One way to manage a firm’s workforce through peaks and troughs in demand is by utilizing labor outsourcing. In this article, the Vietnam Briefing outlines the conditions for foreign firms with respect to labor outsourcing in Vietnam.

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Demand in most businesses is seldom ever consistent. In the lead-up to Christmas in the western hemisphere, for example, demand for consumer goods often reaches its annual peak. In the period directly following Christmas, however, consumer demand is often the lowest it will be all year.

As a result, many manufacturers scale back at the start of the year but ramp up toward the end. Not only does this mean running machines and equipment for more hours or at a higher pace, but it also means that firms need flexibility in their workforce. They need to be able to bring in more staff when it’s busy and to be able to let staff go when it slows down.

Whereas a permanent workforce is often essential, firms may find that filling the gaps around peak periods can best be addressed utilizing labor outsourcing. In this light, the Vietnam Briefing outlines how labor outsourcing works in Vietnam.

See also: Recruitment Strategies for Foreign Manufacturers in Vietnam

What is labor outsourcing?

Labor outsourcing is when a worker is hired by one company to perform work at one or more third parties. These are often called labor-hire, labor dispatch, or temporary worker arrangements.

This type of labor arrangement is generally used to regulate a firm’s workforce in line with market demands.

Note that in Vietnam, labor outsourcing is only allowed for select roles. These are outlined in Decree 145/2020/NĐ -CP and include:

• Translation and interpretation providers
• Secretarial and administrative assistants
• Receptionists
• Travel guides
• Sales support staff
• Project support staff
• Machine programmers
• Television and telecommunications manufacturing and installation
• Operation, inspection, and/or repair of construction machinery and power production systems
• Buildings and factory cleaners
• Document editors
• Security/bodyguards
• Telemarketers and customer care phone support
• Financial and tax support services
• Car repair and inspection
• Scanning, drawing industrial engineering, Interior decorating
• Driving
• Management, operation, maintenance, and service on ships
• Management, supervision, operation, repair, maintenance, and service of oil and gas drilling rigs
• Flying aircraft and working on aircraft, maintaining and repairing aircraft and related equipment, and aviation dispatch and flight supervision

Firms that wish to offer labor-hire services must also acquire a license. Details regarding establishing a labor-hire business are outlined in Decree 145, Chapter 4, Article 12. This article, however, will focus on the regulations around engaging in a labor outsourcing agreement.

Labor outsourcing regulations in Vietnam

Labor outsourcing is codified in Vietnam’s Labor Code from 2019, which outlines the following guidelines, limitations, and restrictions.

A firm can employ an outsourced worker only when:

• A firm experiences a sharp increase in demand over a limited period of time;
• A permanent worker is taking temporary leave, for example, maternity leave, or due to a workplace injury; or
• The role requires a highly skilled worker.

The law also specifically identifies the following cases in which an outsourced worker cannot be used. This includes:

• The outsourced worker is employed to cover the work of a striking worker or a worker involved in a labor dispute;
• An agreement has not been reached between the labor-hire firm and its client with respect to who will take responsibility in the event the worker is injured at work; or
• The outsourced worker is a replacement for an employee who was made redundant due to a restructuring at the company.

Firms should also keep in mind that:

• A labor outsourcing agreement can last a maximum of 12 months.
• Firms using an outsourced worker cannot send that worker to another company.
• A firm cannot employ a worker from a labor-hire firm that is not licensed as a labor outsourcing provider.

Labor outsourcing contracts

In order to utilize an outsourced worker, the labor hire company and its client must have a labor outsourcing contract.

Labor hire contracts must contain the following information:

• The client’s location, the vacancy to be filled, a description of the work to be carried out, and any other commitments required of the worker;
• It must state how long the worker will be employed and the intended start date;
• It must detail work hours, rest periods, and occupational health and safety guidelines; and
• It must clearly state which party is responsible for compensating an employee in the event they are injured at work.

A labor outsourcing contract must offer the same rights and benefits or better as those in the contract between the employee and the outsourcing enterprise.

See also: Q&A: Understanding Vietnam’s Labor Market and Key HR Compliance

Roles and responsibilities

Labor-hire businesses

Labor-hire businesses also have a number of obligations under the Labor Code. These include:

• Ensure the worker is aware of the contents of the labor outsourcing contract;
• Provide the client with the curriculum vitae of the outsourced worker;
• Pay the outsourced worker a salary that is the same or higher than an employee in the same role with the same qualifications working directly for the client; and
• Keep records of the firm’s labor outsourcing agreements and provide the provincial labor authority with reports periodically.

The labor-hire firm also has the right to take disciplinary measures against an outsourced worker in the event said worker violates labor regulations.

Labor-hire clients

Firms hiring workers from labor-hire companies in Vietnam also have a number of obligations under the Labor Code. These include:

• Ensure the hired worker is aware of the firm’s internal labor regulations and any other relevant processes or procedures;
• Avoid discriminating between the temporary workers and employees working directly for the company;
• Reach an agreement with the temporary worker with respect to working nights and overtime commensurate with the Labor Code;
• Return the outsourced worker in the event they fail to satisfy the conditions of their employment; and.
• Provide evidence of any violations of the firm’s regulations by the outsourced worker to labor-hire firm.

Temporary workers

Temporary workers are obligated to perform the work for which they have been hired and to follow the internal rules and regulations of their temporary employer. They also have a number of rights. These include:

• Receive a salary that is the same or higher than an employee in the same role with the same qualifications working directly for their temporary employer;
• File a complaint in the event the client violates the labor outsourcing contract; and
• Negotiate the termination of the employment contract with the labor-hire firm in order to conclude an employment contract with a labor-hire client.

Labor outsourcing arrangements for foreign firms

There are no additional restrictions beyond what is written in the Labor Code for foreign firms looking to engage in a labor outsourcing arrangement. Furthermore, foreign-invested enterprises engaged in export activities may find these arrangements ideal for managing definite periods of high demand.

Firms interested in labor outsourcing should contact the human resources experts at Dezan Shira and Associates to learn more.