Employer of Record (EOR) Services and Foreign Nationals in Vietnam: Navigating a Regulatory Grey Area

As Employer of Record (EOR) services continue to gain popularity globally, an increasing number of foreign companies without a presence in Vietnam are exploring whether such arrangements can be used to deploy foreign nationals into Vietnam. This is particularly relevant where the host entity in Vietnam is a client that is unwilling or unable to sponsor the foreign national’s work permit, visa, or temporary residence card.

A common scenario involves a foreign company engaging a Vietnamese EOR provider to employ a foreign national, sponsor the individual’s work permit, and administer local payroll and employment compliance. The foreign national is then deployed to work in Vietnam, often at the foreign company’s client site, supplier facility, manufacturing plant, project location, or other third-party premises.

While these arrangements may appear attractive, businesses should be aware that the current Vietnamese work permit framework does not expressly address this operating model. As a result, companies should carefully evaluate the legal and practical implications before implementation.

A Growing Business Need

The use of EOR services is often driven by legitimate business needs. This is particularly relevant where:

• the overseas employer does not have a registered entity in Vietnam
• the assignment exceeds the 90-day period during which work activities may be performed without a work permit; and
• the host entity or entities in Vietnam are clients that are unwilling or unable to sponsor the foreign national’s work permit, visa, or temporary residence card.

Examples of work being carried out in Vietnam for a foreign company with no local presence in Vietnam include:

• overseeing production at one or more supplier factories in Vietnam or conducting quality control activities;
• supporting technical projects or managing customer implementations;
• installing, commissioning, or maintaining complex equipment supplied by a foreign company with no local presence in Vietnam, where the required expertise is available only within that company’s own workforce;
• establishing an initial presence in the market before making a long-term investment.

In such situations, the foreign company may seek a local partner capable of employing the individual and sponsoring the required work permit and immigration documentation.

The question, however, is whether the current regulatory framework was designed with these arrangements in mind.

A Regulatory Framework Built Around Traditional Employment Models

Vietnam’s work permit regulations generally contemplate more traditional structures, such as:

• direct local employment, where foreign employees work for entities with an established presence in Vietnam;
• intra-corporate transfers; and
• contractual service suppliers.

However, there appears to be limited regulatory guidance addressing situations where:

• a foreign company has no registered entity in Vietnam;
• a Vietnamese EOR or professional services provider sponsors the work permit and visa;
• the foreign national performs services primarily for the benefit of one or more clients, projects, suppliers, or customers; and
• the Vietnamese host entity is unwilling or unable to sponsor the foreign national’s work permit, visa, or temporary residence card.

The regulations do not appear to expressly confirm how such arrangements should be assessed, nor do they provide clear criteria for determining when an EOR model involving foreign nationals is acceptable.

This lack of specific guidance creates a degree of uncertainty for businesses seeking to rely on these structures.

Looking Beyond the Work Permit

When evaluating EOR arrangements, businesses often focus on whether a work permit, long-term visa, or temporary residence card can be obtained for the project duration.

However, obtaining a work permit through an EOR company may not necessarily resolve all compliance considerations, even where the arrangement is presented as a professional services or consultancy model rather than a secondment model.

An important question is how the arrangement operates in practice. For example:

• Who directs the individual’s day-to-day activities?
• Who determines work priorities?
• Who supervises performance?
• Where is the individual physically working?
• Who is the ultimate beneficiary of the individual’s services?

These questions may become relevant when assessing whether the practical reality of the arrangement aligns with the employment and immigration structure that has been established.

The Potential Concept of Disguised Employment

Another consideration is whether certain arrangements could potentially be characterized as a form of disguised employment.

While Vietnamese legislation does not currently provide specific rules dealing with EOR structures involving foreign nationals, regulators may in some circumstances look beyond contractual arrangements and consider the substance of the working relationship.

Questions may arise where, for example:

• the individual works exclusively or primarily at a third-party site;
• the host company directs daily activities, conducts performance evaluations, and controls working schedules; or
• the EOR company or sponsoring entity has limited involvement beyond payroll administration and work permit or immigration sponsorship.

This does not necessarily mean that such arrangements are prohibited. However, it illustrates why companies should not assume that the existence of an employment contract and a work permit alone eliminates all compliance considerations.

A New Regulatory Signal: Foreign Workers and Labor Outsourcing

A recent draft labor law amending certain provisions of the 2019 Labor Code appears to make this issue even more relevant. In particular, the draft proposes to amend Article 52 on labor outsourcing by expressly stating that labor outsourcing would not apply to foreign workers working in Vietnam.

If adopted, this would be an important clarification. It would mean that foreign nationals could not be supplied to a third-party user enterprise under Vietnam’s statutory labor outsourcing framework.

Although EOR arrangements using a professional services or consultancy model are not formally structured as labor outsourcing, the proposed wording may nevertheless be relevant when assessing work arrangements involving foreign nationals. In practice, authorities may look beyond the contractual label used by the parties and consider whether the arrangement resembles the supply of manpower rather than the provision of genuine professional services.

Potential Risk Indicators

• the Vietnamese sponsoring entity mainly acts as payroll employer and work permit sponsor;
• the foreign national works primarily at third-party premises;
• the day-to-day work is directed by the third-party host entity;
• the sponsoring entity has limited operational control over the foreign national’s actual work; or
• the arrangement is presented as consultancy, but in practice resembles staff augmentation or labor leasing.

A Fact-Specific Analysis

One of the challenges for businesses is that the analysis is often highly fact-dependent, and the acceptability of a given structure may also vary from one provincial authority to another.

Two arrangements that appear similar on paper may present very different compliance profiles depending on:

• the role of the sponsoring entity and the nature of the services being performed;
• the work location;
• the level of supervision exercised by each party; and
• the degree of operational control retained by the sponsoring entity.

In addition, practical interpretations may evolve over time.

Conclusion

The purpose of this article is not to conclude that EOR arrangements involving foreign nationals in Vietnam are either compliant or non-compliant.

Rather, it is to highlight that the current work permit framework does not appear to expressly address a number of increasingly common business models involving foreign nationals sponsored by one entity while performing work primarily for another.

In the absence of clear regulatory guidance, businesses should avoid viewing EOR arrangements solely as a payroll or immigration solution. Instead, careful consideration should be given to the overall operating model and the practical reality of the working relationship.

As Vietnam’s regulatory framework continues to evolve, businesses considering EOR solutions should evaluate not only immigration compliance, but also the practical reality of the working relationship. The distinction between a genuine consultancy model and the indirect supply of manpower may become increasingly important in the years ahead.

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