Posted 8.03. 2019 by Cekindo / Last update on 24.03. 2020
Employment of both local and foreign employees must be carried out in accordance with the minimum wage set by the government in Vietnam. For those companies or individuals who are interested in investing or building businesses in the country, apart from the minimum wage, it is extremely important to understand the labour law in Vietnam.
However, hiring a foreigner in Vietnam is not an easy task. This bureaucratic and lengthy process is limited by several quotas and regulations on what positions foreigners can hold.
As we described in Tips on Foreign Employment in Vietnam, foreigners are subject to different regulations in terms of taxes and payroll, and providing relevant training to your HR and accounting departments might not be cost-effective.
In case your projects are short-term or you would like to test the local Vietnamese market first, setting up a legal entity (and closing it later) in order to enable your professionals to legally work in Vietnam is not worth this investment.
In this article, we will discuss different kinds of HR outsourcing in Vietnam and ways how companies can employ foreigners without incorporating a legal entity in Vietnam.
According to the investment law and labour law in Vietnam, foreign-owned enterprises can employ local and foreign employees through intermediaries and can increase or decrease the number of labour according to production needs and relevant laws.
For the employment of foreigners, the employer shall submit the application to the Labour and Welfare Department at least 30 days before the proposed employment. A written report on:
If there is a change of foreign employment, the employer should submit a foreign labour employment demand adjustment in a written report as well.
After receiving the foreign employment report or adjustment report from the employer, the labour force and Social Affairs Department in Vietnam shall inform its final decision to the employer.
Related article: Why It Is Best to Outsource HR for Your Business in Vietnam
Employer of Record (EOR) is a service provider that hires employees on their payroll, but the employees will work for other companies.
In other words, Employer of Record enables employers to hire foreign employees before establishing a physical entity in Vietnam. This is especially beneficial for employers when they would like to expand their business from abroad to Vietnam.
Besides, it also works when companies do not plan to have its operation in Vietnam but would like to outsource their processes such as IT support and customer service.
In general, EOR helps companies manage the following:
Professional Employer Organisations partners with already established small and medium-sized enterprises and provides co-employment services.
While the main purpose of PEO is to help with handling contracts, the contract is between the employee and the client using PEO services. This can significantly reduce the legal risk and streamline the administration.
Related article: HR Outsourcing and How It Impacts Business Performance
The major difference of EOR and PEO is that EOR provider is the full legal employer of the workers on the payroll.
Provided that the EOR vendor is already set up in places that companies want to expand their business to, the company can engage their employees legally in those regions without a legal entity and does not hold responsibilities of any the employment.
On the other hand, PEO vendor is not a full legal employer but a provider that shares employer risks and additional protection for an employee lawsuit. The PEO vendor is not mentioned in an employment contract, so it does not hold legal liabilities.
In general, these two kinds of HR outsourcing fit different workforce strategies.
While PEO is suitable for companies looking for external help regarding HR function, EOR is a perfect solution for businesses that want to expand quickly or even without the hassle of incorporating a legal entity in Vietnam.
Interested in HR outsourcing in Vietnam? At Cekindo, our experienced advisers will help you get employment set up quickly even without a legal entity in Vietnam.
Contact us now to discuss your need of an Employer of Record in Vietnam. Fill in the form below.