Tet Bonus and 13th-Month Salary: Mandatory or Not Under Law?

This English version is translated from the Vietnamese original. In case of any discrepancy, the Vietnamese version prevails.

Are Tet bonuses and 13th-month salary mandatory? This is a question thousands of business owners, chief accountants, and investors ask every time year-end approaches. Many mistakenly believe this is a binding legal obligation, leading to unnecessary labor dispute risks — or conversely, overlook it entirely and inadvertently breach commitments made with employees. This article analyzes common misconceptions, compares them against current legal provisions, and proposes practical solutions for businesses.

Misconception 1: Tet bonuses and 13th-month salary are mandatory under law

This is the most common misconception. Many employees — and quite a few accountants — believe that Vietnamese law mandates that businesses must pay Tet bonuses or 13th-month salary. In reality, this is not the case.

The Labor Code 2019 (45/2019/QH14), at Article 104 – Bonuses, provides:

A bonus is money, property, or other forms of compensation that an employer awards to an employee based on production and business results, and the level of job performance by the employee.

This provision does not impose a mandatory obligation to pay bonuses. The law merely defines what a "bonus" is and establishes the basis for determining bonus amounts (production and business results, job performance level), while whether to pay a bonus, and how much — are entirely within the employer's discretion, unless the business has made a commitment through an employment contract, internal regulations, or a collective labor agreement.

Similarly, the 13th-month salary is not mentioned in any provision of the Labor Code 2019 as an amount that must be paid. This is a common practice at many businesses but is entirely based on agreement, not a legal requirement.

Misconception 2: The 13th-month salary and Tet bonus are the same thing

Many people confuse these two concepts. In fact, they have different natures:

Criterion	13th-Month Salary	Tet Bonus
Legal nature	Agreed amount (usually equal to one month's base salary or contract salary)	Bonus based on business results/performance (Article 104 Labor Code 2019)
Basis for determination	Employment contract, internal regulations, collective labor agreement	Production and business results, level of job performance
Mandatory under law?	No	No
Mandatory under contract?	Yes, if clearly committed to in the contract	Yes, if clearly committed to in the contract or collective agreement
Specific amount	Usually equal to one month's salary; determined by mutual agreement	Determined by the employer

The key point: if a business has included the 13th-month salary in the employment contract pursuant to Article 13 of the Labor Code 2019 (agreement on wages and working conditions), then that amount becomes a contractual obligation — the business cannot unilaterally eliminate it without the employee's consent.

Misconception 3: A business in loss must still pay Tet bonuses

Some employees believe that even if a business is facing operational difficulties, Tet bonuses remain a non-negotiable right. This is only partially correct.

According to Article 104 of the Labor Code 2019, bonuses are determined based on production and business results. This means:

• If a business has no bonus scheme, no commitment in a contract or collective agreement — there is no legal obligation to pay a bonus, even if the business is profitable.
• If a business has a bonus scheme tied to business results, then when business results are poor, the bonus amount may be reduced or zero — provided the scheme allows for this.
• If a contract commits to a fixed bonus (for example: "minimum Tet bonus of one month's salary"), then even if the business incurs losses, it must honor that commitment.

Real-world example: Company A signs an employment contract with Employee B stating "year-end bonus equal to one month's base salary." Even if Company A fails to achieve profit targets in 2026, Company A must still pay this amount because it is a contractual obligation, not a discretionary bonus under Article 104.

Misconception 4: A business can change or cancel bonuses at any time

Many business owners believe that because bonuses are "not mandatory under law," they can change or cancel them anytime without any procedures. This poses significant legal risks.

An employment contract, under Article 13 of the Labor Code 2019, is an agreement between parties on their rights and obligations in the employment relationship. When a bonus amount or 13th-month salary has been included in an employment contract, a collective labor agreement, or a publicly disclosed wage and bonus scheme, they become binding terms. Unilaterally changing them without the employee's consent (or without following proper contract modification procedures as required by law) may result in labor disputes.

Another risk: many businesses have paid Tet bonuses for several consecutive years without including them in contracts but announcing them publicly each year. This practice may create a reasonable expectation for employees and complicate matters when the business wants to stop paying bonuses.

Tet bonus and 13th-month salary: mandatory or not — legal framework summary

To conclusively answer the question are Tet bonuses and 13th-month salary mandatory, two levels must be distinguished:

1. Statutory level: The Labor Code 2019 (45/2019/QH14), Article 104, does not stipulate a mandatory obligation for all businesses to pay Tet bonuses or 13th-month salary. This is a discretionary matter within the employer's decision-making authority.
2. Agreement level: If a business has made a commitment through an employment contract (Article 13 Labor Code 2019), a collective labor agreement, or a publicly disclosed internal scheme — that bonus becomes a legal obligation arising from the agreement, which may be enforced if breached.

In other words: not mandatory under law, but potentially mandatory under contract.

What should businesses do to manage risks?

Based on the legal framework analyzed above, here are practical steps for business owners and chief accountants:

• Review employment contracts: Check whether current contracts contain any provisions regarding 13th-month salary or Tet bonuses. If they do, these are contractual obligations that must be fulfilled.
• Establish a clear bonus scheme: If a business wishes to maintain a flexible bonus policy (tied to business results), it should issue a written bonus scheme clearly stating conditions, basis for determining bonus amounts, and the business's right to adjust them. This aligns with the spirit of Article 104 of the Labor Code 2019.
• Distinguish clearly in contracts: Do not combine the 13th-month salary with monthly salary if it is meant to be a year-end bonus. Ambiguity in contracts generally favors employees in disputes.
• Notify promptly: If in 2026 a business will not pay bonuses or will reduce bonus amounts compared to the scheme, it should notify employees in writing before the customary bonus payment date, explaining the basis according to the current scheme.
• Do not establish bonuses as "precedent" if you do not want to create an obligation: Each bonus payment should be backed by a clear decision with supporting reasons (business results, job performance evaluation), avoiding creating an impression of automatic entitlement.

When should legal advice be sought?

The following situations pose potential dispute risks, and businesses should consult legal counsel before taking action:

• A business wants to stop or reduce the 13th-month salary already included in employment contracts.
• Employment contracts contain bonus provisions that are unclear about conditions and amount determination.
• An employee files a lawsuit or complaint demanding Tet bonus payment that the business believes it does not owe.
• A business is drafting or revising standard employment contracts, wage and bonus schemes, or collective labor agreements.
• A foreign investor wants to assess labor law risks before acquiring or merging with a Vietnamese business.

A&D Law Firm — business legal counsel in Vietnam — provides services including employment contract review, wage and bonus scheme development, and labor dispute resolution consultation. If your business is facing any of the issues mentioned above, our team of lawyers is ready to assist.

This article is provided for general legal information reference only and does not substitute professional legal advice for specific situations. Real-world circumstances may have special features affecting legal outcomes. Please contact A&D Law Firm's lawyers for consultation appropriate to your business's circumstances.