How To Create a Labor Outsourcing Company in Viet Nam 2024

1. Understanding Labor Outsourcing:

Before venturing into the world of labor outsourcing in Vietnam, it's crucial to grasp the basic principles and regulations governing this business activity. Here's a breakdown of the key points you need to understand:

1. Definition and Purpose:

• What it is: Labor outsourcing involves an employment arrangement where:
  • A labor outsourcing company recruits and employs workers.
  • These workers are then dispatched to work for other companies (client companies) under the management of those companies.
  • However, the employment relationship remains with the outsourcing company.
• Purpose: Businesses utilize labor outsourcing for various reasons, such as:
  • Meeting temporary surges in demand for specific skills.
  • Replacing employees on maternity leave or other temporary absences.
  • Accessing highly skilled workers not readily available in-house.
  • Reducing costs associated with recruiting and training permanent staff.

2. Legality and Regulations:

• Operating a labor outsourcing company in Vietnam requires a license.
• Strict regulations govern these activities, outlined in:
  • Labor Code 2019: Establishes general principles and rights for workers and employers.
  • Enterprise Law 2020: Defines company formation and operation procedures.
  • Decree 145/2020/ND-CP: Provides detailed regulations specifically for labor outsourcing, including:
    • Permitted industries and jobs: Lists the specific types of work allowed for outsourcing (Appendix 2).
    • Company requirements: Capital, legal representative qualifications, etc.
    • Licensing process: Application procedures, timelines, and fees.
    • Labor contract guidelines: Ensuring fair treatment and adherence to labor laws for outsourced workers.
    • Client company limitations: Prohibits specific practices, like replacing striking workers or using unlicensed outsourcing companies.

3. Key Distinctions:

• Labor outsourcing is different from:
  • Temporary staffing: In temporary staffing, the employment relationship lies with the staffing agency, not the client company.
  • Freelancing: Freelancers are independent contractors, not employees, and work for multiple clients directly.
  • Subcontracting: In subcontracting, companies outsource entire tasks or projects, not just personnel.

4. Importance of Understanding:

By thoroughly understanding the concept of labor outsourcing and its regulations in Vietnam, you can:

• Assess viability: Determine if this business model aligns with your goals and complies with legal requirements.
• Make informed decisions: Navigate company establishment, licensing, and operational processes smoothly.
• Ensure ethical practices: Treat both employees and clients fairly and responsibly, building trust and a positive reputation.

Remember: This is a simplified overview. Seeking professional legal advice tailored to your specific situation is crucial to ensure full compliance and successful operation in the Vietnamese labor outsourcing market.

2. Key Requirements:

Setting up a labor outsourcing company in Vietnam involves fulfilling specific legal and financial requirements. Here's a breakdown of the key elements you need to know:

1. Legal Framework:

• The Labor Code 2019: Establishes the legal foundation for labor relations, employee rights, and outsourcing regulations.
• Enterprise Law 2020: Outlines general company formation procedures and requirements applicable to outsourcing companies.
• Decree 145/2020/ND-CP: Provides detailed regulations specifically for labor outsourcing activities, including:
  • List of permitted industries and jobs: Appendix 2 specifies the types of work allowed for outsourcing (e.g., interpretation, construction machinery operation, etc.).
  • Company requirements: Capital, legal representative qualifications, etc.
  • Licensing process: Application procedures, timelines, and fees.
  • Labor contract guidelines: Ensuring fair treatment and adherence to labor laws for outsourced workers.
  • Client company limitations: Prohibits specific practices like replacing striking workers or using unlicensed outsourcing companies.

2. Company Conditions:

• Legal Status: Register your company as a legally recognized entity in Vietnam.
• Capital Deposit: Maintain a deposit of VND 2 billion (approximately USD 87,000) at a Vietnamese bank.
• Legal Representative: The individual leading your company must meet specific criteria:
  • Be a company manager as defined by the Enterprise Law.
  • Have no criminal record.
  • Possess at least 3 years of experience in labor outsourcing or labor supply within the past 5 years.

3. Licensing Process:

• Application: Submit a complete application package to the Department of Labor, War Invalids and Social Affairs in your chosen province. Documents include:
  • Application form
  • Legal representative's resume and criminal record check
  • Proof of deposit certificate
  • Company registration documents
  • Business plan or feasibility study
• Review and Evaluation: Authorities will assess your application within 20 working days.
• License Issuance: Successful applicants receive a labor outsourcing license from the provincial People's Committee.

4. Additional Considerations:

• Market Access: Foreign investors have limited access and must strictly comply with CPTPP commitments and Decree 145/2020/ND-CP regulations.
• Target Industries: Focus on areas listed in Appendix 2 and align your business model with permitted occupations.
• Compliance: Stay updated on changes in regulations and maintain meticulous adherence to labor laws and ethical practices.
• Cultural Sensitivity: Understand local business etiquette and cultural nuances for respectful and smooth operations.

Remember: This information provides a general overview. Seeking professional legal and financial advice is crucial to ensure you meet all specific requirements and navigate the process smoothly. Don't hesitate to consult with experts if you have further questions or require tailored guidance for your company setup.

