Labour outsourcing in the information technology sector
In the context of Vietnam’s growing and substantive participation in the Global Information technology human resource supply chain, many foreign technology enterprises seek to engage Vietnamese engineers through flexible engagement models, particularly remote working, without establishing commercial presence in Viet Nam.
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Pursuant Vietnamese law, utilization of Vietnamese employees is associated with obligation to enter labor contracts and to fully comply with mandatory social insurance contributions. In practice, to satisfy these obligations without a direct presence in Viet Nam, many foreign enterprises decide to choose cooperates with domestic human resource service providers.
However, depending on the way such cooperation models are organized and implemented in practice, they may be considered to constitute labor subleasing activities – an industry classified as a conditional business line pursuant the Labor Code 2019. The issue thus arises as to whether human resource service providers operating in Viet Nam are legally permitted to engage in labor subleasing within the information technology sector, and, if so, where is the legal boundary between labor subleasing and service provision contracts in this sector.
Pursuant the Labor Code 2019 and Decree No. 145/2020/ND-CP, labor subleasing is defined as an arrangement whereby the employees enter into a labor contract with a labor subleasing enterprise and is subsequently assigned by enterprise to work for, and be subject to the direct management and supervision of, the labor user for a specified period of time, while the employment relationship
continues to be maintained with the subleasing enterprise. Accordingly, labor subleasing constitutes a conditional business line and may only be conducted with respect to jobs included in the list prescribed by the Government.
Pursuant Appendix II promulgated together with Decree No. 145/2020/ND-CP, Vietnamese law prescribes a specific list of jobs permitted to be carried out under labor subleasing arrangements, including the following:
1. Interpreting/Translation/Stenography
2. Secretary/Administrative Assistant
3. Receptionist
4. Tour Guide
5. Sales Support
6. Project Support
7. Programming of manufacturing machinery systems
8. Manufacture, installation of television, telecommunications equipment
9. Operation/inspection/repair of construction machinery, production electrical systems
10. Cleaning and sanitation of buildings and factories
11. Document editing
12. Bodyguard/Security guard
13. Telemarketing/Customer care via telephone
14. Handling financial, tax matters
15. Automobile repair/Operational inspection
16. Industrial technical drawing, scanning/Interior decoration
17. Driver
18. Management, operation, maintenance, and service on seagoing vessels
19. Management, supervision, operation, repair, maintenance, and service on offshore oil and gas rigs.
20. Aircraft piloting and in-flight services/Aircraft and aircraft equipment maintenance and repair/Flight dispatch and operation/Air traffic supervision
It can be observed that jobs of a specialized nature within the information technology sector are not expressly enumerated in the list of jobs permitted to be carried out under labor subleasing arrangements. However, the list does contain certain categories of work that may be related to the information technology sector, including “Programming of manufacturing machinery systems” and “Project Support”.
According to the opinion of the Department of Labour – War Invalids and Social Affairs (now the Ministry of Home Affairs) Ho Chi Minh City, where subleased employees directly participate in support activities and are subject to direction, management, task assignment of the labor user for the purpose of carrying out software development, upgrading, or maintenance projects, such work may regarded as “Project Support”, falls the categories of jobs permitted to be carried out under labor subleasing arrangements in accordance with applicable law[1]. However, the application of the “Project Support” categories to information technology positions is not automatic but must be assessed on the basic of the substance of the transaction and actual manner in which the work is organized and implemented. Pursuant to that, the selection of an appropriate cooperation model must be determined with reference to the scope of work, employees’ level of participation, the management and supervisory relationship between the parties.
Because of that, in cases the cooperation between foreign enterprise and Vietnam based-human resources service provider in substantively in the nature of a labor subleasing arrangement with respect to information technology positions, yet fails to satisfy the statutory conditions regarding the categories of work eligible for labor subleasing, such model may be exposed to the risk of non-compliance with the prevailing legal framework.
In practice, many enterprises choose to enter the provision agreements with human resources service providers as an alternative arrangement, particularly in respect of highly specialized projects that are implemented on a deliverable-based or outcome-oriented basis. However, for such a model to accurately reflect the legal substance of the transaction and to mitigate the risk of being deemed an unlawful labor subleasing arrangement, both the contractual terms and the manner of implementation must clearly demonstrate the service provider’s operational independence, including its authority over workforce organization, management methods, responsibility for work results, and the absence of direct control or supervision by the service recipient over the service provider’s employees.
In the context of an increasingly developed legal environment and progressively clearer compliance requirements, a cautions approach grounded in the substance of operations and long-term vision can enable enterprises more effective balance between operational flexibility and level of legal certainly.
Lawyer Y Huynh – CBI Law Firm
This article is provided for general informational purposes only and does not constitute legal advice for any specific case. The legal regulations cited herein are effective as at the time of publication but may have been amended, supplemented, replaced or ceased to be effective at the time readers refer to them. Accordingly, readers are advised to seek advice from a qualified lawyer before applying any information contained in this article.
For any enquiries or requests for legal consultancy services, please contact CBI Law Firm for assistance.
[1] https://doithoaidn.hochiminhcity.gov.vn/index.php/cauhoi/xemcauhoi/20746
