Are you looking to expand your business into Vietnam but unsure how to navigate the country’s labor laws, payroll regulations, and hiring processes?
Establishing a legal entity in a foreign country and complying with Vietnamese employment laws can be time-consuming and expensive.
An Employer of Record (EOR) can help your business hire local talent without setting up a subsidiary. With an EOR, businesses can concentrate on their core operations and comply with Vietnamese labor laws.
Understanding the Employer of Record (EOR) in Vietnam
An Employer of Record (EOR) is a third-party entity that hires employees on behalf of a foreign company, allowing businesses to enter the Vietnamese market without the complexities of setting up a local legal entity.
Vietnam has a well-defined labor framework governed by laws such as the Labor Code (Law No. 45/2019/QH14), which regulates employment contracts, wages, working hours, and dispute resolution.
The Social Insurance Law (Law No. 58/2014/QH13) mandates contributions to social security programs, while the Personal Income Tax Law (Law No. 04/2007/QH12) outlines income tax obligations for employees and employers.
An EOR ensures compliance with Vietnamese regulations for foreign companies hiring in Vietnam by handling employment contracts, payroll, and employer obligations, reducing legal complications and penalties.
Let’s take a quick look at how an Employer of Record can help businesses at different stages.
1. Hiring and Onboarding Employees Through an EOR
In Vietnam, all employment contracts must comply with the Labor Code to be legally recognized. Whether oral or written, contracts should clearly outline key terms, including:
- Job Responsibilities – Defining the employee’s role within the company.
- Working Hours and Rest Breaks – Standard work hours and overtime regulations.
- Compensation & Benefits – Salary structure, payment schedule, and allowances.
- Contract Duration – Whether permanent, fixed-term, or project-based.
- Health, Safety, and Social Security – Compliance with workplace safety standards and social security contributions.
An EOR takes responsibility for drafting and managing employment contracts on behalf of foreign companies, ensuring that all agreements comply with Vietnamese labor laws and safeguarding businesses from compliance issues.
2. Labor Compliance and Employer Responsibilities
Vietnam’s labor laws require all employers, including EORs, to conduct self-inspections to ensure compliance with labor standards. Key obligations include:
- Non-Discrimination Policies – Employers must prevent workplace discrimination based on gender, ethnicity, social class, religion, marital status, pregnancy, disability, and union participation.
- Work Hour Restrictions – Employees cannot work more than 48 hours per week, while those in hazardous conditions are limited to 36 hours per week.
- Overtime Compensation – Workers receive 1.5 times their salary for overtime on weekdays and double pay for weekend overtime.
By using an EOR, foreign businesses can ensure full labor law compliance without the need for direct legal oversight, as the EOR manages all audits, reports, and HR compliance measures.
3. Employee Protections and Termination Policies
Vietnamese labor law restricts termination for certain protected employee groups. An EOR must ensure that businesses adhere to these regulations, preventing unlawful dismissals. Employees who cannot be terminated without due process include:
- Employees on sick leave or medical-related absences.
- Workers on employer-approved leave.
- Individuals detained without trial or awaiting investigation.
- Trade union representatives engaged in union-related activities.
By engaging in an EOR, foreign companies avoid legal complexities surrounding labor laws, ensuring that all employment decisions, from hiring to termination, are legally compliant, ethically sound, and risk-free.
Payroll Management and Tax Compliance in Vietnam for Remote Employees
Vietnam’s Personal Income Tax (PIT) system operates on a progressive scale, with tax rates ranging from 5% to 35% based on employees’ income levels. New businesses in Vietnam face complex wage and payroll tax calculations, requiring careful adherence to a multi-tiered tax system and mandatory contributions. If you don’t want to manage these intricacies yourself, partnering with an Employer of Record (EOR) in Vietnam can save time and ensure full compliance.
| Annual Taxable Income (Million VND) | Monthly Taxable Income (Million VND) | PIT Rate (%) |
| 0 to 60 | 0 to 5 | 5 |
| 60 to 120 | 5 to 10 | 10 |
| 120 to 216 | 10 to 18 | 15 |
| 216 to 384 | 18 to 32 | 20 |
| 384 to 624 | 32 to 52 | 25 |
| 624 to 960 | 52 to 80 | 30 |
| More than 960 | More than 80 | 35 |
Apart from income tax, employers and employees must also contribute to Vietnam’s social security system, which includes:
- Social Insurance (SI): Employers contribute 17.5%, while employees contribute 8%. This covers pensions, maternity benefits, and sick leave.
