This article covers how Employer of Record (EOR) services in Vietnam can be your gateway to unlocking the country's skilled workforce.
Discover how EORs navigate the intricacies of Vietnamese employment laws, streamline payroll and benefits management, and help you focus on what truly matters - growing your business in one of the more dynamic economies in Southeast Asia.
What is an Employer of Record (EOR)?
To understand the benefits of using an EOR in Vietnam, we must first define it. An Employer of Record is a third-party service provider serving as the legal employer for remote workers in a foreign country. They handle all aspects of employment, such as payroll, taxes, benefits, and compliance with local labour market laws.
An EOR takes on the administrative burden of managing employees in a foreign market so you can focus on your core business. This is especially useful for companies hiring employees in Vietnam, where the labour market laws and regulations can be complex and time-consuming.
The Role of Employer of Record in Vietnam
For businesses looking to hire employees in Vietnam, working with an EOR can provide numerous benefits. Some of the key roles and responsibilities of an EOR in Vietnam include:
1. Compliance with Vietnamese law
Local labour market and regulations in Vietnam can be challenging for foreign companies to navigate. An EOR ensures your business complies with all relevant labour market laws and employment regulations, including minimum wage requirements, working hours, and employee benefits. This can save you time and resources while ensuring your business operates within the legal framework of Vietnam.
2. Payroll Management
Managing payroll for remote workers in a foreign country can be complicated and time-consuming. An EOR simplifies this process by handling all aspects of foreign workers' payroll, including calculating and withholding taxes, making social security contributions, and ensuring timely employee payments. This provides peace of mind for businesses while also ensuring that remote employees are paid accurately and on time.
3. Employee Benefits
In addition to salary, employee benefits are essential to any employment package in Vietnam. An EOR can help you navigate the complex landscape of employee benefits in Vietnam, including health insurance, pension contributions, unemployment insurance, and other benefits required by law. This ensures your employees are well taken care of, which can improve employee satisfaction and retention. The average monthly salary for employees in Vietnam from 2020-2023 was almost VND 8 Million.
4. Legal Support
In the event of legal disputes regarding a labour contract or issues with employees in Vietnam, an EOR can provide legal support and guidance to help resolve conflicts. They can also assist with drafting employment and labour contracts that comply with local labour laws, ensuring your company is protected from potential legal issues. This can save you time and resources while also mitigating potential risks.
5. Employee Onboarding and Termination
An EOR or professional employer organisation can also assist with onboarding new employees in Vietnam. This includes handling all necessary paperwork and ensuring compliance with local regulations. They can also support employee termination, a complex and delicate process in any country.
6 Steps to Hiring Through an EOR in Vietnam
Using an EOR in Vietnam can streamline the hiring process and make it easier for businesses to access the country's talented local workforce. Here are six steps to help you get started:
1. Choose a Reputable EOR Provider
Do your research and choose an EOR provider with experience working in Vietnam. Look for companies with a good reputation, strong track record, competitive salaries, and positive client reviews. This will ensure you have a reliable partner to handle your employment needs in Vietnam.
2. Discuss Your Specific Needs
Every business is unique, and so are their hiring needs. Discuss your specific requirements with an EOR provider to find the best solution for your company. This includes industry-specific regulations, employee benefits packages, and payment schedules.
3. Sign an Agreement
Once you've found the right EOR provider, sign a contract that outlines the responsibilities and services they will provide. This will ensure both parties are clear on expectations and avoid any misunderstandings in the future.
4. Identify Your Employees
Work with your chosen EOR to identify the employees you want to hire in Vietnam. Provide all necessary information and documentation to professional employer organisations to ensure a smooth onboarding process for your new employees.
5. Employee Onboarding
Once an EOR has identified suitable candidates, they will handle onboarding. This includes drafting employment contracts, handling payroll, and ensuring compliance with local labour laws and regulations.
6. Ongoing Support
An EOR will continue to provide support and assistance throughout the employment period, including managing payroll, handling employee benefits, and ensuring employment rate and compliance with all relevant laws and regulations.
Employment Laws and Regulations in Vietnam
Employment law relating to the labour force in Vietnam is governed by the Vietnamese labour Code, which outlines employers' and employees' rights and responsibilities. Some key provisions of this code include:
- Hiring Process: Employers must follow fair and transparent recruitment procedures, including providing equal opportunities for all candidates.
- Employment Contracts: Employers must provide a written employment contract to employees within 30 days of starting work. This contract must include a job description, salary, working hours, and benefits.
- Working Hours: The standard working week in Vietnam is 48 hours, with a maximum of eight hours per day. However, specific industries may have different regulations.
- Overtime: Overtime work is limited to 200 hours per year and must be compensated more than regular hours. This applies if employees are required to work on public holidays.
- Termination of Employment: Employers can only terminate an employee's contract for specific reasons outlined in the labour Code, such as misconduct or redundancy. In case of termination, employers must provide severance pay and other benefits as required by law.
Obtaining a Work Permit in Vietnam
Securing a work permit in Vietnam involves a series of steps. We recommend speaking with specialists to ensure a smooth process when applying for visas. Here’s an overview for those planning a professional venture in Vietnam.
