Employment of both local and foreign employees in Vietnam must be carried out in accordance with local labor regulations, minimum wage, social insurance, benefits, and more. For those companies looking to expand to Vietnam and build their team in the country it is essential to understand the local labor codes and regulations. As Vietnam is still a developing country, these regulations tend to change quite frequently.
This article will provide guidance to hiring employees in Vietnam via two types of services:
EOR (Employer of Record): An employee that works indirectly for you in another country via a third party. The employee signs the contract with the EOR provider.
PEO (Professional Employer Organization) is a recruitment provider which helps with recruitment, payroll and creating contracts for SMEs looking to hire within the country.
Read about Cekindo’s Recruitment Services in Vietnam
Hiring a foreigner in Vietnam is not an easy task, compared to hiring local Vietnamese employees. Hiring a foreigner in Vietnam is not an easy task, compared to hiring local Vietnamese employees. 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, as well as immigration rules.
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 always worth this investment. EOR can be a good alternative in this case.
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.
Hiring a Foreigner in Vietnam
According to the investment law and labor law in Vietnam, foreign-owned enterprises can employ local and foreign employees through intermediaries and can increase or decrease the number of employees 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 the recruitment needs must include:
- needs of the job
- number of foreigners employed
- professional level
- work experience
- salary level
- working period
If there is a change of foreign employment, the employer should submit a foreign labor employment demand adjustment in a written report as well.
After receiving the foreign employment report or adjusted report from the employer, the labor force and Social Affairs Department in Vietnam shall inform of its final decision to the employer.
HR Outsourcing in Vietnam with Employer of Record
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 as a first step.
Besides, it also works when companies do not plan to have their operations in Vietnam but would like to outsource their processes such as IT support and customer service
In general, EOR helps companies manage the following:
- Tax filing
- Hiring contracts
- Hiring and background checks of candidate
How is EOR Different from Professional Employer Organisation (PEO)?
Professional Employer Organisations partner with already established small and medium-sized enterprises and provide 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.
The major difference between EOR and PEO is that the EOR provider is the full legal employer of the workers on the payroll.
Essentially an Employer of Record Services provides the fastest most efficient way to set up your workforce in a foreign country without actually setting up a presence there. It’s ideal for a company that wants to outsource its labor or simply do research before fully expanding into that country.
On the other hand, a 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 functions, EOR is a perfect solution for businesses that want to expand quickly or even without the hassle of incorporating a legal entity in Vietnam.
Cekindo is a leading provider of global market entry services in South East Asia. We are part of InCorp group, a regional leader in corporate solutions, that encompasses 8 countries in Asia, headquartered in Singapore. With over 500 legal experts serving over 12,000 Corporate Clients across the region, our expertise speaks for itself. We provide transparent legal consulting, setup, and advice based on local requirements to make your business perfectly fit into the market with healthy growth.
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