(a) No, there is no specific legislation.
However, under the Labor Code, which has been effective since early 2021, a worker who performs a job under the management, administration and supervision of an employer and receives remuneration from such employer will likely be classified as an employee of that employer. As a result, if the relationship meets this description, the individual should be treated as an employee.
(b) No, there is no specific legislation from either a tax or social security perspective. However, if a contingent worker is concluded to have de facto employment with an employer, the employer would be required to contribute compulsory social/health/unemployment insurances for the employee to the mentioned insurance fund.
(c) No, there is no specific legislation. Pension is part of the compulsory social insurance. See the social security analysis above.
(a) Yes. According to Vietnamese law, a contingent worker is classified as an employee if the individual works for an employer on an agreement basis, is paid a salary and is managed, administrated and supervised by such employer. Otherwise, the contingent worker is not considered an employee and is, therefore, excluded.
(b)
- Tax: Yes. A resident contingent worker who does not sign a labor contract or has a labor contract with a term of less than three months is subject to provisional 10% personal income tax (PIT) withholding for each remuneration payment above VND 2 million (approximately USD 87). However, PIT can be waived if the total taxable income of the contingent worker after deducting family deductions (personal deduction: VND 11 million/month, dependent allowance: VND 4.4 million/month/dependent) does not reach the minimum taxable income.
A nonresident contingent worker is subject to 20% PIT on remuneration.
- Social security: Yes. According to Vietnamese law, matters related to compulsory social security/social insurance only arise if the contingent worker meets the requirements to be classified as an employee (see point (a)). Otherwise, the contingent worker is not considered an employee and is, therefore, excluded.
(c) Yes. Pension is a part of the compulsory social insurance scheme, see point (b) above.
There are no new developments coming up.
However, the following new developments have recently taken effect:
- The Labor Code 2019 specifies that a worker without labor relations is a worker who works without a labor contract. Accordingly, a contingent worker who is a freelancer or independent contractor may fall into this category. Certain regulations in the Labor Code (e.g., labor conditions) would be applicable to these workers.
- In addition, according to the Labor Code 2019, where the two parties provide a different "label" (other than "labor/employment contract") to their agreement but the agreement includes provisions on a paid job, wage and details the management, administration and supervision of a party, such agreement will still be regarded as a labor contract. This means that even if a contingent worker signs a contract with a name other than "labor/employment agreement," but the nature of such contract is actually an employment agreement, such contract may still establish a labor relationship that binds both the employer and the contingent worker; and, accordingly, the contingent worker will eventually be classified as an employee.
With the rise in digital platform services, we are seeing an increasing global trend in case law and legislation aimed at protecting platform workers' labor rights. For more insight on these developments, along with other employment law updates, click here.
The main employment law risk is misclassification. If contingent workers are classified as employees, they will be entitled to greater rights and benefits as regulated under Vietnamese law.
A finding that an individual or a contingent worker is an employee would give them greater labor and employment law rights. An employee has extensive rights, including the right not to be unfairly dismissed, right to statutory redundancy pay, statutory leave regimes, working time and minimum wage rights, etc.
Misclassification will carry higher costs and obligations, potential reputational risk and more restrictions on managing the relationship for the employer. If a contingent worker is classified as an employee, but the employer fails to provide such employee with their entitled rights and benefits, the employer may face administrative penalties and even criminal sanctions (illegally terminating/dismissing the employee or forcing the employee to resign due to personal motives causing serious consequences).
Classification of contingent workers has no impact on the tax treatment of the workers' income because withholding is required for both employees and contingent workers, except for the special rule on provisional 10% PIT withholding in certain cases mentioned above.
For tax purposes, the employer or the entity hiring contingent workers has the responsibility of withholding proper PIT based on the residency or nonresidency status of the individuals.
In general, there is no difference from a tax perspective for contingent workers and regular workers, as withholding is required in both cases. Failure to withhold the proper PIT would expose the entity to 20% penalty of underpaid PIT plus interest at 0.03% per day. There is no required notification for tax purposes.
The main risk is misclassification, leading to the employer's liability for failure to pay employer's social security contributions and failure to withhold the employee's social security contributions.
The consequences would be compulsory submission of 100% of the amount due plus monetary penalties (on a case-by-case basis) and interest on the amount due.
Breach of regulations on contribution to compulsory social insurance may result in criminal sanctions (monetary sanctions, imprisonment, prohibition from holding certain positions/jobs).
There is a misclassification risk. If the employer takes the view that individuals are self-employed, but the relevant authorities subsequently conclude that they should have been classified as employees, the company is at a high risk of liability for failure to contribute the employer's social security contributions and failure to withhold employees' social security contributions (for pension purposes) for the whole period of the misclassification.
The consequences would be compulsory submission of 100% of the amount due plus monetary penalties (on a case-by-case basis) and interest on the amount due.
Breach of regulations on contribution to the compulsory social insurance may result in criminal sanctions (monetary sanctions, imprisonment, prohibition from holding certain positions/jobs).
No.
If the individual (or contingent worker) is classified as an employee, but the employer evades payment of social security premiums for such individual or illegally dismisses the individual, the employer will commit criminal offenses and, therefore, will be subject to criminal sanctions (monetary sanction, imprisonment, prohibition from holding certain positions/jobs).