How to pay and manage Vietnamese contractors: A practical guide
Complete guide to paying contractors in Vietnam: Wise vs PayPal fees, tax requirements, currency considerations (USD vs VND), and contractor management tools.
If you're paying independent contractors in Vietnam, you need to handle payment, understand currency preferences, and manage the contractor relationship effectively. The payment part is straightforward once you know the right method. The compliance part—ensuring proper contractor classification, using written agreements, and managing currency preferences—is where most foreign businesses struggle.
This guide walks through what you actually need to do. Then we'll show you where Kontrable helps organize the work.
The main things you need to do
1. Use Wise for payments. It's the cheapest and most reliable way to pay Vietnamese contractors. Wise costs $3-8 per transfer with real mid-market exchange rates. PayPal costs $5-15 and has worse exchange rates. Traditional bank transfers cost $15-40 and take 3-7 days. Use Wise.
2. Ask about currency preference. Most Vietnamese contractors prefer USD for stability and international purchasing power. The Vietnamese dong (VND) can fluctuate. Always ask the contractor which currency they prefer before setting up payments.
3. Use a written contract. Document the contractor relationship with a clear service agreement covering scope, deliverables, payment terms, currency, IP ownership, confidentiality, and explicit statement that they're an independent contractor (not an employee).
4. Ensure proper contractor classification. The contractor must control how they work, use their own tools, work for multiple clients, and be project-based. Don't set their hours, provide equipment, or require exclusive work.
5. Keep payment records. Maintain documentation of all payments made. As a foreign company, you typically don't withhold Vietnamese taxes, but you need records for your own country's tax compliance.
That's the foundation. Everything else builds on these five things.
Payment methods: What actually works
For paying Vietnamese contractors:
Use Wise. It's the cheapest, fastest, and most transparent way to pay contractors in Vietnam.
Why Wise is best: It charges $3-8 per transfer with real mid-market exchange rates—no markup. PayPal charges $5-15 and has worse exchange rates. Traditional bank transfers cost $15-40 and take 3-7 days. For regular payments, Wise saves you money and time.
How to set up: Create a Wise business account (free). Get the contractor's bank details (account number, bank name, SWIFT code). Send USD or VND to their account. Wise converts at mid-market rate if needed. The contractor receives money in 1-2 business days.
What about PayPal?
PayPal is widely accepted in Vietnam and offers instant transfers, but it charges $5-15 per transaction with worse exchange rates than Wise. For small one-time payments or if the contractor specifically prefers it, PayPal works. For regular payments, use Wise.
What about Payoneer?
Payoneer is popular with Vietnamese freelancers and charges $5-10 per transfer with 1-3 day delivery. It's useful if the contractor already has an account and prefers it. But Wise is still cheaper and faster.
What about traditional bank transfers?
Avoid them. They cost $15-40 per transaction and take 3-7 days. Use Wise or PayPal instead.
Currency: USD or VND?
Most Vietnamese contractors prefer USD for stability and international purchasing power. The Vietnamese dong (VND) can fluctuate, and contractors want certainty on what they're earning.
Tech workers especially prefer USD because they're paid by international clients and need stability. USD also has better long-term purchasing power than VND. Some contractors may prefer VND for local expenses, but this is less common in the tech sector.
Always ask your contractor which currency they prefer before setting up payments. Have the conversation upfront so both sides know exactly what's being paid. If they're flexible, USD is often simpler for international transfers.
Tax and compliance requirements
When hiring contractors in Vietnam, tax obligations are straightforward: the contractor is responsible for their own taxes. You don't withhold taxes or file anything with Vietnamese tax authorities.
Your responsibilities: Ensure the worker is truly an independent contractor. Have a clear written service contract. Keep documentation of all payments. Don't withhold Vietnamese taxes. Ensure proper contractor relationship (they control their work, use their own tools, work for multiple clients, are project-based).
Contractor's responsibilities: They handle their own tax compliance with Vietnamese authorities. They register with tax authorities if required. They file tax returns and pay income tax on freelance earnings. They handle VAT obligations if applicable. They keep records of income and expenses.
Important note: As a foreign company paying a Vietnamese contractor, you typically don't have tax withholding obligations in Vietnam. The contractor handles their own tax compliance. Consult with a tax professional in your country about reporting requirements in your jurisdiction.
