Hiring your first employee in Vietnam can feel straightforward: you find the right person, agree on a salary and decide when they can start. Then comes the contract. Should you offer a one-year agreement, choose an indefinite-term contract for an ongoing role, or engage someone as a freelancer?
The answer affects how the relationship can end and which employment, insurance and tax obligations may apply. For foreigners and international businesses, Vietnam’s rules may differ from what they are used to at home. Start by understanding the difference between employment and genuinely independent services.
Under Vietnam’s Labour Code, an employment contract is an agreement between an employee and an employer covering paid work, wages, working conditions, and the rights and obligations of both parties.
Vietnam recognizes two main types of employment contracts:
- Definite-Term Employment Contracts (Hợp đồng lao động xác định thời hạn) – Contracts with a fixed duration and expiry date.
- Indefinite-Term Employment Contracts (Hợp đồng lao động không xác định thời hạn) – Contracts without a pre-set expiry date.
A freelance or service agreement (Hợp đồng dịch vụ) is not a third type of employment contract under labor law; It is a separate arrangement for services, provided the actual working relationship is genuinely independent.
The label alone does not decide the legal status. If a person performs paid work and is managed, directed and supervised by the business in a way that meets the legal definition of employment, the arrangement may be treated as an employment contract even if the document is called a freelance or service agreement.
Quick Comparison: 2026 Contract Framework
| Feature | Definite-Term Employment | Indefinite-Term Employment | Service Contract / Freelance |
|---|
| Governing Law | Labour Code 2019 | Labour Code 2019 | Civil Code 2015 |
| Maximum Term | Up to 36 months | No pre-determined end date | Defined by project or scope |
| Expat Cap | Capped by Work Permit length (Max 2 yrs) | Not permitted for foreign employees | Capped by service agreement terms |
| Resignation Notice | 30 days (12–36 mo) / 3 days (<12 mo) | 45 days | As defined in contract terms |
| Compulsory Insurance | Mandatory (1 mo for locals; 1 yr for expats) | Mandatory | None (Provider handles own tax) |
| Tax Withholding | Progressive PIT scale | Progressive PIT scale | 10% PIT (payments 5,000,000 VND) |
1. Definite-Term Employment Contract (Hợp đồng lao động xác định thời hạn)
A definite-term contract specifies an exact duration and expiry date. For example, a small business or tech startup launching a new service in Ho Chi Minh City or Hanoi might hire a marketing specialist on an initial 12-month agreement to test market demand. Both parties know the expected duration, but the contract remains subject to legal rules on early termination and renewals.
What to Know Before Signing
- Duration: A definite-term contract can be executed for a maximum duration of up to 36 months from its effective date.
- Renewal Limits: When the contract expires and the employee continues working, both parties have 30 days to execute a new contract. Under general rules, you may only sign one additional definite-term contract. Following the second definite-term contract, any subsequent contract must be converted into an indefinite-term contract.
- Foreign Worker Restriction (Crucial Exemption): Foreign employees cannot legally hold an indefinite-term employment contract in Vietnam. Under Article 151.2 of the Labour Code, the employment contract duration for a foreign worker is strictly tied to the validity of their Work Permit (or Work Permit Exemption), capped at a maximum of 2 years per permit term (renewable).
- Compulsory Insurance: A fixed expiry date does not exempt an employer from statutory insurance. Mandatory Social Insurance (BHXH), Health Insurance (BHYT), and Unemployment Insurance (BHTN) apply to local Vietnamese employees under contracts of 1 month or longer. Foreign workers holding a Work Permit under contracts of 12 months or longer are subject to BHXH and BHYT (foreign nationals remain exempt from BHTN).
- Employee Resignation Notice: Employees have the right to unilaterally resign without cause, provided they observe the minimum statutory notice period:
- At least 30 days for contracts lasting from 12 to 36 months.
- At least 3 working days for contracts shorter than 12 months.
2. Indefinite-Term Employment Contract (Hợp đồng lao động không xác định thời hạn)
An indefinite-term contract has no predetermined expiry date. It is standard for ongoing core operational roles where a company is building long-term talent, such as operations managers, chief accountants, or in-house legal counsel.