3. Licensing Process:

Establishing a labor outsourcing company in Vietnam requires obtaining a license from the relevant authorities. To ensure a smooth and successful application, understanding the steps involved is crucial. Here's a detailed breakdown of the licensing process:

1. Prepare the Required Documents:

• Application Form: Obtain the official application form from the Department of Labor, War Invalids and Social Affairs (DOLISA) in your chosen province. It typically includes sections for company information, legal representative details, and requested license type.
• Legal Representative Documents:
  • Resume: Submit a detailed resume of your company's legal representative, highlighting relevant experience and qualifications.
  • Criminal Record Check: Obtain a criminal record check for the legal representative, issued within the past 6 months.
• Financial Documents:
  • Deposit Certificate: Provide a certificate from a Vietnamese bank confirming the required deposit of VND 2 billion.
  • Company Registration Documents: Submit copies of your company's registration certificate and other relevant documents.
• Business Plan or Feasibility Study: Present a comprehensive plan outlining your business operations, target market, financial projections, and strategies for ensuring compliance with regulations.

2. Submit the Application Package:

• Meet with Relevant Authority: Visit the DOLISA in your chosen province and schedule an appointment for application submission.
• Complete Application Review: Present all required documents and ensure they are complete, accurate, and translated into Vietnamese if necessary.
• Payment of Fees: Be prepared to pay any applicable application fees as determined by the authorities.

3. Application Review and Evaluation:

• Timeline: The DOLISA has 20 working days to review your application and conduct necessary verifications.
• Evaluation Criteria: They will assess your company's eligibility based on:
  • Meeting all legal requirements, including capital deposit and permitted industries.
  • Legal representative's qualifications and experience.
  • Completeness and accuracy of submitted documents.
  • Business plan's viability and compliance with ethical practices.
• Possible Outcomes:
  • Approval: If everything is satisfactory, you will receive a notification of approval and instructions for receiving your license.
  • Request for Additional Information: In some cases, the DOLISA may request further information or clarifications before making a decision.
  • Rejection: If your application does not meet the requirements, you will receive a written explanation for the rejection and options for resubmission.

4. License Issuance:

• Collect Your License: Upon approval, visit the DOLISA to formally receive your labor outsourcing license.
• Validity and Renewal: Be aware of the license's validity period and renew it before expiry to continue operating legally.

Additional Tips:

• Start preparing your documents well in advance to avoid unnecessary delays.
• Seek professional assistance from legal or business consultants familiar with labor outsourcing regulations.
• Keep copies of all submitted documents for your records.
• Maintain open communication with the DOLISA throughout the process and address any concerns promptly.

4. Additional Considerations:

While understanding the legal framework and licensing process is crucial, success in the Vietnamese labor outsourcing landscape requires considering several additional factors. Here's a detailed breakdown of these key considerations:

1. Market Access and Target Industries:

• Foreign Investor Restrictions: Foreign investors have limited access to labor outsourcing and must strictly comply with CPTPP commitments and Decree 145/2020/ND-CP regulations. Consult legal professionals to understand specific limitations and opportunities for your foreign-invested company.
• Targeting Permitted Industries: Focus on the list of authorized industries and jobs specified in Appendix 2 of Decree 145/2020/ND-CP. Align your business model and service offerings with these permitted areas to avoid legal complications.
• Market Research and Demand Analysis: Conduct thorough market research to identify industries with high demand for outsourcing services and assess your potential competitiveness.

2. Client Acquisition and Partnerships:

• Developing Client Relationships: Build strong relationships with companies requiring flexible staffing solutions in your target industries. Consider attending industry events, networking with business associations, and developing a robust marketing strategy.
• Cultural Understanding and Sensitivity: Respect local business practices and cultural nuances when interacting with potential clients. This fosters trust and strengthens your brand image.
• Potential Partnerships: Explore opportunities to partner with established staffing agencies or local companies for market access, expertise, and client referrals.

3. Compliance and Ethical Practices:

• Staying Updated on Regulations: Be proactive in staying up-to-date with changes in labor laws and regulations governing outsourcing activities. Regularly consult legal counsel to ensure compliance.
• Maintaining Transparent Contracts: Ensure fair and transparent labor contracts for your employees, adhering to legal minimum wage and benefits requirements.
• Ethical Treatment of Employees: Implement responsible recruitment practices, provide proper training and development opportunities, and uphold ethical standards in dealing with your workforce.

4. Additional Points:

• Financial Planning and Budgeting: Develop a detailed financial plan considering initial setup costs, ongoing operational expenses, and potential risks. Budget for legal fees, marketing activities, and maintaining the required deposit.
• Human Resources Management: Develop efficient systems for employee recruitment, selection, training, payroll management, and grievance redressal.
• Technology and Data Security: Invest in appropriate technology platforms for managing employee data and complying with data privacy regulations.
• Building a Positive Reputation: Foster a reputation for ethical practices, quality service, and client satisfaction. This attracts both reliable employees and trustworthy clients.

5. Conclusion:

Vietnam's labor outsourcing market presents exciting opportunities, but careful planning and understanding are crucial. While legal requirements and licensing processes demand attention, additional considerations like market research, ethical practices, and client acquisition are vital for success.

Remember:

• Comply with regulations: Decree 145/2020/ND-CP and the Labor Code are your guides.
• Focus on permitted industries: Appendix 2 lists the authorized options.
• Build strong relationships: Network and partner for market access and trust.
• Prioritize ethical practices: Transparency, fair contracts, and responsible employee treatment are key.
• Seek professional guidance: Legal and business experts can support your journey.

By combining thorough preparation, cultural sensitivity, and a commitment to ethical business practices, you can navigate the Vietnamese labor outsourcing landscape and establish a thriving company that benefits both your employees and client partners. If you need further explanation on this subject, please don't hesitate to contact us through email at lienhe@luatminhkhue.vn or phone at: +84986 386 648. Lawyer To Thi Phuong Dzung