Contractor vs employee classification
One mistake businesses make is treating contractors like employees. Vietnam has labor laws that distinguish between the two, and misclassification can create legal risk.
A proper independent contractor relationship means they control how work is done, use their own tools and equipment, work for multiple clients, and are engaged on a project basis with defined deliverables. They shouldn't have set working hours, provided equipment, exclusive work requirements, or ongoing employment-like arrangements.
Document the relationship carefully with a written contract that explicitly states independent contractor status.
Why hire Vietnamese contractors?
Vietnam has emerged as a major tech outsourcing destination with excellent advantages. Rates are 30-50% lower than Western countries while maintaining quality. The country has a growing tech talent pool with skilled developers. The workforce is dedicated and reliable. English proficiency is improving in the tech sector—many contractors speak English well enough for international work. Time zone overlap with Asia-Pacific region (ICT is UTC+7) is good for regional collaboration. Vietnam has an expanding startup and tech industry with modern development practices.
Common mistakes and how to avoid them
Mistake 1: Using expensive bank transfers. Traditional international wire transfers cost $15-40 per transaction with poor exchange rates. Over a year, paying a single contractor, this costs thousands extra.
Solution: Use Wise ($3-8) or PayPal ($5-15). You save 60-80% on transfer fees.
Mistake 2: Not asking currency preference. You assume VND is fine, but the contractor wants USD for stability. They're frustrated because you're not protecting their earnings from currency fluctuation.
Solution: Always ask which currency they prefer before setting up payments. Most tech contractors prefer USD.
Mistake 3: No written contract. Verbal agreements lead to disputes about scope, deliverables, and payment terms. Without documentation, there's no clarity when disagreements arise.
Solution: Always have a written service agreement before starting work. Cover scope, deliverables, payment terms, currency, IP ownership, confidentiality, and termination terms.
Mistake 4: Ignoring time zone differences. Vietnam is UTC+7, which means limited overlap with US West Coast hours. You expect real-time responses and coordination.
Solution: Establish clear communication windows upfront. Use async tools (Slack, email, project management software). Vietnamese contractors are often flexible with hours for international work.
Mistake 5: Misclassifying employees as contractors. You treat a contractor like an employee—setting hours, providing equipment, requiring exclusive work. This creates legal risk.
Solution: Ensure true contractor relationship. They control how work is done, use their own tools, work for multiple clients. Document this in the contract.
Frequently asked questions
Q: Should I pay Vietnamese contractors in USD or VND? A: Most Vietnamese tech contractors prefer USD for stability and international purchasing power. Always ask your contractor which currency they prefer before setting up payments.
Q: Do I need an EOR platform for Vietnamese contractors? A: No. EOR is for hiring employees internationally. Vietnamese contractors handle their own tax compliance. You just need a good payment method (Wise) and the ability to organize contracts and payment records.
Q: What's the best payment method for Vietnam? A: Wise offers the lowest fees ($3-8) and best exchange rates. PayPal is also popular but has higher fees ($5-15). Avoid traditional bank transfers ($15-40).
Q: Do I need to withhold Vietnamese taxes? A: No. As a foreign company paying a Vietnamese contractor, you typically don't withhold Vietnamese taxes. The contractor is responsible for their own tax compliance.
Q: Do I need a local presence or business registration in Vietnam? A: No. You're paying independent contractors for services. You don't need a Vietnamese business entity, registration, or tax ID. The contractor handles their own compliance.
Q: What should be in a contractor agreement for Vietnam? A: Include scope of work, deliverables, payment terms, currency, independent contractor status, IP ownership, confidentiality, and termination terms. A simple written agreement protects both sides.
Getting started
If you're paying Vietnamese contractors, here's the process:
- Set up Wise business account
- Ask contractor for currency preference (USD or VND)
- Get contractor's bank details or Wise account
- Create written service agreement
- Agree on payment schedule
- Keep records for your tax purposes
- Maintain contractor contact and documentation
Kontrable helps with steps 1, 3, 4, 5, 6, and 7 by organizing contractor information, tracking payments, managing contracts, and storing invoices. You stay in control of your payment method and use Wise directly.
If you're managing a few contractors, a spreadsheet works. If you're managing dozens or coordinating across a team, Kontrable saves time and keeps contractor data organized.
Ready to get organized?
[Start a free trial of Kontrable] – Get invoice workflows, payment tracking, and contract storage. Try it free.
