Guide · Contractors
Contractor or employee in Vietnam?
When a “contractor” is legally an employee, what reclassification costs, and how to fix the arrangement before an inspection does it for you.
Updated 22 October 2026 · General information, not legal or tax advice
Short answer
When is a contractor in Vietnam really an employee?
Under Article 13 of Vietnam’s Labour Code, any arrangement in which a person does paid work and is managed, directed or supervised by the other party is an employment relationship, whatever the contract is called. So a “contractor” who works set hours, takes daily instructions, uses your tools and works only for you is legally an employee. If an inspector reclassifies the arrangement, the employer owes back-dated social, health and unemployment insurance — about 32% of gross pay between employer and employee — plus unpaid personal income tax, late-payment interest and administrative fines. Withholding 10% income tax on payments to an individual does not change their status. Moving the person onto a proper labour contract, directly or through an EOR, removes the risk.
Warning signs
Signs a contractor is an employee.
- You set their working hours or require them online at fixed times.
- They receive day-to-day instructions and report to one of your managers.
- They are paid a fixed monthly amount rather than per deliverable.
- They work only for you, over a long period.
- They use your laptop, accounts and email address, and appear as staff.
- They take paid leave or are covered by your company policies.
The cost of reclassification
What reclassification costs.
| Back-dated insurance | About 32% of gross pay: 21.5% employer and 10.5% employee social, health and unemployment insurance |
|---|---|
| Trade-union fee | 2% of the insurance salary |
| Personal income tax | Tax under the progressive rates, less any 10% already withheld |
| Interest and fines | Late-payment interest and administrative fines |
| Employment rights | Leave, notice and severance as for any employee |
Source: Labour Code 2019, Article 13; Law on Social Insurance 2024 (41/2024/QH15).
How to fix it
Moving contractors onto proper contracts.
Without a Vietnamese entity, an employer of record can employ the person on a compliant labour contract from an agreed start date. Nhân Kiệt checks their current arrangement, sets the salary so their take-home pay is planned, registers insurance and tax, and keeps you directing the work. Use the employer cost calculator to see the monthly cost.
Questions
Contractors in Vietnam: FAQ
Can a foreign company pay a Vietnamese freelancer?
Yes, for genuinely independent work delivered as a result. If you direct their daily work like an employee, it is employment under Article 13 of the Labour Code.
Does withholding 10% tax make someone a contractor?
No. The tax treatment does not change the substance of the relationship.
What happens if a contractor is reclassified?
The employer owes back-dated insurance of about 32% of gross pay, unpaid income tax, interest and fines, and the person gains employee rights.
How do I convert a contractor to an employee without an entity?
Through an employer of record, which employs them on a Vietnamese labour contract while you continue to direct the work.
Hiring in Vietnam? We handle all of this as your employer.
Nhân Kiệt employs your team, runs payroll, insurance, tax and work permits. Fee: US$99–199 per employee a month, plus VAT.
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