The Vietnamese government recently passed a decree limiting the number of foreign employees allowed to work in local businesses and organizations. Decree105/2003/ND-CP passed on September 17, 2003, limits the maximum number of expatriate employees at 3% of the total workforce or not more than 50 foreign employees per company.

Foreigners employed in Vietnam must be 18 years or older, be in good health, have no criminal convictions, and have specialized knowledge. Those who are planning to work in Vietnam for three months or more must apply for a work permit with the local labor department in the provinces and cities. Work permits will not be able to exceed 36 months. However, foreigners holding key positions in companies will not require working permits. For example, directors or deputy directors, executive committee members, general directors and deputy general directors, will be exempt from the work permit requirement.

This decree is expected to further hinder the amount of foreign direct investment entering into Vietnam. The country´s heavy income taxing on high-wage earning Vietnamese employees has also created an obstacle for companies wanting to hire more local white-collar workers.

Under the current tax structure, Vietnamese workers earning more than $200 per month must pay 50% in income tax as well as taxes for social insurance and other tax surcharges. Thus, Vietnamese employees taking home $2,000 after taxes per month may actually cost a company almost $6,000 a month. Many foreign companies had previously chosen to hire foreign employees who were not liable for these high taxes. However, the recently passed decree will undoubtedly put greater strain on multinational companies in Vietnam. Presently, there are more than 50,000 foreign workers in Vietnam with work licenses. According to the Ministry of Labour, Invalids and Social Affairs, almost half of these workers are employed in Ho Chi Minh City with joint ventures or foreign-invested companies.