaries, processing payments, and accurately recording payroll expenses into the accounting system.

For more information on the payroll process within an enterprise, including the roles and responsibilities of related departments and individuals, please refer to Question 5 below.

5. What specific tasks are typically included in payroll processing within an enterprise?

No.	Implementation Step	Person in Charge	Detailed Description	Estimated Time (for small and medium-sized enterprises)	Applicable Forms/Documents
1	Record information and data for payroll processing	Person in charge at relevant departments	– Record the working hours of each employee (including regular working hours, overtime, and leave) – Record information about allowances and bonuses for each employee	Daily + 01 day at the end of the payroll period	Timesheet, overtime tracking sheet, leave tracking sheet, allowance and bonus tracking sheet
2	Verify and confirm data	Human Resources Department	– Collect and verify the above data with relevant departments to ensure accuracy and completeness	1 day	Consolidated payroll data sheet
3	Prepare payroll, tax, and insurance declarations	Payroll Accounting	– Based on verified data from the Human Resources Department and relevant regulations, the payroll accounting team calculates the detailed salary payable for each employee, along with taxes, insurance, and union fees.	1 day	Payroll sheet
4	Review and approve	Chief Accountant, Director	Review and approve the payroll.	0.5 days	Approved payroll sheet
5	Prepare payment order	Payroll Accounting	Prepare a salary payment request	0.25 days	Payment request
6	Process salary payment	Cashier/Payment Accounting	Process salary payments for each employee and settle amounts payable for taxes, insurance, and union fees.	0.25 days	Bank statement/payment voucher
7	Distribute payslips and record transactions	Payroll Accounting, Payment Accounting/Cashier	Distribute payslips to employees and record payroll transactions in the accounting system.	0.25 days	Payslip

6. What is the appropriate and effective organizational structure for a payroll department?

Typically, payroll tasks are handled by a dedicated individual who proactively coordinates with relevant departments such as Human Resources, Tax, and Timekeeping to collect the necessary information for preparing payroll sheets, personal income tax (PIT) declarations, and social insurance filings.

In cases where the enterprise has a large number of employees, one or two additional staff may be assigned to support the detailed tasks within the payroll process. You can find more information on the specific responsibilities of the payroll function in Question 5.

Depending on the company’s size, the payroll function may be part of the Accounting or Human Resources department, or in many cases, it operates independently under the direct supervision of the Board of Management to ensure payroll data confidentiality.

7. Which internal and external authorities are responsible for inspecting and supervising payroll activities in an enterprise?

Typically, payroll activities in a company are subject to inspection and supervision by the following individuals and entities:

Internal to the Company:

Individuals/departments directly involved in the payroll process (see more in question 5)
Head of Human Resources, Chief Accountant, and Board of Directors for review and approval
Internal Control Department
The company organizes its own team to inspect compliance with labor laws and report the results of self-inspection online here

External to the Company:

Department of Labor, Invalids, and Social Affairs inspects activities related to compliance with labor laws at the company
Social Insurance Agency for activities related to mandatory insurance
Tax Authority for activities related to Personal Income Tax and Corporate Income Tax

8. What are the key criteria for recruiting staff into the payroll department of a company?

Key Criteria for Recruiting Personnel for the Payroll Department:

Solid professional expertise: mastery of payroll calculation methods and procedures; strong understanding of relevant regulations (Labor Law, Social Insurance, Personal Income Tax, etc.)
Strong sense of information confidentiality
Attention to detail, accuracy, good memory, and a passion for working with numbers
Ability to grasp, synthesize, and organize work effectively
Proficient in data processing and analysis
Strong computer skills: especially Excel proficiency, and familiarity with HR management systems, payroll, and timekeeping software available in the market
Self-motivated with a proactive learning and professional development mindset

9. How to optimize the payroll processing procedure in an enterprise?

Businesses can optimize their payroll management process in several ways:

Switch to an automated payroll system

Manual payroll processing is time-consuming and labor-intensive for the HR department. Printed payslips are easily lost and are not an environmentally friendly solution in the workplace, not to mention the high risk of errors due to incorrect entries and calculations.

This is why payroll software can significantly enhance payroll management efficiency. An automated system provides a higher level of security and accuracy in all calculations, from salaries, bonuses, and overtime payments to taxes. Additionally, you will spend less time on payroll reports, allowing you to allocate that valuable time to more impactful business activities. Your employees can also easily access their payment details and payroll history online, making automation a win-win for both parties.