- Health Insurance (HI): Employers contribute 3%, while employees contribute 1.5%. This provides access to Vietnam’s public healthcare system.
- Unemployment Insurance (UI): Employers and employees each contribute 1%, offering financial support in case of job loss.
An EOR ensures compliance with these tax obligations by managing tax filings, processing monthly payroll, and submitting social security contributions on time. This eliminates the risk of penalties due to late or incorrect filings.
An Overview of Benefits of Hiring an Employer of Record (EOR) in Vietnam
Besides facilitating compliance with Vietnamese labor legislation, an EOR reduces the intricacies associated with onboarding, salary disbursements, benefits management, and termination processes for international businesses. Some of the main advantages of engaging with an EOR in Vietnam are:
| Legally Hiring Employees | The EOR acts as the local entity authorized to employ Vietnamese workers on behalf of foreign companies. |
| Faster Onboarding | Streamlined hiring processes ensure new employees can start work without administrative delays. |
| Efficient Payroll Management | Salaries are processed on time without the need for costly third-party payment services. |
| Compliant Benefits & Perks | Employees receive legally mandated benefits, ensuring a competitive and attractive compensation package. |
| Risk-Free Employee Termination | Proper termination procedures help avoid potential legal disputes and financial penalties. |
| Expert Legal Support | Access to professionals with deep knowledge of Vietnamese employment laws, helping businesses navigate regulatory challenges. |
| Adaptation to Changing Regulations | The EOR ensures continuous compliance with new labor laws and tax policies. |
| Tax & Social Security Compliance | The EOR withholds and files payroll taxes, social security contributions, and unemployment |
Using an EOR, international companies can expand in Vietnam without hassle, ensuring that all employment issues comply with the law, are well-managed, and are cost-effective.
Key Challenges and How to Overcome Them
In Vietnam, businesses face challenges in implementing an EOR due to communication barriers, cultural differences, and labor laws, which can cause operational difficulties. To mitigate these barriers, businesses should engage local EORs with local expertise, clear service agreements, and strong compliance practices to address issues, as they offer better support and cost-effectiveness and can adjust services as needed.
By selecting a reputable EOR with experience in Vietnam’s regulatory environment, such as RecruitGo, businesses can overcome these challenges and establish a successful presence in the country.
Cost Considerations and Service Fees
The cost of using an EOR varies based on factors such as the number of employees, payroll services, and additional HR support. Some global EOR services such as Deel and Skuad charge anywhere from $250 to $600 per employee. In comparison, local EOR services such as RecruitGo charge $100-$200 per month (depending on employees salary) and offer more personalized services.
In general, while this adds to operational expenses, it eliminates the costs of setting up a legal entity, maintaining an in-house HR team, and dealing with compliance risks.
Setting up a foreign-owned enterprise in Vietnam requires substantial initial investment, licensing fees, office rental, and ongoing administrative expenses. An EOR provides a cost-effective alternative, allowing businesses to focus on growth without the complexities of local entity registration.
Conclusion
Expanding into Vietnam offers great business opportunities, but navigating the country’s complex labor laws can be challenging. An Employer of Record (EOR) in Vietnam simplifies this process by managing legal employment, payroll, and compliance, allowing businesses to focus on their core objectives. Whether it’s hiring local talent, managing tax obligations, or handling work permits for foreign employees, an EOR ensures smooth and compliant operations in Vietnam.
