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Employer of Record in Vietnam

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​published on 9 April 2024 | reading time approx. 4 minutes

The concept of "Employer of Record" (EoR) is not previously formally recognized or anchored in the Vietnamese legal system. However, Vietnamese labor law recognizes so-called labor outsourcing or temporary work, which has similarities to EoR. This enables companies to cover short-term additional labor requirements. However, companies should plan these processes carefully from a tax and compliance perspec­tive, particularly in cross-border situations.​



Is the concept of EoR known in your country? Is the concept of EoR regulated by law in your country?​

The concept of EoR has not been implemented in Vietnamese law yet. However, the labor code of Vietnam regulates the concept of labor outsourcing which is similar to EoR in some respects. In particular, labor outsourcing is a three-way arrangement in which an employee enters into a labor contract with an outsourcing company, which subsequently dispatches the employee to work for another employer (economic employer) while still maintaining the labor relation with the outsourcing company with whom the labor contract is concluded. The maximum duration of assignment under labor outsourcing is twelve months.

Labor outsourcing companies must obtain a Labor Outsourcing License, the duration of which is 60 months. The license can be renewed, if the operator meets all the statutory requirements.

Currently, Vietnam has not legally established an EoR scheme. However, there are HR service companies, which are effectively offering EoR in the way of labour outsourcing.

There is a demand for EoR. In particular foreign companies show interest in labour outsourcing / EoR service:​
  • Smaller foreign companies do not want their own presence in Vietnam due to cost and commitment
  • Manufacturing or service companies which require flexibility in respect of their demand for employees on short notice
  • Companies having shortage of skilled employees generally.​

Special features of the activity within the framework of the EoR concept or temporary employment

The maximum duration of labor dispatch is twelve months.

The economic employer may employ a temporary employee in the following cases:
  • The employment is necessary for a sharp increase in labor demand over a limited period of time
  • The dispatched employee is meant to replace another employee who is taking maternity leave, has an occupational accident or occupational disease or has to fulfill his/her citizen’s duties
  • The work requires highly skilled workers
  • Labor outsourcing service can only be conducted for certain defined jobs.
The economic employer may not employ a dispatched employee in the following cases:
  • The dispatched employee is meant to replace another employee during a strike or settlement of labor disputes
  • There is no agreement with the outsourcing companies on responsibility for compensation for the dispatched employee’s occupational accidents and occupational diseases
  • The dispatched employee is meant to replace another employee who is dismissed due to changes in organizational structure, technology, economic reasons, full division, partial division, consolidation or merger of the enterprise.
The economic employers who receive employees from labor outsourcing companies are not required to obtain any permit or license to accommodate these employees.

In accordance with the regulations, labor outsourcing companies are obligated to ensure that dispatched employees receive salary not lower than that of regular employees. The labor outsourcing contract between the economic employers and the outsourcing companies shall not include any agreement on the rights and benefits of dispatched employee which are less favorable than those stipulated in the concluded employment contract between the dispatched employee and the outsourcing company.

In addition, it is important to highlight that labor outsourcing companies are unable to dispatch Vietnamese employees abroad for employment. Overseas deployment services require a distinct license and must meet specific conditions for implementation.

What are the tax peculiarities of the EoR concept in your country?

Generally speaking, labor outsourcing consists of a service provider and recipient relationship and also an employee / employer relationship with no specific tax considerations in this respect. 

In cross border projects involving labor outsourcing in Vietnam, the PE risk cannot be generally excluded. Whether a PE exists or not, will depend on the individual facts of the case. Facts suggesting the existence of an PE in Vietnam may include temporary employees employed by a service provider in Vietnam but effectively providing services for a foreign entity for more than 183 days in each twelve-month period in respect of a Vietnam based project. 

If a PE is assumed, then the foreign entity may be subject to Tax in Vietnam on the income generated from such activity, which can be collected by way of
  • a withholding tax (Foreign Contractor Withholding Tax) on the income generated from such activity or 
  • corporate income tax on the profit generated.
​The current Double Taxation Agreement between Vietnam and Germany does not provide any specific guidance regarding temporary employment. Therefore, general provisions in respect of business profits or other income may apply to income generated by outsourced employees in Vietnam on behalf of a foreign entity on a case-by-case basis.

In your opinion, how will the EoR concept continue to develop in your country?

In Vietnam, there are no specific Employer of Record (EoR) services, but many aspects are covered by an outsourced employment scheme. This scheme offers benefits such as local expertise, flexible workforce scaling, cost-effectiveness, and risk mitigation. However, limitations include short-term contract requirements and the need for expatriates to obtain work permits, posing challenges for companies. Small-scale foreign entity activity faces hurdles with work permits, while alternatives like representative offices (RO) and foreign subsidiaries are available. The flexibility and agility of outsourced employment are particularly advantageous for manufacturing and large-scale service providers. Overall, careful planning and compliance are crucial for effective leverage of these solutions amidst Vietnam's regulatory landscape.​

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