Consolidate payroll schedules

Some businesses maintain various types of employment contracts, such as permanent, temporary, seasonal, shift-based, freelance, or contract-based workers. These companies often separate payroll schedules for each group. Monthly, weekly, or bi-weekly payment schedules may make sense in other contexts, but for payroll management, these processes can easily lead to duplicate errors.

To minimize risks and handle payroll correctly, you should pay all employees on the same schedule. Similarly, since payroll involves more than just calculations and payments, your responsible staff also need to handle other tasks, such as tax reporting or compliance with regulations. Therefore, allow them to focus entirely on one critical task at a specific time.

Create a transparent payroll policy

Common payroll management issues—such as employee misclassification, overpayment, or underpayment of taxes—can be significantly reduced by establishing an accurate and transparent payroll policy. The key is to provide employees with clear guidelines regarding timekeeping, resignation, expense reimbursement, employee classification, salary/bonus determination, and the company’s payroll system to address wage-related concerns. Create a policy that is easy to understand and accessible to all employees, both current and future. Additionally, ensure employees know who to contact when issues arise.

Encourage employee feedback to improve payroll management

Another way to optimize payroll management is to solicit feedback and suggestions from employees. Their input can help you identify unclear aspects of the payroll process that require more attention. You can periodically collect feedback from all levels or incorporate it into an employee engagement survey to better understand employee satisfaction with their work. This approach allows you to detect and address workplace issues promptly before they escalate.

Source: adecco.com.vn

II. About Payroll Outsourcing Services

1. To what extent can enterprises outsource payroll services? What are the advantages and limitations of using outsourced payroll services?

Scope of Outsourced Payroll Services:

View detailed description here

Benefits of Using Outsourced Payroll Services:

Cost Reduction: According to HR experts, in a company, an employee’s operational costs can include additional administrative expenses equivalent to 2.5–3 times their monthly salary. Outsourcing payroll services costs roughly the same as hiring a payroll staff member. However, businesses avoid expenses related to training, benefits, annual salary increases, office space, computers, and payroll software investments.
Data Confidentiality: Businesses can ensure absolute confidentiality of payroll information from internal employees.
Accuracy and Timeliness: Accurate and prompt implementation of policies, calculations, and payments for salaries, bonuses, and benefits enables businesses to effectively plan their budgets.
Time Savings and Cost Risk Mitigation: Precise and comprehensive handling of tax and mandatory insurance procedures saves businesses time and minimizes the risk of financial losses.
Increased Operational Productivity: Allows business leaders to focus entirely on business development goals.

Limitations of Using Outsourced Payroll Services:

Despite the benefits mentioned above, outsourced payroll services also have certain limitations. The primary challenge is selecting a reputable service provider.

These companies must have a thorough understanding of legal regulations regarding salaries, bonuses, and administrative procedures. Additionally, they should maintain close relationships with government agencies such as Social Insurance, Health Insurance, and the Department of Labor to ensure a smooth payroll process.

Moreover, these HR-focused companies must be equipped with robust information security systems, software, and servers. This ensures businesses can trust the accuracy of payroll results and the security of their data.

2. What types of enterprises should consider using outsourced payroll services?

Which Businesses Should Use Outsourced Payroll Services

Newly established businesses with limited experience in management and operations
Small and medium-sized enterprises that do not need to maintain a large HR department
Large enterprises with a high number of employees where the administrative and HR department cannot handle the calculation and payment of salaries for a large workforce

For Businesses Managing Payroll In-House, Consider Outsourcing Payroll Services When Facing the Following Signs

Frequent Errors
Errors in payroll processing lead to financial losses. Additionally, they can cause issues with employees and government agencies. A reliable payroll service provider rarely makes significant mistakes, and in the case of unforeseen errors, businesses can receive financial compensation from the provider.
Time-Consuming Process
When employees juggle multiple tasks, relieving them of the burden of payroll regulation and calculation can boost productivity and bring greater benefits to the company. Professional payroll services specialize in handling complex payroll processes. As experts in their field, they perform these tasks faster and more efficiently than your staff.
Rising HR Costs
The cost of maintaining a dedicated payroll HR department may not be a burden for large companies but can be a concern for small and medium-sized ones. If your company has fewer than 20 employees, using an outsourced payroll service is more cost-effective.
Compliance Becomes a Burden
Whenever there are changes in laws or regulations, your employees bear the burden of keeping up with them. A good payroll service provider stays updated on tax regulations, alleviating this burden for your staff.
Frequent Payroll Software Upgrades
Business owners must continuously update and maintain the latest payroll software versions while staying informed about the latest tax regulations. Outdated payroll and tax information can create challenges, requiring constant updates and upgrades. Outsourcing payroll services helps eliminate these unnecessary costs.

