Update day: July 14 , 2023

Foreign investors and labor outsourcing activities in Vietnam

Labor outsourcing is becoming a reliable method for foreign companies to take advantage of the young and valuable labor force in Vietnam. By collaborating with local companies, foreign investors can take advantage of the talents and skills of Vietnamese employees in a variety of business sectors, from manufacturing and services to information technology. Besides, one of the important advantages of labor outsourcing activities in Vietnam is the diversity of labor sources.

However, labor outsourcing also imposes some challenges for investors who need to establish a labor supply enterprise in Vietnam. The following article will give investors an overview of the conditions and challenges that they face when providing labor outsourcing services in Vietnam.

Table of contents:

1. Labor outsourcing services by Vietnamese law

Clause 1, Article 52 of the Labor Code 2019, labor outsourcing is when an employee enters into a labor contract with an employer who is a labor outsourcing enterprise, after which the employee is transferred to work and is managed by another employer while still maintaining an employment relationship with the employer who has entered into a labor contract.

Accordingly, a labor outsourcing enterprise is an enterprise established by the Enterprises Law 2020 that is granted a license for labor outsourcing operations, recruits, and enters into labor contracts with employees, then transfers the employees to work under the management of another employer while still maintaining the labor relationship with the enterprise that has entered into a labor contract.

In the case that labor outsourcing activities are being performed through e-commerce websites, foreign investors need to meet additional conditions related to e-commerce services.

2. What conditions do the WTO commitments and Vietnamese laws stipulate for labor outsourcing services?

According to the WTO Commitments, the labor outsourcing service has not been committed by Vietnam to open the market to foreign investors. However, under Vietnamese law, specifically as listed in Appendix I to Decree 31/2021/ND-CP, the labor outsourcing service is not subject to market access restrictions for foreign investors. Accordingly, if the laws and resolutions of the National Assembly, ordinances and resolutions of the National Assembly Standing Committee, and decrees of the Government do not stipulate provisions for market access restrictions, foreign investors are entitled to access to the market as regulated for domestic investors.

Currently, the Labor Code 2019 and Decree 145/2020/ND-CP have regulations on conditions for conducting labor outsourcing services. At the same time, many foreign investors are allowed to do business in this service in Vietnam, including:

Adecco Vietnam
ManpowerGroup Vietnam
HR2B

3. Providing labor outsourcing services through e-commerce websites

This is probably an issue that many investors are interested in since, with the trend of digital technology, enterprises want to integrate all the needs of clients and suppliers right on a digital platform. However, depending on the scope of activities on the e-commerce website, enterprises will need additional sub-licenses, namely a Trading License issued by the Department of Industry and Trade. This license will arise in case where there is a basis to determine that the enterprise is providing e-commerce services.

E-commerce service means a commercial activity whereby an e-commerce service provider sets up an e-commerce website to provide an environment for other traders, organizations, and individuals to conduct promotional activities, sell goods, or provide services. Therefore, in the case of an enterprise providing labor outsourcing services on a digital platform in which the enterprise is the connecting party between employers and employees, and at the same time provides a digital environment for the parties’ interaction, information searching, and service connection, in some cases, the competent authority will rely on the scope of operation of the website to require enterprises to have a Trading license.

In case where the enterprise traditionally performs labor outsourcing activities, and the enterprise’s website is only for introducing the services, the conditions for a trading license are not required.

In conclusion, labor outsourcing activities in Vietnam have become an attractive and potential method for foreign investors. However, to fully take advantage of the potential of this activity, close cooperation between foreign investors and the Vietnamese Government is essential. Vietnam needs to have clear policies and regulations to ensure the rights of employees, and create favorable conditions for foreign enterprises to operate and develop in a stable and sustainable business environment.

Time of writing: 20/06/2023

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