How to hire and pay contractors in Vietnam

How do you hire and pay contractors in Vietnam?

You can hire a genuine independent contractor in Vietnam directly, from overseas, with no local entity: you agree a scope and fee, the contractor invoices you, and you pay them. The tax step that defines the arrangement is a 10% personal income tax on each payment of ₫5,000,000 or more to an individual who has no labour contract, or one shorter than three months. Who operates that 10% depends on where the payer sits: a payer inside Vietnam deducts and remits it at source, while a foreign company with no Vietnamese entity cannot, so the resident contractor declares and settles their own tax instead.1

The catch is that paying someone as a contractor does not make them one. Vietnamese law looks at the substance of the relationship, not the label on the document, so a worker you treat like an employee can be reclassified as one — with back-dated social insurance, back tax and fines. The practical rule is simple: use contractors for genuinely independent, project-based work, and when a contractor becomes a long-term, directed member of your team, convert them to an employee — which an employer of record in Vietnam can do without you opening an entity. The difference between the two, and the cost of getting it wrong, is set out in full in EOR versus independent contractor in Vietnam.

Can a foreign company hire contractors in Vietnam?

Yes. A foreign company can engage an individual in Vietnam as an independent service provider under a civil service contract, and no local entity is needed to do so. What matters is that the engagement is genuinely non-subordinate: the contractor controls how and when the work is done, serves other clients, uses their own tools, and is paid for a result rather than for their time under your direction.

That boundary is drawn by the Labour Code. Under Article 13, it is substance, not the title of the document, that counts: if an arrangement involves paid work, wages and the hirer directing or supervising the worker, it is treated as an employment relationship regardless of what the contract is called.2 So a "contractor" who works fixed hours, reports to a manager, uses your equipment and has no other clients is, in Vietnamese law, an employee — and employing a person triggers a labour contract, social insurance and the roughly 23.5% employer on-cost covered in Vietnam payroll and employer costs. For the contract rules behind that line, see Vietnam's labour law and employment contracts.

How do you pay a contractor in Vietnam? The 10% withholding

From 1 July 2026, a payer in Vietnam that pays an individual with no labour contract — or one shorter than three months — must withhold 10% personal income tax on each payment of ₫5,000,000 or more and remit it, paying the contractor the net amount. The threshold rose from ₫2,000,000 on that date, so guides still quoting the lower figure are out of date (Decree 253/2026/ND-CP and Circular 87/2026/TT-BTC). Below ₫5,000,000 the payer withholds only if the individual asks it to.1

One exception survives the 2026 rewrite: an individual whose only income is this kind of payment, and whose total taxable income after personal deductions will stay below the taxable threshold, can sign a written commitment (Form 08/CK-TNCN) so the payer does not withhold.1 Otherwise the payer deducts the 10%, remits it and gives the contractor a withholding certificate. The contractor then reconciles at the annual personal income tax finalisation — a resident settles against the progressive five-band scale and may get some of the 10% back, or owe more; a non-resident is taxed at a flat 20% on Vietnam-source income. The rates and bands are set out in Vietnam personal income tax for 2026.4

How do you pay a Vietnam contractor from abroad?

If you pay from overseas with no Vietnamese entity, you generally cannot operate the 10% withholding yourself: it is a step for a payer registered for tax in Vietnam, which an offshore company is not. In a genuine contractor arrangement the contractor invoices you, you pay the invoice in full, and the resident contractor declares and pays their own personal income tax — and, above the registration threshold, their own business taxes — in Vietnam.

Two cautions go with that. Some cross-border service payments fall under Vietnam's foreign-contractor tax, which can put a withholding duty back on the payer; whether it applies turns on the specific service, so take advice before the first payment. And paying gross from abroad settles nothing about status: if the person is really an employee, the live exposure is unpaid social insurance and an unsigned labour contract, not the income tax. Where you want the tax handled cleanly in-country, a Vietnamese employer of record puts a licensed local entity in the payer's seat and runs the withholding and payroll for you; our Vietnam employer guides cover the adjacent rules.

The 10% withholding is not a status call

It is easy to assume that if you withhold the 10% you have "done the contractor thing correctly" and the person is therefore not an employee. That is not how it works. The 10% withholding is purely a tax-collection mechanic; it says nothing about whether the relationship is employment.1 The status question is answered separately, by the Article 13 substance test above.2

So two things can be true at once: you withheld the 10% on every payment, and the person was an employee all along. Paying tax through the contractor channel does not cure a misclassification — it just means some tax was collected while the real exposure, unpaid social insurance and the penalty for never signing a labour contract, kept building. Whether an arrangement is lawful turns on the facts, which is also why using a compliant structure matters; see whether an EOR is legal in Vietnam for how the legal-employer line is kept clean.

What is the misclassification risk, and the penalty?

If a contractor is really an employee in substance, a labour inspector can reclassify the relationship from the start. That pulls in back-dated social insurance — about 21.5% of gross for the employer plus 10.5% for the employee, roughly 32% in total, at the rates set out in Vietnam payroll and employer costs — together with back personal income tax, interest and administrative fines. The exposure is retroactive, so it compounds for every month the arrangement ran.

The fine for not signing a required written labour contract is a lump sum tiered by the number of affected workers and doubled for a company, not a per-worker charge (Decree 283/2026/ND-CP, which replaced Decree 12/2022/ND-CP from 10 September 2026; doubling under Article 7).5 In practice the fine is the smaller part; the back-contributions are the real cost. The full exposure, with the tier table and worked figures, is the canonical subject of EOR versus independent contractor in Vietnam, which this page links to rather than repeating.

When and how do you convert a contractor to an employee?

Convert a contractor to an employee once the work stops being independent and project-based: when the person works set hours under your direction, has become a core part of the team, uses your systems, and has no real other clients. At that point the contractor channel no longer fits the facts, and the cleanest fix is to put them on a Vietnamese labour contract. If you have no Vietnamese entity, an employer of record does this for you — its Vietnam-registered entity becomes the legal employer while the person keeps doing the same job for you.

Converting also removes the live misclassification exposure going forward and gives the worker the statutory protection and benefits an employee is owed. Why companies choose this route over opening their own entity is set out in the benefits of using an EOR in Vietnam.

Contractor, household business or employee — which is which?

Three engagement types get confused in Vietnam, and they are taxed and protected very differently. An individual contractor is taxed through the 10% withholding; a registered household business (business individual) pays its own business taxes and can invoice you; an employee sits under the Labour Code with full social insurance. The table compares them on the points that decide which one you actually have.

How EOR Vietnam converts contractors to compliant employees

EOR Vietnam employs your worker through a Vietnam-registered entity and handles the labour contract, payroll, social, health and unemployment insurance, personal income tax withholding, onboarding and offboarding — so a contractor who should be an employee becomes one without you setting up a company. For a Vietnamese national the service fee is a flat US$149 per employee per month, the same whatever the salary, seniority, role, location in Vietnam or headcount, as of October 2026; it is not a percentage of pay. Foreign nationals who need a Vietnamese work permit are quoted separately, because the permit and visa handling differs case by case.

There are no setup, onboarding, offboarding, contract or payslip fees and no hidden fees. A refundable security deposit equal to two months of the employee's employment cost — gross salary plus the statutory employer contributions — is held for the duration of the engagement and returned at the end, less any unpaid amounts. Everything else — salary, the statutory contributions and any statutory or agreed employment payments — is passed through at cost. Each written quote names the employing entity and shows the statutory on-cost separately from the fee; see what an EOR actually costs in Vietnam, or request a costed quote.