Source: symplefy.com

3. What should enterprises consider when selecting a payroll outsourcing provider to ensure quality and minimize risks?

Key Criteria for Selecting a Payroll Service Provider:

Experience in Payroll Services: A provider with extensive experience is more likely to have a well-developed service process and consistently deliver high-quality services.
Clear and Comprehensive Service Delivery Process: This can be assessed through the company’s website and initial discussions regarding the scope and approach to service delivery.
Strong Market Reputation: A reputable provider tends to demonstrate a higher level of commitment to service quality assurance.
Qualified and Sufficiently Resourced Team: The service provider should have a highly qualified workforce with sufficient capacity to handle the assigned tasks.
Formal Confidentiality Commitment: The provider must offer a written confidentiality agreement with clear provisions, supported by internal policies, procedures, and tools to uphold data security and confidentiality commitments.

4. What should enterprises keep in mind when using outsourced payroll services to ensure smooth implementation and maximize efficiency?

Key Considerations for Businesses When Choosing a Suitable Payroll Service Provider:

1. Businesses Should Create a Checklist of Key Considerations

This checklist helps businesses evaluate and compare service providers intuitively, making it easier to identify the provider that meets their requirements.

Businesses need to clearly define the functions they wish to outsource and the level of support needed. Then, prepare a questionnaire with essential questions for negotiations, covering their support team, pricing, fees, software used, and more.

Here are some questions you might ask:

How many staff members will handle the payroll?
What software is used?
What is the initial setup process?
What is the workflow like?
How secure are your processes?
Are there any additional costs I should be aware of?

2. Experience

Businesses should seek a service provider with many years of experience, a strong track record, a solid reputation, and valuable feedback from their clients.

These providers are familiar with business requirements, so they know how to adapt and tailor their services to meet your needs. They stay updated with relevant legal changes, understand how to work with government agencies, and can address payroll issues while providing advice when needed. They can also ensure greater accuracy in all processes.

In other words, their experience brings you peace of mind.

3. Advanced Technology

Cutting-edge technology ensures the security of information and the efficiency of all payroll processes. Providers understand this, so they strive to equip themselves with the latest software and technology. However, since each company invests differently in technology, look for one that meets your specific requirements.

Discuss openly about privacy, data storage, and protection, the number of monthly payrolls, different pay cycles, and any specific needs you have. If possible, request a trial of their software to ensure it is modern, user-friendly, and meets your expectations.

4. Transparent Cost Structure

Hidden fees are unpleasant surprises. For example, some payroll service companies may charge extra for onboarding new employees or when you request a payroll summary report for a specific period. This can lead to significant costs and derail your savings plan.

Therefore, always be cautious of hidden fees, especially when the price seems too good to be true. To prevent issues from hidden costs, ask providers to clearly explain their pricing structure, particularly regarding terms that may incur additional fees in the future. Then, ensure these terms are specified in the service agreements.

5. Additional Services

As mentioned earlier, some companies offer more than just payroll services. These 360^o service providers can handle all your HR functions. Instead of partnering with multiple companies for various HR services, you only need one. This allows you to save time and energy, enabling you to focus on running and growing your business.

Source: adecco.com.vn

III. On Technical and Professional Matters

1. What are the procedures related to labor and payroll for foreign employees working in Vietnam?

1. Employee Record Management and Labor Contract Establishment

Employee records are mandatory for businesses. For foreign workers, these records are also tied to obtaining work permits, residence cards, personal income tax declarations and payments, and procedures for opening bank accounts. Foreigners should be fully aware of the requirements for each type of record, ensuring proper storage and updates to comply with local authorities throughout their employment in Vietnam.

The labor contract is a critical document that establishes the rights and obligations between employees and the business. It also relates to mandatory obligations such as personal income tax, insurance, salary receipt, and overseas salary transfers. Failure to properly manage the format, content, and terms of the labor contract can lead to serious disputes, increased tax costs, or disruptions to other work-related matters for foreigners.

Personal identification documents.
Documents proving qualifications and professional experience.
Appointment decisions.
Offer letters.
Labor contracts.
Housing lease agreements.

