Vietnam PEO And EOR Service Is On The Rise
Despite the pandemic, a growing number of businesses are looking to expand to emerging markets like Vietnam. Vietnam offers advantages in terms of human resources, such as a large pool of skilled workers, increasing quality, and competitive hiring costs. Many large technology companies, including Google, Amazon, and Microsoft, have been looking for IT professionals from Vietnam in particular.
The pandemic has also led to an increase in remote work, which has given Vietnam’s labor force an additional advantage. Additionally, travel restrictions have made it difficult for multinational corporations to expand their physical presence in new countries. As a result, many companies are looking for PEO/EOR (Professional Employer Organization/Employer of Record) services in Vietnam to help them hire and manage employees without having to incorporate an offshore company in Vietnam.
The Unfavorable Facts Of Vietnam PEO Service To Multinational Companies
However, once you understand Vietnamese labor law, you may realize that PEO/EOR services in Vietnam are not as straightforward as you may have thought. Here are some of the most common factors in PEO/EOR services in Vietnam that are not favorable to multinational corporations:
1. The Deposit
Many PEO companies in Vietnam require clients to deposit at least one month of gross payroll to kickstart the service. This requirement stems from the fact that the PEO company is bound by labor law when it enters into a labor contract on behalf of its clients. Vietnamese labor law is well-known for being extremely protective of employees. It requires the employer to provide at least one month’s notice before termination. To be on the safe side, the PEO company would ask for this deposit to cover the last month’s payment if the client decides to terminate the employment. This practice, however, places the clients on the financially inefficient side. In many cases, the deposit becomes the deciding factor, and the PEO deal is turned down.
2. The Vat Tax
Many PEO companies in Vietnam struggle with their own internal processing or fail to obtain a proper business code for PEO businesses. As a result, they frequently ask clients to pay VAT on the total transfer amount. This will significantly increase the clients’ budget. For businesses with a large team of employees or high-income employees, this VAT tax imposition would be a deal-breaker.
3. Service Charged By Percentage
Another unfavorable thing from some PEO companies in Vietnam is that they typically use a percentage charging scheme. This means that the PEO company will take a percentage of the total payroll that the client will pay for the employee. For example, the PEO company might charge 7-10% (or even up to 15-20%) of the total payroll. This allows the PEO company to avoid financial losses for high-income positions. However, it puts the client on the side of unstable hiring expenses, causing additional stress on their own budget revision and approval.
4. Slow Onboarding Process
Some PEO companies in Vietnam require one week to onboard an employee because they require all procedures to be done in hard copies and original signatures (traditional methods). This can be a challenge for multinational companies that are used to more efficient and digital processes.
Another challenge is language and cultural differences. Vietnam is a country with a rich culture and language, and it is important to have a PEO company that understands these differences. If there is a lack of communication between the PEO company and the overseas employer, it can lead to misunderstandings and delays.
To avoid these challenges, it is important to choose a PEO company that has a good reputation, a strong track record of compliance, and a clear understanding of the Vietnamese market. It is also important to make sure that you have good communication with your PEO partner. This will help to ensure that the onboarding process goes smoothly and that your employees are properly taken care of.
Read more: Vietnam PEO partner for your business expansion
Iris International PEO Service – Why Us?
With many years of experience in the PEO industry, Iris International takes pride in providing our clients with a unique approach to PEO services.
- No deposit: We offer a no-deposit option for clients who do not want to freeze their capital with a PEO company in Vietnam.
- No VAT tax on payroll: We understand that charging VAT on the gross payroll paid to employees is unreasonable.
- Flat fee: We offer a flat fee for our clients at a very competitive price (from USD 250/person, one of the most competitive in the market). This means that you will know the exact cost of our PEO/EOR services when you change the number of employees.
- 48-hour onboarding process (can be faster): We can onboard a new employee in a maximum of 48 hours. This is the best option for businesses that need to hire employees quickly.
- Experts: Our experts have been providing PEO/EOR services to multinational corporate clients for years. They follow strict service protocols and SOPs to ensure the highest quality of service delivery. You can be confident that your business and employees are in good hands when you work with us.
- Free consultations: We are happy to provide free consultations on Vietnamese employment law, culture, and HR practices.
If you are interested in learning more about our PEO services, please feel free to book a meeting with us by filling out the form below.
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