Vietnam's strong economic growth and continued foreign investment are supporting demand for workers across manufacturing, services and other sectors. In 2025, Vietnam's GDP grew by 8.02%, while disbursed Foreign Direct Investment (FDI) reached US$27.62 billion, the highest level recorded during the 2021–2025 period. This continued investment is strengthening Vietnam's role in regional supply chains and creating opportunities for businesses looking to establish or expand operations in the country.
Labour costs remain an important consideration for companies evaluating Vietnam as an investment and manufacturing destination. Vietnam's regional minimum wages were increased by an average of 7.2% from 1 January 2026, with monthly minimum wages ranging from VND 3.7 million to VND 5.31 million, depending on the region. These statutory rates provide a baseline for employment costs, while actual labour costs vary depending on factors such as location, industry, job function, skills and experience.
However, assessing labour costs in Vietnam requires more than looking at base salaries. Employers also need to consider compulsory social, health and unemployment insurance contributions, Personal Income Tax (PIT), employee benefits, overtime and other employment-related costs. Vietnam's labour regulations also set requirements around employment contracts, working hours, payroll and employee benefits, all of which can affect the overall cost of employing staff.
This guide examines Vietnam's labour costs in 2026, including minimum wages by region, average salary considerations, employer costs, statutory contributions and key factors that businesses should consider when budgeting for employees in Vietnam.
Operating Costs for Businesses in Vietnam
By definition, operating costs are all the expenses incurred by companies daily to run a business. However, the cost of running a business varies based on your daily activities. While companies involved in buying and selling properties have to include real estate agents and marketing fees in the operating cost, a plumbing company would have to deal with storage and equipment costs.
Moreover, business owners must be aware of the differences between operating expenses and operating costs. Both might sound the same, but they are not. Operating costs include all kinds of expenditures, even operating expenses like rent, utility bills, raw materials, and product delivery charges. Contrary to that, operating expenses are business spending not directly linked with manufacturing the product or delivering the service. It is merely a part of the operating cost.
It is calculated as:
Operating costs = Cost of goods sold (COGS) + Operating expenses (OPEX)
While COGS include direct labour costs, wages, raw material costs, repairs, utilities, tax, and rents, OPEX includes advertising, administrative, R&D, insurance, and office supply expenses.
Types of Operating Costs
Operating costs generally fall into three categories: fixed, variable and semi-variable costs. Understanding how each behaves can help businesses plan budgets and manage their ongoing expenses more effectively.
Fixed costs remain relatively stable regardless of changes in business activity. Common examples include rent, leases and certain salaries.
Variable costs change depending on business activity, production levels or market conditions. These may include raw materials, utilities, packaging, payroll and sales commissions. For example, manufacturing costs may increase as production grows, while marketing expenses may rise during seasonal campaigns.
Semi-variable costs have both fixed and variable elements. A software subscription, for example, may have a fixed monthly cost but increase when additional users are added. Similarly, office cleaning may have a regular monthly charge, with additional costs for occasional deep cleaning. Over time, additional electricity and increased internet usage can also fall into this category.
Why Operating Costs Matter
A clear understanding of operating costs helps businesses prepare accurate budgets, monitor financial performance and plan for changes in spending. It can also support better compliance and tax planning by giving businesses a clearer view of their underlying costs.
For investors and business owners, understanding these costs provides greater visibility into the financial position of a business and supports more informed decisions about growth, investment and resource allocation.
Cost of Doing Business: Understanding Vietnam Labour Costs
The place is still one of the cheapest places in Asia to do business. In 2025, despite rising costs across Southeast Asia, Vietnam maintains its competitive advantage with labour costs approximately 50% lower than China and significantly below Singapore and Malaysia. The cost structure remains attractive for labour, utilities, rent, and taxes in the country, making it an attractive alternative, especially for the higher-priced economies of Asia, including China and Malaysia.
Labour Costs: Still a Key Advantage
Labour cost is often the first metric investors evaluate, and Vietnam delivers. Updated 2025 data shows Vietnam's hourly minimum wage ranges from $0.69 to $0.99 across regions. Let’s briefly compare Vietnam’s labour cost competitiveness:
| Country | Average Gross Annual Income at Minimum Wages | Hourly Minimum Wage (USD) |
| Vietnam | ~$1,591 | $0.76 |
| Indonesia | ~$2,449 | $1.18 |
| Thailand | ~$3,733 | $1.50 |
| Philippines | ~$3,405 | $1.64 |
| Malaysia | ~$4,348 | $1.86 |
Source: https://worldpopulationreview.com/country-rankings/minimum-wage-by-country
Vietnam remains highly cost-effective, especially in manufacturing, textiles, electronics, and back-office outsourcing. Recent surveys indicate Vietnamese factory workers earn approximately $250-400 monthly on average, maintaining significant cost advantages over regional competitors.
