What to Know About Outsourcing your HR Processes in Vietnam

HR functions are complex yet they directly affect your company's performance, which why it is best to outsource human resources in Vietnam.

Setting up your workforce in Vietnam is no easy task, both in terms of legal compliance as well as being able to hire & keep skilled workers. Hence, human resources (HR) professionals in Vietnam have a critical role in developing any business as they possess comprehensive knowledge and experience in dealing with the constantly changing Vietnamese regulations. HR outsourcing firms with a long track record in the country can also assist with dealing with the high turnover rates as well as the skills gap which a lot of companies have issues with.

Read About Cekindo’s HR & Payroll Outsourcing Services in Vietnam

Setting up your workforce for a successful entry in Vietnam is complex due to two main reasons that you should be aware of:

  1. Vietnam has a higher turnover rate than average, compared to other countries. The latest data as reported in 2019 is that the average turnover rate in Vietnam stands at 24%, well above the global ideal rate of 10%.
  2. As Vietnam is still considered a “lower income developing nation”, its education system still lags in being able to provide a pool of high-skilled individuals for all industries. According to a recent report on high-demand skills in Vietnam, there is a big shortage in the following areas: Blockchain, Game Development & Business Intelligence.

The benefits of outsourcing HR in Vietnam means that you have the option to entrust all your HR needs, including legal setup of your HR processes as well as recruitment to an established team of HR professionals with enough experience in this market to help you overcome any difficulties.

This article elaborates on the top reasons you should outsource your human resources operations in Vietnam.

1. Cutting Down Staff Turnover Rate

There are various reasons for high staff turnover rates in Vietnam, and understanding those reasons will help you build a team with strong foundations. These reasons are tied back to very traditional culture, a restless young population, and a new era of entrepreneurial enterprises driven by a post-covid digital revolution. Details are as follows:

  • Traditional Culture: Young people traditionally live with their family until they get married. that means that they don’t depend on their paycheck in order to pay their monthly rent. Rent and food are still given to them by their parents, therefore they have a stronger safety net than young people in the western world. If they quit, it will not impact their day-to-day life, so it’s easier for them to quit.
  • The Era of the Side Gig: Young people in Vietnam are starting side businesses at higher rates than ever, especially coming out of covid where people resorted to online businesses. On average 70% of Vietnamese people have a side job separate from their full-time work. This adds a level of uncertainty to your workforce that you should be aware of.

It may be a good idea to evaluate your existing HR performance to start dealing with these problem. An incompetent HR department will bring forth employees’ frustration when their complaints are not properly handled, or when HR hires employees who are not fit for the job.

By outsourcing HR to a professional provider in Vietnam, you can make sure that the right people are hired. HR professionals will evaluate candidates’ personalities and cultural fit, as well as their qualifications and experience. Also, part of an HR service provider’s job is to keep your staff engaged, happy and productive. An HR provider with years of experience with Vietnamese employees, and Vietnamese culture and how that fits in at an international firm is essential to your success.

It is obvious that outsourcing HR can go a long way in helping you retain your company’s employees.

RELATED: High demand skills in Vietnam’s workforce and advice for businesses in 2022

2. Mitigating Risks via Legal Assistance

This is one area in which many businesses in Vietnam really struggle to keep up, as they do not understand how the legal regulations work in Vietnam. Businesses might get even more confused as the laws in Vietnam pertaining to hiring, wages and salaries, insurance claims management, and other benefits are constantly changing. Setting up your HR processes correctly and within the country’s legal framework is essential to maintaining operations smoothly.

By outsourcing HR, you do not have to worry about failure of compliance, which can lead to fines being handed down to you by the ministry of labor. A trustworthy business process outsourcing company will keep you updated as per the latest regulations that you should be aware of and incorporate these into your HR policies.

3. Hiring Skilled and Proficient Employees

Another great benefit of HR outsourcing is it allows your business to find the most qualified and competent person to fill every position. With Vietnam seeing a massive influx of foreign investment as a result of a pivot in the global manufacturing and supply chain away from China, we have seen more and more transitional setup in Vietnam. This means that at the moment there is more competition for Vietnam’s pool of skilled employees than ever before.

You can benefit from HR professionals’ ability to reach more candidates in the shortest period of time, and access passive candidates that may actually be a good fit for your company.

4. Outsourcing Human Resources Reduces Costs

An established HR or PEO agency already has its processes established to find and hire the best workforce for any foreign company looking to do business in the country, making it the most efficient solution. When a foreign company sets up those processes from scratch it will use a lot of your time, resources, and budget for a recruitment system built on trial and error. In terms of the legal side, the more you do alone, the more you will risk unknowingly going against labor code regulations and incurring fines from the government.

About Us

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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Vojtech Zehnalek

Verified by:​

Vojtech Zehnalek, MSc.

Vojtech Zehnalek is the CEO of the Cekindo Vietnam office. He graduated in Economics and International Trade from the University of Economics in Prague, the Czech Republic, and he also earned a Business Degree at the Vlerick Business School in Belgium.

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