Initiated by the employer in Vietnam, organisations must receive approval from the Ministry of Labor, Invalids, and Social Affairs before commencing work. This application should be applied for at least 15 days in advance before the start date of the employee.
Allow 20 business days for processing.
The employee must:
- Fill out the work permit application
- Satisfy health requirements
- Be an adequality skilled worker to satisfy the job (manager, director or technical level skillset)
- Not have a criminal record and submit a background check
- Have a valid passport
- Supply required photos
- Be 18 years of age
Employee Benefits and Entitlements
In addition to the basic employment rights and regulations outlined in the labour Code, employers must provide various employee benefits and entitlements in Vietnam. These include:
Vietnamese employees are entitled to a yearly leave of 12 days per year after continuous service of at least 12 months. This is increased to 14 days off if they are disabled, minors, and performing poisonous, hazardous, or arduous tasks and to 16 days if their job is categorised as challenging and dangerous work. These amounts increase by one day for every five years of continuous service.
Vietnamese employees are entitled to paid sick leave based on the length of their social insurance contributions. For less than 15 years of social insurance payments, sick leave is 30 days. For 15 to 30 years of payments, it increases to 40 days. And for over 30 years of payments, it becomes 60 days.
Maternity and Paternity Leave
Expectant mothers are entitled to six months of maternity leave with full pay and benefits. This leave can be extended for an additional six months without pay. Male employees are entitled to five days of paternity leave with full pay. This increased to 10 days for multiple births or 14 days if there were childbirth-related complications.
Social Insurance and Health Insurance
Employers must contribute to employees' social insurance fund, which includes health insurance, maternity and sick leave benefits, and retirement pensions. The amount of contribution varies based on the employee's salary and position.
The 13th-month salary in Vietnam
Also known as the Tet bonus, the 13th month salary is a non-mandatory bonus of an extra month’s salary paid to employees before the Vietnamese New Year. This is a common practice in Vietnam and is seen as a way for employers to show appreciation for their employees' hard work throughout the year.
Termination and Notice Period Guidelines
According to the labour Code, employers must provide a minimum notice period of 45 days before terminating indefinite term contracts. The notice period must be at least 30 days for staff with a fixed contract period. Employees are entitled to receive a severance payment equivalent to half a month’s salary for each year worked at the company.
Benefits and Challenges
Working with an EOR provider in Vietnam can offer significant benefits for foreign businesses and investors, including:
- Compliance: An EOR provider ensures that your business complies with all relevant laws and regulations, minimising the risk of penalties or legal issues.
- Cost Savings: Outsourcing employment through an EOR provider can be more cost-effective than setting up a legal entity in Vietnam.
- Efficiency: Partnering with an EOR provider streamlines the hiring and onboarding process, allowing your business to focus on day-to-day operations.
- Expertise: EOR providers have in-depth knowledge of local labour laws and regulations, ensuring that your business remains compliant and avoids potential issues.
However, there are also some challenges to consider when working with an EOR provider in Vietnam, including:
- Language and Cultural Barriers: It is essential to communicate clearly with your EOR provider to avoid cultural or Vietnamese language barriers. Choosing an EOR provider with experience working with international businesses can help mitigate this challenge.
- Limited Control: As the employer of record, the EOR provider controls employment-related matters, such as payroll and benefits. This means businesses may have less control over the hiring and management of their employees in Vietnam. Be sure to check the details of your contract to ensure you are receiving the right amount of support.
Choosing the Right Employer of Record Service in Vietnam
When selecting an employer of record in Vietnam, it is crucial to consider their experience, reputation, and services offered. Some key factors to look for include:
- Experience: Choose an EOR provider with a proven track record of working with international businesses in Vietnam. This will ensure that they understand the local laws and regulations well.
- Customised Solutions: Look for an EOR provider that offers customisable solutions to meet your business's specific needs and requirements.
- Reputation: Read reviews and ask for recommendations from other businesses who have worked with the EOR provider to get a sense of their reputation.
- Additional Services: Some EOR providers may offer other services, such as HR support, legal advice, and visa assistance, which can benefit foreign businesses.
- Cost: Compare the costs of various EOR providers to find one that offers competitive pricing and meets your budget. It is crucial to consider all expenses, such as administration fees and contributions to social insurance.
Expand your business with an EOR in Vietnam
Partnering with an EOR provider in Vietnam is a practical and efficient way for foreign businesses to enter the Vietnamese market. It ensures compliance with local laws and regulations, provides cost savings, and allows businesses to focus on operations.
However, it is essential to carefully consider the challenges and choose an EOR provider with customised solutions and a good reputation in the country. By understanding employment rights and benefits and selecting the right EOR provider, businesses can successfully expand their operations in Vietnam without the added complexity of setting up a business entity.
For a customised solution, explore a partnership with Knit for trusted EOR services and elevate your business globally.
Disclaimer: The content of this article is intended solely for informational purposes. It is advised to consult with a qualified professional before making any contractual commitments. Any decisions made or actions taken based on the information provided herein are at the sole discretion and responsibility of the reader.
The Employer of Record is responsible for:
- Facilitate payroll and tax compliance
- Manage employee benefits
- Handle HR administration
- Provide legal compliance
- Assist with work permits and immigration
- Offer risk management
- Support employee relations
- Maintain confidentiality
- Stay updated on employment regulations