Vietnam is recognized as one of the fastest-growing economies in Asia, with key sectors including manufacturing, technology, agriculture, and tourism. Given these favorable conditions, it’s no wonder that many businesses are eager to expand their operations in the country. To facilitate expansion, many companies utilize an employer of record.
An employer of record Vietnam allows businesses to navigate Vietnam's regulatory landscape effectively, ensuring they can focus on growth while adhering to necessary legal requirements, thus unlocking the potential of this vibrant market.
Benefits of Using Employer of Record Vietnam
Hire local talent
Vietnam is an attractive destination for businesses due to its growing economy and highly skilled workforce. For example, the country has a large number of IT professionals, producing about 50,000 graduates annually, making it a rapidly growing center for tech talent. Vietnamese workers are also known for their adaptability and commitment to skill development, with 71% eager to enhance their capabilities. However, navigating the recruitment process can be challenging for foreign companies. An employer of record Vietnam simplifies this process, allowing businesses to quickly hire local talent without the need to establish a legal entity in the country.
Compliance
Vietnamese labor laws are complex and staying compliant can be difficult for businesses unfamiliar with the local regulations. An employer of record Vietnam ensures full compliance with these laws, including employee contracts, tax obligations, social security, and other legal requirements. This reduces the risk of costly legal issues or fines while enabling businesses to focus on their core operations.
Risk Mitigation
An employer of record company Vietnam can help mitigate risks associated with employing staff in a foreign country, such as employment disputes or labor law violations. For instance, employing foreign workers without valid work permits can lead to significant penalties, including fines ranging from VND 500,000 to VND 3,000,000 for employers who fail to comply with labor laws regarding work permits and contracts. An EOR manages the entire process of obtaining necessary work permits and ensures that all employees are legally authorized to work in Vietnam, thus preventing potential legal disputes and financial liabilities associated with non-compliance.
Cost effective
When a business expands to Vietnam and utilizes an employer of record, it can save significantly compared to establishing a local entity. This includes reduced costs associated with setup, compliance, and ongoing operational expenses. According to a Deloitte study, companies can reduce their HR costs by as much as 32% through outsourcing. By leveraging an employee of record Vietnam, businesses can streamline their entry into the Vietnamese market while minimizing financial burdens and administrative complexities.
Focus on core business
An employer of record Vietnam takes on major administrative functions on behalf of a client company such as managing the employee's day to day contribution and employee performance, compliance with local labor laws, and tax regulations, benefits and payroll administration. This gives business enough time to concentrate on its primary goals, such as developing products, enhancing services, or growing its customer base. For instance, companies that outsource their HR functions report a 21% boost in profitability.
How does an employer of record services Vietnam work?
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1. Hiring process
An employer of record Vietnam takes over the hiring process, from sourcing candidates, review resumes, conducting screening interviews, to onboarding the new hire, ensuring the recruitment process is efficient and compliant with Vietnamese labor laws.
Read next: Global Hiring Guide: Vietnam
2. Employment contract
Without an employment contract, businesses risk misunderstandings about job scope, pay, and legal rights. In Vietnam, having a contract is legally required. It protects both the employer and employee by clearly stating the terms of employment, such as salary, benefits, and working conditions. An employer of record company Vietnam ensures that the contract follows local labor laws, preventing disputes and legal issues. Without a proper contract, companies can face penalties and difficulties in managing their employees.
3. Payroll and benefits
According to the Vietnam labor code, employers are required to adhere to the minimum wage, pay employees in full and on time, including salaries, overtime, and bonuses. They must also provide mandatory benefits such as social insurance, health insurance, and unemployment insurance. Working with a Vietnam employer of record simplifies this process by ensuring full compliance with these regulations, including managing deductions and contributions accurately, preventing legal complications, and ensuring that employees receive their full entitlements.
4. Compliance
An employer of record Vietnam manages compliance by taking on the legal responsibilities associated with employment, such as minimum wage, employment contracts, employment benefits administration and workplace safety standards. They actively track labor laws and update their clients on any changes in policies or procedures.
5. HR administration
All day-to-day HR tasks, such as managing employee performance, handling grievances, and maintaining employee records, are managed by the EOR. This frees up the client company to focus on their core business activities.
Things to Consider When Choosing Employer of Record Vietnam
Local expertise
If you want to work with an EOR in Vietnam, it’s essential to choose one with strong local expertise. An EOR with deep knowledge of Vietnam’s labor laws, tax regulations, and cultural nuances will ensure your business remains compliant and operates smoothly. They will also be better equipped to manage local talent effectively, ensuring a positive employee experience while navigating the unique challenges of the Vietnamese market. This expertise can prevent costly mistakes and improve overall operational efficiency.
Compliance track record
An employer of record Vietnam with a compliance track record means that the EOR has a proven history of adhering to local laws and regulations. For businesses looking to enter the Vietnamese market and carry out operations, this is important because it reduces the risk of legal penalties and employment disputes.