Updated Monthly & Hourly Minimum Wages (2026)
Under Decree No. 293/2025/ND-CP, effective 1 January 2026, Vietnam's regional minimum wage rose by an average of 7.2%, replacing the previous rates set under Decree No. 74/2024/ND-CP.
| Region | Monthly Minimum Wage (VND) | Hourly Minimum Wage (VND) |
| Region I (Hanoi, HCMC, Hai Phong, Da Nang) | 5,310,000 | 25,500 |
| Region II | 4,730,000 | 22,700 |
| Region III | 4,140,000 | 20,000 |
| Region IV | 3,700,000 | 17,800 |
Average Salaries by Sector in Vietnam (2025)
As of early 2025, the average monthly salary in Vietnam is approximately VND 8.3 million (equivalent to USD 321). However, this overall figure is significantly skewed by the lower wages in agricultural jobs and rural areas. This can be misleading for businesses when hiring highly skilled positions in major urban centres.
In reality, the cost of attracting talent in Vietnam varies considerably depending on location, specific industry, and the required level of expertise.
High-paying sectors
- Information Technology (IT): 25–40 million VND/month
- Finance and Banking: 20–35 million VND/month
- Manufacturing Engineering: 18–30 million VND/month
Mid-range sectors
- Healthcare and Pharmaceuticals: 15–25 million VND/month
- Marketing and Communications: 12–22 million VND/month
- Education (private sector): 12–20 million VND/month
Entry-level and service roles
- Retail and Hospitality: 8–15 million VND/month
- Customer Support/Call Centers: 8–12 million VND/month
- Factory workers: 6–10 million VND/month
Salaries in major cities like Hanoi, Ho Chi Minh City, and Da Nang are significantly higher compared to rural or smaller provinces, with urban centers paying 39% more than rural areas. According to the General Statistics Office under the Ministry of Finance, the average monthly income in Vietnam during Q1 2025 was VND 10.1 million in urban areas and VND 7.2 million in rural areas.
Mandatory Costs and Employee Benefits in Vietnam
Compulsory Cost
Wages are not the only consideration when hiring someone in Vietnam. Employers must contribute to Vietnam’s social security system, known as SHUI: Social Insurance, Health Insurance, and Unemployment Insurance.
SHUI Contribution Rates
When hiring employees in Vietnam, businesses must account for mandatory contributions beyond basic salaries. Below are the official contribution rates for 2025:
| Category | Employer Contribution | Employee Contribution |
| Social Insurance (SI) | 17.5% | 8% |
| Health Insurance (HI) | 3% | 1.5% |
| Unemployment Insurance | 1% | 1% |
This raises the employer's overall expenses by roughly 21.5% above the gross wage. These figures are essential when calculating the true cost of employment.
There are also salary caps used for calculating these contributions:
- For Social and Health Insurance: Capped at 20 times the base wage (now 46.8 million VND/month)
- For Unemployment Insurance: Limited at 20 times the regional minimum wage
Monthly Direct Cost
Monthly Direct Cost refers to variable workforce expenses such as Overtime Payments and Business Travel or Expense Claims, which can fluctuate based on the employee’s workload, seasonal projects, or changing operational requirements.
For instance, Overtime pay ranges from 130% to 300% of the regular hourly wage, depending on the type of extra work performed, including weekday overtime, weekend overtime, night shifts, and work on public holidays or paid leave. Employees working overtime at night receive an additional 20% on top of their overtime pay.
Overtime
Employees who work beyond their normal working hours are entitled to overtime pay. The minimum rate depends on when the overtime is worked:
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150% of the normal hourly wage on regular working days
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200% on weekly days off
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300% on public holidays and paid days off
Additional premiums apply when overtime is performed at night. Employers should factor these rates into workforce budgets, particularly where roles involve extended or variable working hours.
Monthly Indirect Cost
Monthly Indirect Cost covers benefits that enhance employee well-being and satisfaction, this includes:
- Annual Health Check (required by law)
- Depends on the company policy.
- On average, this cost may vary from US$20 to US$200 per person.
- 13th Month Salary (common practice in Vietnam)
- Equal to 1 month of gross salary/year
- Example: For VND 30.000.000/month (~ US$1.139)=> Monthly equivalent: VND 2.500.000 (~ US$94).
- Performance Bonus
- Typically varies by company policy and industry.
- Some companies budget 1–3 months of base salary annually as a bonus.
- Social Activities
- Often includes team building, year-end parties, workshops, etc.