What to Know Before Signing
- Duration: There is no fixed end date. The contract continues until lawfully terminated by either party or by mutual agreement.
- Applicability: Primarily intended for local Vietnamese citizens. Foreign nationals cannot enter into indefinite-term contracts due to work permit validity caps.
- Employee Resignation Notice: Local employees can unilaterally resign without providing cause by giving at least 45 days' advance notice (unless specific managerial or specialized industry rules apply).
- Employer Termination: An indefinite-term contract is not a guarantee against dismissal, but ending it requires statutory grounds under Article 36 (or formal retrenchment procedures), along with a 45-day notice period and applicable severance pay calculations under Article 46.
Probationary Period Callout (Hợp đồng thử việc): Prior to executing a definite or indefinite employment contract, employers usually institute a formal probation period under Articles 24–27. Maximum probation durations are 180 days for enterprise managers, 60 days for roles requiring a university degree or professional qualification, and 30 days for technical trades. Probationary salary must equal at least 85% of the official role wage.
3. Service Contracts & Freelance Agreements (Hợp đồng dịch vụ)
Not every business need requires a direct employee. A company may engage an independent designer to create brand assets, a translator to localize technical manuals, or a consultant to perform a specific compliance audit. In a genuinely independent arrangement, the business engages a service provider under a civil service contract.
Under Vietnam’s Civil Code 2015, a service contract involves one independent party performing an agreed service for another in exchange for a fee.
What to Know Before Signing
- Duration & Scope: Governed by project milestones, defined deliverables, and commercial timelines. The 36-month labor cap and statutory renewal caps do not apply to genuine civil service contracts.
- Tax Withholding & Invoicing (2026 Rules): When paying an unregistered resident individual freelancer 5,000,000 VND or higher per transaction or installment, the hiring business is required to withhold 10% Personal Income Tax (PIT) at source and provide the individual with an official tax deduction receipt (Chứng từ khấu trừ thuế PIT). Payments under 5,000,000 VND are exempt from mandatory at-source withholding.
- Insurance & Benefits: Independent service providers are responsible for managing their own tax declarations and personal insurance. They are not entitled to employer-funded social insurance, paid statutory leave, public holiday pay, or severance benefits.
Compliance Checklist for Foreigners & Small Business Owners
Before executing an agreement in Vietnam, verify the following core compliance points:
- Verify True Working Relationship: Determine whether the individual works under your direct management, follows set office hours, and uses company equipment (Employment) or delivers an agreed outcome independently (Service Provider).
- Align Foreign Expat Paperwork: Ensure employment contract start and end dates match the exact validity period on the expat's Work Permit or Work Permit Exemption.
- Structure Statutory Contributions Correctly:
- Local Vietnamese Employees: BHXH + BHYT + BHTN (for contracts 1 month).
- Foreign Expat Employees: BHXH + BHYT (for contracts 1 year with Work Permit). Foreigners are exempt from BHTN.
- Bilingual Precedence Clause: When drafting contracts in both Vietnamese and English, include a clear clause specifying which language version prevails in the event of an administrative or legal discrepancy (Vietnamese is required by labor inspectors during official audits).
- Execution Format: Employment contracts generally must be executed in writing or via legally recognized electronic signatures under the Law on Electronic Transactions. Verbal contracts are valid only for temporary work lasting under 1 month.
Final Thoughts
Choosing the right structure in Vietnam comes down to three factors: the degree of operational control, role longevity, and the worker's nationality. Standard international templates rarely align with Vietnamese regulatory requirements, and misclassifying staff carries measurable financial and regulatory exposure.
At Easytiger, we know a generic template cannot answer every question about Vietnam’s regulatory environment. Whether you are hiring your first local team, structuring expat executive agreements, or engaging independent specialists, explore Easytiger to connect directly with vetted local employment lawyers, HR practitioners, and tax advisors.
Disclaimer: This guide is provided for general informational purposes only and does not constitute formal legal or tax advice. Statutory requirements may vary depending on corporate legal structures, administrative locations, worker nationality, and specific operational conditions. Confirm current regulations with a qualified professional in Vietnam prior to executing binding agreements.
