Compliance Check: Vietnam - Hiring Local Employees Without a Local Entity

There are complicated rules which govern when and how a foreign entity can operate in Vietnam without establishing a local entity. Companies should pay particular attention to employment structures in such circumstances.

Can a foreign entity operate in Vietnam without a local entity?

The rules in relation to foreign entities operating in Vietnam are complex and depend in part on the work performed. Additionally, the foreign entity may be required to register its offshore operations with the Vietnamese authorities.

Can a foreign entity hire a local employee?

There is no express prohibition against a foreign entity hiring local employees in Vietnam. There are, however, practical considerations to take into account. For example, there is currently no mechanism for a foreign entity to make contributions to social security/insurance schemes.

What about foreign employees?

A non Vietnamese employee will require a work permit to live and work in Vietnam. Only a local entity can make a work permit application. Therefore it is not possible for a foreign entity to employer a non Vietnamese employee to work in Vietnam.

What law governs the employment contract?

As a starting principle, if an employee is based and working in Vietnam, Vietnamese employment laws will apply. This means the employee is entitled to all of the local protections set out under Vietnamese law.

If the employee's contract of employment is with a foreign entity, that contract may also contain a governing law clause. It is important to understand which laws apply, and whether there are any dual employment risks.

What should employers do?

Employers should review their commercial operations in Vietnam and ensure that any employees are properly engaged. Herbert Smith Freehills can help companies to assess the position and consider options to ensure compliance. To discuss how, please contact fatim.jumabhoy@hsf.com