Viet Nam is becoming an attractive destination for global technology companies thanks to its abundant workforce, high expertise, and competitive costs. Vietnamese software engineers, data specialists, and programmers not only meet technical requirements but also flexibly work according to international standards at significantly lower costs compared to engineers from developed countries. However, the legal framework in Viet Nam imposes many barriers on the form of remote employment.  

Under the current legal provisions, a Foreign Technology Company wishing to enter into labor contracts, pay social insurance, and pay salaries to Vietnamese Employees must establish a legal entity in Viet Nam in the form of a subsidiary or a representative office. However, establishing a legal entity in Viet Nam often comes with strict legal requirements, complicated procedures, and significant operational management costs. Therefore, in practice, many Foreign Technology Companies have chosen to enter into service contracts with a Human Resources Company in Viet Nam to carry out paperwork and administrative tasks such as signing labor contracts, paying salaries, and paying insurance for Vietnamese Employees. Although this model brings flexibility and reduces management costs, if not implemented carefully, the service relationship may be considered as disguised labor subleasing – an activity strictly restricted under Viet Nam’s laws.   

According to Article 52 of the Labor Code 2019 and detailed guidance under Decree No. 145/2020/ND-CP, labor subleasing service means that an enterprise enters into a labor contract with an employee and then sends that employee to work for another enterprise (the subleasing user enterprise), while still managing salary, insurance, and part of administration for the employee. However, there are important conditions and restrictions on labor subleasing activities, including:  

• Only 20 specific job positions are permitted by law to be subleased (Annex II of Decree 145/2020/ND-CP), such as interpreters, translators, receptionists, typists, accountants, etc. This list does not include positions in the information technology sector such as programmers, software engineers, or data specialists. 

• The labor subleasing period for one employee shall not exceed 12 months (Article 53.1 of the Labor Code 2019). 

• Enterprises providing labor subleasing services must satisfy strict conditions, such as: making a deposit of at least VND 2 billion at a commercial bank (Article 21.2 of Decree 145/2020/ND-CP); and the legal representative must have had at least three years of direct professional or managerial experience in labor subleasing or labor supply within the last five consecutive years (Article 21.1.c of Decree 145/2020/ND-CP). 

In case of violation, the Human Resources Company may be subject to administrative sanctions, even license revocation, and may be held legally liable if there are signs of evading obligations relating to employees.  

To avoid falling within the scope of labor subleasing regulations, Foreign Technology Companies and Human Resources Companies may choose to enter into a Technology Service Contract, clearly specifying that the Human Resources Company will provide one or several specific technology services to the Foreign Technology Company. In such case, the contents of the Contract must ensure the following: 

• Clarify the nature of a technology service based on projects, not the assignment of specific individuals to work permanently at the client’s office. 

• Payments should be based on deliverables or service packages, instead of being calculated by working hours or individual salaries. 

• Use clauses on confidentiality, intellectual property, and product quality liability to emphasize the independent nature of the technology service contract. 

In the context of Viet Nam’s deeper integration into the global technology value chain, designing an appropriate legal model to utilize information technology human resources effectively is an urgent need. Foreign Technology Companies must clearly understand the difference between a “labor subleasing service contract” and a “technology service contract” in order to avoid unnecessary legal risks. 

Disclaimers:

This article is for general information purposes only and is not intended to provide any legal advice for any particular case. The legal provisions referenced in the content are in effect at the time of publication but may have expired at the time you read the content. We therefore advise that you always consult a professional consultant before applying any content.

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Author: DINH QUANG LONG | Alex, Partner