To learn more about their track record, you can research the EOR’s reputation through testimonials and reviews from other businesses, particularly those in your industry. Also make inquiries about past instances where the EOR successfully navigated complex compliance issues. This can provide insights into their reliability and service quality.
Service offerings
Businesses have varying needs, and different employers of record Vietnam offer a range of services. It’s important to evaluate each Vietnam employer of record to ensure they provide the specific services your business requires, such as payroll management, employee benefits administration, compliance support, and day-to-day HR tasks. You can ask for a detailed service proposal which includes a breakdown of the services they offer to ensure they meet your specific needs. Additionally, you must consider the cost of each service to ensure it aligns with your HR budget.
Technology platform
Assessing the right technology platform is also crucial when choosing an appropriate EOR for your foreign businesses. With a robust platform, you can expect and efficient handling of payroll, compliance, and employee data. The right platform should offer user-friendly features, transparency, and real-time access to important information, helping you streamline HR processes and maintain control over your operations, even from abroad.
Request for a demo which shows you a demonstration of how their technology platform works. It is at this stage you pay attention to how it integrates with your existing HR systems and processes. A seamless integration can enhance data flow, reduce manual entry errors, and ensure that employee information is consistently updated across platforms
References and testimonials
When in doubt about which EOR provider to choose, look for reviews online from social media platforms, industry forums, and business review sites. These sources can provide unfiltered feedback from other companies that have used the EOR's services. Additionally, reaching out directly to other businesses for testimonials or case studies can give you a clearer idea of the provider's reputation, reliability, and overall service quality. This helps ensure you make an informed decision before committing to an EOR.
Challenges and Risks for Vietnam Employer of Record
Complex Vietnam employment law
Vietnam's labor laws are intricate and change frequently. Employers must ensure compliance with local laws regarding employee contracts, working hours, social insurance contributions, and labor union requirements. An EOR must stay updated to avoid legal disputes or penalties.
Employer of record Vietnam selection
Selecting an appropriate EOR in Vietnam can be challenging. Businesses must consider the EOR’s expertise in local labor laws, their ability to ensure compliance, and the level of support they provide. Vetting potential EORs based on experience, client testimonials, and track record is crucial.
Protecting employee data
Vietnam has regulations on data privacy and security, particularly for handling employee data. The employer of record Vietnam must comply with data protection laws and ensure they have secure systems to manage and store sensitive employee information.
For example, under the Personal Data Protection Decree (PDPD), which took effect on 1 July 2023, organizations must obtain explicit consent from employees before collecting or processing their personal data. This includes informing them about how their data will be used and ensuring secure storage and management of that information.
Non-compliance can lead to significant penalties, emphasizing the importance of robust data protection systems for employers operating in Vietnam.
Read next: Employee Data Management: How HRIS Can Help Achieve Accuracy and Security
Frequently Asked Questions for Employer of Record Vietnam
1. What is an EOR?
An Employer of Record Vietnam is a third-party organization that handles employment-related tasks on behalf of a company, such as payroll, benefits, taxes, and compliance with local labor laws. This allows businesses to hire employees in a country without setting up a legal entity there.
2. How long does it take to hire an employee through an employer of record Vietnam?
The hiring process through an EOR in Vietnam typically takes between 1-4 weeks, depending on the complexity of the employment contract and any visa or permit requirements.
3. What are the costs associated with using an employer of record Vietnam?
Costs vary based on the EOR provider, the employee’s compensation, and any additional services required (such as visa handling or benefits management). There is usually a monthly fee, which may be a percentage of the employee's salary or a flat rate.
4. Can I terminate an employee through EOR Vietnam?
Yes, you can terminate an employee through an EOR in Vietnam. However, the termination must comply with local labor laws, which often involve specific notice periods, severance payments, and justifiable reasons for termination.
5. Does an employer of record Vietnam provide benefits to employees?
Yes, an EOR typically manages employee benefits, including health insurance, social security contributions, and other statutory benefits. The exact benefits provided will depend on local regulations and any additional agreements made between the employer and the EOR.
6. Can an employer of record Vietnam help with visa and work permit applications?
Yes, many EORs provide assistance with visa and work permit applications as part of their services. This is especially useful for foreign employees requiring legal documentation to work in Vietnam.
Maximize Your Business Potential with Employer of Record Vietnam
An employer of record Vietnam can be a valuable asset for businesses looking to expand into the Vietnamese market. By partnering with a reliable and reputable EOR, you can streamline your HR processes, mitigate risks, access global top talents, reduce costs, and enhance your company’s reputation in Vietnam.
Omni makes it easy to support employees across multiple countries, time zones, and currencies.
Our centralized document management solution makes gathering the necessary data required to apply for employment visas and other country-specific initiatives seamlessly and timely. With customized workflows and automated reminders, HR can help empower employees to manage the deadlines and documentation requirements for applications. And centralized documents and real-time data makes it easy for employees to access salary information and produce reports and documents necessary for verification.
Our dedicated local team of experts provides personalized support and ensures your business remains compliant with Vietnam’s labor laws. Book your demo with our team to learn more about how Omni can help maximize your business potential.
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