- Typical budget: VND 1.600.000 (~US$60/person/year).
While these mandatory costs form the bulk of labour expenses, businesses may also offer other optional benefits such as KPI-based incentives, training or transportation allowances, or premium healthcare insurance to attract and retain talent in Vietnam’s competitive labour market.
To better understand workforce cost, here is a step-by-step example of breaking down the cost components and calculating the total salary and mandatory cost.
| No | Description | Rate | Monthly Cost (USD) | Monthly Cost (VND) |
| 1 | Salary and Allowance | | 1139.38 | 30,000,000 |
| | Monthly Gross Basic Salary | | 1139.38 | 30,000,000 |
| | Other Allowances | | - | - |
| 2 | Mandatory Cost and Employee Benefits | | 282.28 | 7,432,500 |
| 2.1. | Compulsory Cost | | 267.76 | 7,050,000 |
| | Employer’s Social Insurance | 17,5% | 199.39 | 5,250,000 |
| | Employer’s Health Insurance | 3% | 34.18 | 900,000 |
| | Employer’s Unemployment Insurance | 1% | 11.39 | 300,000 |
| | Trade Union | 2% | 22.79 | 600,000 |
| 2.2. | Monthly Direct Cost | | 0.00 | 0 |
| | Overtime Payment | | - | - |
| | Business Travel and Expense Claim | | - | - |
| 2.3. | Monthly Indirect Cost | | 14.53 | 382,500 |
| | Performance Bonus | | - | - |
| | 13th Month Salary | | - | - |
| | Annual Health Check | ~US$120/person/year | 9.68 | 255,000 |
| | Social Activities | ~US$60/person/year | 4.84 | 127,500 |
| | 24/7 Accident & Medical Insurance | Depends on salary bracket | - | - |
| | Total Workforce Cost (1 + 2) | | 1421.67 | 37,432,500 |
Trade Union Law Reform (Effective July 2025)
Foreign workers with 12-month contracts are permitted to join or form trade unions under Vietnam’s recently passed Law on Trade Unions. This aligns with international labour standards and increases workers’ bargaining power. *Note: USD to VND exchange rate stands at 26,330 (updated July 2025)
Economic Outlook and Future Projections
Vietnam's economy has kept accelerating. Full-year 2025 GDP growth came in at 8.02%, up from 7.09% in 2024, and the country's second-highest annual growth rate in the 2011–2025 period, with the economy surpassing US$514 billion in size. Industry and construction led the way, expanding 8.95% and contributing over 43% of overall GDP growth, with manufacturing alone growing 9.97%, its strongest performance since 2019.
That momentum has carried into 2026. GDP grew 8.18% year-on-year in H1 2026, up from 7.63% in the same period of 2025, with industrial production rising 10.8%, the fastest first-half industrial growth rate since 2019. The government has set an ambitious 10% GDP growth target for 2026, alongside a goal for the processing and manufacturing industry to account for roughly 24.96% of GDP.
Key economic indicators for 2026:
- GDP grew 8.18% year-on-year in H1 2026, accelerating from 7.63% in H1 2025
- Manufacturing expanded 9.97% in 2025, the fastest pace since 2019, and remains the primary engine of GDP growth
- The government's 2026 target sets manufacturing and processing at approximately 24.96% of GDP
- Vietnam attracted US$34.65 billion in registered FDI in H1 2026 alone, up 61% year-on-year — already tracking well ahead of earlier 2026–2030 annual FDI projection
Tax Incentives for Reducing Average Cost in Vietnam
Global investors looking to set up a company in Vietnam are often worried about how to reduce costs in business. For them, knowing about tax incentives like Corporate Income Tax (CIT) incentives is essential. CIT incentives can considerably reduce the average cost of doing business in Vietnam, as it has preferential tax rates and tax holidays.
While the standard CIT rate is 20%, it can increase up to 50% based on the nature of the project. Also, there are specific provisions for providing 10%, 15%, and 17% preferential tax rates to foreign investors, which can be available either for a specific period or the full tenure of the project.
On the contrary, companies are granted provisions to pay 50% of their taxes or refrain from paying CIT for a certain period if they fulfill certain conditions. It is usually available for 4 years, starting from the first profit-earning year or the 4th revenue-generation year. The Vietnamese government also provides land rental exemptions and customs duty tax incentives.
Final Words
Vietnam offers real advantages for investors weighing manufacturing or service-delivery locations: competitive labour costs, favourable tax policies, and strong economic fundamentals that hold up against regional alternatives. But success here means staying on top of a regulatory landscape that keeps moving, new trade union requirements, wage adjustments, and the incentives available to you. We help you make sense of it, and use it to your advantage.
