In recent years, the concept of “Employer of Record” (EOR) has gained prominence in Vietnam, particularly due to the increasing demand for remote hiring and employment outsourcing services by international companies with or without a physical presence in the country. EOR services have emerged as a preferred solution for managing human resources and payroll for remote employees in Vietnam. Let’s delve into the details of EOR services and how they work.
What is EOR service?
An Employer of Record (EOR) is a local entity or company that takes on legal responsibility, on behalf of its client (the hiring company), for managing various aspects of employment, including but not limited to payroll, taxes, benefits, insurance, visa applications, sponsorship, and other human resource-related transactions and operations for overseas company registration in Vietnam. EOR services are designed to simplify and streamline the complexities associated with hiring and managing employees for foreign company formation in a foreign country like Vietnam.
Why EOR service?
Many businesses hire Employer of Record (EOR) services to simplify a range of complex tasks related to human resources, market entry, market understanding, and payroll management for their out-of-country employees, including those in Vietnam.
In essence, when a company engages an EOR, the EOR becomes the formal employer of the client’s employees. This outsourcing arrangement ensures that the business adheres to local labor laws and other relevant regulations, greatly assisting the company in its global expansion efforts.
In international contexts, regulations governing employee benefits and taxes can vary widely and prove intricate to navigate. EORs play a vital role in helping businesses incorporate international companies in Vietnam, optimize their benefits administration, and even handle the sponsorship of work visas, work permits, and Temporary Resident Cards (TRCs) for their foreign staff in Vietnam.
Similar concept
EOR services are often confused with Professional Employer Organizations (PEOs). Despite their apparent similarities, many businesses tend to mix them up, but it’s essential to recognize that Professional Employer Organizations (PEOs) and Employers of Record (EORs) offer distinct services.
These two outsourcing models have several distinguishing factors, with a primary focus on their main differences:
- Liability: In the PEO model, the PEO acts as the client’s co-employer, but the client company retains all liabilities and responsibilities. Conversely, in the EOR model, the EOR becomes the legal employer of the client company’s employees, shouldering the liability load.
- Compliance: EORs excel in managing compliance.
- Insurance: Employers of Records take comprehensive care of employee insurance needs.
How EOR service works in Vietnam
The EOR service process is simple and straightforward, involving the following steps:
1. Engagement of the EOR service contract.
2. Settlement of the initial fee or deposit if applicable.
3. Onboarding the employee into the EOR’s payroll system.
4. Customization and arrangement of legal documents as per the specific offers (e.g., probation contract, labor contract, etc.).
5. Enrollment of the employee(s) into the state insurance system, ensuring full compliance with local legal and PIT (Personal Income Tax) requirements.
6. Calculation of monthly salary, employer taxes, and duties by the designated cut-off date.
7. Monthly invoicing by the EOR company to the client for services, covering the employee’s salary, benefits, and expenses.
8. Payment of the salary to the employee and submission of taxes and duties to the government by the designated payday.
Recruiting foreigners in Vietnam using EOR service
In reality, there are two distinct practices when it comes to employment in Vietnam: recruiting Vietnamese nationals and recruiting non-Vietnamese (foreigners). Hiring a foreigner can be significantly more challenging compared to employing a local Vietnamese.
In fact, Vietnamese law mandates that companies must obtain permits to hire non-Vietnamese individuals for any job position. This process typically takes 1-2 months to complete and involves a substantial amount of paperwork and administrative work. Additionally, the employment of expatriates (expats) must be regularly reported to the government, which can create a significant operational hassle for businesses.
This is precisely why many companies, even if they have their own established presence in Vietnam, opt for EOR arrangements to employ their non-Vietnamese staff. EOR companies also offer different pricing structures for this category of employment.
Engaging Iris International as your Employer of Record
We take pride in our extensive experience and competence as an Employer of Record (EOR) provider. Our highly skilled HR and Payroll team is also available to provide consultation on various employee-related situations, contributing to the success of foreign company setting up in Vietnam.
Our human resource outsourcing services encompass a range of offerings, including:
1. Consultation on HR and Compensation & Benefits (C&B) policies tailored for the Vietnam market.
2. Arrangement of labor contracts and probation contracts.
3. Efficient management of payroll, taxation, and mandatory insurance calculations and processing.
4. Expert consultancy and advice on labor law matters.
5. Facilitation of work visas, work permits, and Temporary Resident Cards (TRC) for foreign employees under our sponsorship.
Contact us for more information.
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