A software company approached us after onboarding a team in Vietnam through a foreign payroll — no local entity, no employment contracts under Vietnamese law. Eighteen months later, they were facing a reclassification audit, social insurance back-payments, and a contractor who had accrued indefinite employment rights without anyone noticing.

Tech employers in Vietnam move fast. Labour law does not. This article covers the five areas where misalignment is most likely — and most costly.

By Michael Lee, Partner, Dilinh Legal — 4 September 2025.

1. Jurisdiction: You Cannot Hire Directly Without a Local Presence

Foreign companies without a registered entity in Vietnam cannot enter into employment contracts with Vietnamese nationals working in Vietnam. This is a hard rule, not a technicality.

Most tech companies work around this in one of two ways: service contracts with individuals, or outsourcing to an Employer of Record ("EOR"). Both carry risks.

Service contracts must be structured carefully to avoid reclassification as employment (see Section 2 below). EOR arrangements shift the employment relationship to a third party — but the foreign company typically indemnifies the EOR for termination costs, which under Vietnamese law can be substantial.

Fixed-term labour contracts also carry a specific risk in Vietnam: after two consecutive fixed-term contracts, the relationship automatically converts to an indefinite-term contract by operation of law. Tech employers using short fixed-term cycles through an EOR should monitor this closely.

Practical step — Before engaging workers in Vietnam through any structure, confirm whether your arrangement triggers Vietnamese labour law obligations. The consequences of getting this wrong — back-dated social insurance, penalties, and involuntary permanent employment — are not easily unwound.

2. Gig Workers and Freelancers: Classification Is a Compliance Risk

Vietnam's Labour Code does not provide a distinct legal category for gig or platform workers. If a freelance arrangement looks like employment — regular hours, direct supervision, fixed monthly payments, employer-provided tools — it will be treated as employment by the authorities.

Misclassification exposes the engaging company to social insurance and health insurance contributions, personal income tax liabilities, penalties, and retrospective claims by the worker.

Contracts with freelancers should be structured to reflect the reality of an independent business relationship:

Practical step — Have legal counsel review your standard freelancer agreements in Vietnam. A contract that works in Singapore or the US may not achieve the same classification outcome under Vietnamese law.

3. Intellectual Property: Assignments Must Be Explicit

Vietnam's IP framework does not automatically vest all work-product in the employer in the way that US work-for-hire doctrine does. Employment contracts for software developers, designers, and engineers must include explicit IP assignment provisions — and those provisions must be drafted carefully.

Key elements for tech employers:

The standard Dilinh IP clause is drafted to be enforceable across jurisdictions — important for tech companies whose IP may be used, licensed, or litigated outside Vietnam.

Practical step — Review existing employment contracts to confirm the IP assignment language is present and sufficiently broad. Contracts drafted for other jurisdictions will often not meet this standard.

4. Non-Competes and Confidentiality: Know What Is Enforceable

Confidentiality clauses are well-accepted and enforceable under Vietnamese law. Non-compete clauses are not explicitly regulated by the Labour Code — but this creates uncertainty, not freedom.

Post-employment non-competes are not automatically void in Vietnam. They can be enforced, but only where they are:

A standalone restraint agreement — governed by the Civil Code's general contractual principles rather than the Labour Code — is more defensible. Including an arbitration clause gives the company a faster, more predictable enforcement mechanism than court proceedings.

Non-solicitation clauses (restricting the poaching of clients or employees) follow similar principles. They are not explicitly regulated, but can be enforceable where they are reasonably scoped and compensated.

Practical step — If your non-compete and non-solicitation provisions are embedded in labour contracts, extract them into standalone agreements. Seek legal advice on whether the current scope and compensation structure would survive a challenge in Vietnam.

5. Overtime: The Numbers Are Firm, the Enforcement Is Increasing

Vietnam's Labour Code caps working hours at 8–10 hours per day and 48 hours per week. Overtime is limited to 40 hours per month and 200 hours per year. With written employee consent and qualifying business circumstances, this can be extended to 300 hours per year.

For tech companies running agile sprints, managing cross-timezone delivery, and operating under release-cycle pressure, these numbers are not abstract. Violations — undocumented overtime, failure to obtain consent, non-payment of premium wages — expose the company to labour inspections, fines, and reputational risk with local employees.

Managing compliance in practice:

Practical step — Audit your current time-tracking and payroll systems. If your systems do not separately record overtime hours and the premiums paid on them, you will not be able to demonstrate compliance to a labour inspector.

The Bottom Line

Vietnam's labour framework is not hostile to tech employers — but it is not designed with them in mind. The jurisdictional rules, classification standards, and IP obligations all require deliberate structuring, not improvisation.

Companies that get this right early build a compliant, defensible employment framework. Those that do not tend to discover the problem during due diligence, at the point of exit, or when a key employee departs.

About the Author

Michael Lee is a Partner at Dilinh Legal, Ho Chi Minh City. He advises foreign-invested companies on labour, corporate, and M&A matters across Vietnam. Michael has been ranked as a leading lawyer in Corporate and M&A by Legal500 and Chambers Asia-Pacific.

If you have questions about your employment structure or contracts in Vietnam, reach out directly to Michael at michael.lee@dilinh.com.