2. Work Permits and Temporary Residence Cards

Foreign workers must present a work permit during immigration procedures or upon request from competent authorities. Foreign workers employed in Vietnam without a work permit may face deportation as per government regulations. Employers hiring foreign workers without work permits will also face legal penalties.
Once a valid work permit is obtained, foreigners may be eligible for a temporary residence card, which can be considered a long-term visa. Unlike a visa, temporary residence cards have a longer validity, typically ranging from 1 to 5 years. Holders of temporary residence cards are exempt from visa requirements and can enter and exit Vietnam multiple times for work purposes within the card’s validity period, saving time and costs. Additionally, cardholders can sponsor equivalent-term residence cards for their family members.
With a work permit and temporary residence card, foreigners can open bank accounts, credit cards, savings accounts, and access full banking services like residents.

3. Payroll and Taxable Income Management

Foreign workers’ salaries are not only based on mutual agreements but must also align with their nationality, qualifications, experience, and job position. If the salary is deemed unreasonable, tax authorities may conduct domestic and international audits, affecting other aspects of the employee’s work.
In addition to salaries, foreign workers may receive benefits such as travel allowances, housing allowances, accommodation, insurance, children’s school fees, or discount cards. These benefits may or may not be subject to personal income tax, depending on the specific case. Many foreigners have faced additional personal income tax liabilities and penalties due to improper management of these income sources.
Foreign workers’ salaries can be paid in USD or other foreign currencies, with each bank having different requirements for such payments.

4. Mandatory Social Insurance and Health Insurance

Foreign workers in Vietnam are required to participate in mandatory social insurance if they hold a work permit, professional license, or practice certificate issued by Vietnamese authorities and have an indefinite-term labor contract or a fixed-term labor contract of at least 1 year with an employer in Vietnam.
From January 1, 2022, foreign workers must contribute 8% of their monthly salary to the retirement and death benefit fund. Employers, meanwhile, contribute based on the employee’s monthly salary as follows: 3% to the sickness and maternity fund, 0.5% to the occupational accident and disease fund, and 14% to the retirement and death benefit fund from January 1, 2022.
Foreigners receiving pensions or monthly social insurance benefits who no longer reside in Vietnam can authorize someone else to receive these payments. Alternatively, they may opt for a lump-sum social insurance benefit upon request.

5. Personal Income Tax Management

To determine the appropriate method for declaring personal income tax (PIT) for foreigners, tax authorities rely on passports, labor contracts, appointment letters/tax withholding documents, and housing lease agreements.
Depending on whether the individual is a resident or non-resident, they must declare and settle PIT for income earned in Vietnam or worldwide income. Taxable items and tax rates differ significantly between residents and non-residents. Failure to properly declare PIT can lead to penalties from tax authorities in subsequent years. A skilled consultant can assist in managing employee records, legal compliance reports, and declarations to ensure accuracy from the outset and for the next 3 to 5 years.
Resident individuals with income earned abroad that has already been taxed overseas can deduct the foreign tax paid. The deductible amount cannot exceed the tax payable as calculated under Vietnam’s tax schedule, apportioned for the income earned abroad. The apportionment rate is based on the ratio of foreign income to total taxable income.
For resident individuals with income from salaries or wages, if their presence in Vietnam in the first calendar year is less than 183 days but reaches 183 days or more within 12 consecutive months from their arrival, the first tax period is the 12 consecutive months from arrival, and the second tax period follows the calendar year. For the first tax year, tax declaration and settlement must be completed within 90 days from the end of the 12-month period. From the second tax year onward, tax declaration and settlement must be completed by the 90th day after the end of the calendar year.
Foreign resident individuals terminating their employment contract in Vietnam must settle taxes with the tax authorities before leaving the country.
The PIT rate for non-residents’ income from salaries or wages is calculated as taxable income from salaries or wages multiplied by a 20% tax rate. Taxable income for non-residents is determined similarly to that for residents.
The tax rate and basis for calculating PIT for resident individuals with income from salaries or wages are based on taxable income from business, salaries, or wages, which includes assessable income. Assessable income is equivalent to taxable income minus the following deductions: family circumstance deductions; insurance and voluntary pension fund contributions; and contributions to charitable, humanitarian, and educational causes.

6. Termination of Employment and Related Procedures

When terminating employment, foreigners need to manage the following documents to avoid potential risks:

Agreement to terminate the labor contract.
Resignation decision.
Work handover minutes.
Labor contract liquidation minutes.
PIT withholding receipts.
Cancellation or return of work permits and temporary residence cards.
Completion of tax settlement procedures and obtaining tax clearance confirmation before leaving Vietnam.