Employer of Record in Vietnam for FDI: The Ultimate Guide to Compliant Hiring

Vietnam is now a top choice for foreign direct investment in Southeast Asia. Its steady economic growth, skilled young workforce, and competitive labor costs attract international companies that want to expand, build teams, or enter new markets. Vietnam offers scale, talent, and strong long-term growth potential. Foreign businesses often face legal and administrative challenges in Vietnam. Many companies now face the choice between setting up a local legal entity or utilizing an Employer of Record (EOR) model to stay compliant and enter the market more quickly.

While EOR costs in Vietnam may be higher per employee, they are predictable and offer a lower-risk way for foreign companies to begin. This article serves as a practical guide for foreign businesses seeking to utilize the EOR model for entering the Vietnamese market.

TL;DR

• An Employer of Record (EOR) is a company that hires employees for a foreign business. The EOR handles employment contracts, payroll, taxes, benefits, social insurance, and makes sure local labor laws are followed. The foreign company still manages the employee’s daily work but does not have to deal with the legal and administrative work of opening a local office.
• Using an EOR instead of setting up a local company or hiring contractors lowers upfront costs, reduces risks of misclassification and compliance issues, and makes employment costs more predictable, including social insurance and personal income tax.
• Choosing an EOR for early market entry and small teams is the quickest way to start, since you do not need to set up a local company. Employees can usually be onboarded within weeks. However, getting a work permit may still take some time.

What is an Employee of Record (EOR)?

An EOR is a third-party provider that legally employs staff on behalf of a company. The EOR handles payroll, contracts, benefits, social insurance, and compliance with local labour laws. So on paper, the EOR is the official employer, while the client company directs the day-to-day work and pays the third-party provider a fee for this service.

The Strategic Decision: EOR vs. Alternatives

EOR vs. Setting up a Local Entity in Vietnam

• Before you decide whether you opt for EOR or go for the alternative, setting up a company. It is important to make a comparison between using an EOR and establishing an entity (local entity setup), and see what the best option is at this stage in your business strategy.
• You can find a side-by-side view comparing setup time, initial investment, level of control, and legal risk in the table below.

• Key Consideration: Expanding into a new market is not without challenges, especially when it comes to recruitment, compliance, and navigating complex local processes. This is where the Employer of Record (EOR) model becomes a strategic entry point, enabling businesses to quickly and compliantly build teams in Vietnam without the delays of establishing a local entity.
• EOR allows companies to hire someone in a new country without the immediate need to establish a legal entity. Setting up an entity could take several months, while hiring someone through an EOR provider can be done very quickly. Of course, it will take slightly longer when it is a foreigner due to the work permit requirements.  

Hiring Independent Contractors

• You might hire an Independent Contractor, which allows flexibility and lower perceived cost. However, it might not be easy to find and hire one or a team of contractors that will support you in your business strategy and will act in your best interest. This is regardless of the complication of payments and drafting contracts. 
• Note that once you have an entity set up here, it is important to distinguish between an employee and a contractor, because a different tax tariff would apply. Furthermore, if you hire a contractor, you need to take some precautions to prevent they would be considered as an employee, at the risk of violating various rules. This might result in severe legal and financial penalties.

Legal, Compliance, and Cost Framework 

EOR and Vietnam’s Labor Law Landscape

• Mandatory Employment Contract Requirements: Employment contracts can be in Vietnamese or bilingual. There are also some mandatory clauses to be included, such as working hours, workplace, job description, duration of the contract, and probation time.

Vietnam Employment Costs: Beyond the Salary

• Note that the Total Cost of Employment (TCE) for foreign companies hiring staff, either local or foreign, consists of more than the gross salary.
• From the employee’s gross salary, mandatory Social, Health, and Unemployment Insurance (SHUI) contributions need to be deducted. The employer also pays a part on top of the gross salary. It is approximately 21.5% for the employer for Vietnamese employees; for foreigners, the unemployment insurance does not apply. The employee also pays a part, being 8% for retirement and 1.5% for health insurance, so 9.5% in total, which will be deducted from the gross salary.

• Note that the premium for SHUI is not based on the gross salary, but the salary for calculating contributions is capped. The capped salary for social and health insurance is 20 times the statutory base salary, which is currently VND 46,800,000/month. The unemployment salary cap is 20 times the regional minimum salary. The regional salaries are based on the division of Vietnam into four regions. This is based on the level of economic development, cost of living and concentration of industry. This means that there is a distinction between cities and the countryside, and it is also based on the assumption that the cost of living in a city is higher than in the countryside. As a result, the salary in big cities is higher than in smaller ones or the countryside. The regional salaries will, in principle, be amended every year. 
• The EOR’s role is to calculate and file the employee’s PIT on behalf of the employee. The company where the person will work does not have to do anything related to the salary, SHUI and PIT. The EOR will handle the necessary Business Visas, Work Permits, and Temporary Resident Cards (TRC) for expatriate employees. This includes all required documents, like a health check and criminal record.

Read more: Vietnam employment guide: how to hire and terminate staff legally

Benefits and EOR Service Scopes

Why Hire in Vietnam with an EOR?

• If you use an EOR, you will ensure rapid market entry, as you can have a local person working for you within days and, in principle, within weeks, rather than months, if it is a foreign national. While setting up a company can take a long time. 
• Furthermore, if you are new to the Vietnamese market, it is challenging to be familiar with all the legal requirements. If you use an EOR, you reduce compliance risk because the EOR takes on the legal and financial responsibility. The EOR employs your team member and handles all issues required by law.
• Thus, by outsourcing the HR administration and payroll tasks to an EOR, you can focus on your core business.

EOR Service Checklist: What an EOR Handles

• Payroll Management: salaries, 13th-month bonuses, and allowances in VND or USD (for foreigners).
• Leave and Insurance Administration covers the management of required leave, including annual, sick, and maternity leave. It also includes enrolling Vietnamese employees in SHUI and foreign employees in SHI, since unemployment insurance is not available for foreigners.
• HR Support & Offboarding: Draft labour contracts and assistance with disciplinary procedures and compliant contract termination.

Choosing the Right EOR Partner

How to Choose an EOR in Vietnam

When you select an EOR provider in Vietnam, you should consider the following key factors: strong legal compliance, accurate payroll processing, reliable work permit and visa support, clear communication, transparent pricing, data security and proven experience with foreign clients. The provider should also offer flexibility, scalability and a positive employee experience.

How Sunbytes Enables Compliant Hiring in Vietnam

Taking full compliance is the first step for an investor to achieve success. Sunbytes helps CEOs, CTOs, and project leaders turn workforce initiatives into measurable business outcomes by combining deep delivery expertise, proven methodologies, and scalable talent solutions.

Whether you want to test the market, hire small teams, launch pilot projects, or plan for long-term success. Sunbytes offers integrated services to ensure your outsourcing strategy is effective, future-ready, and aligned with your business goals.

Why Global Enterprises Trust Sunbytes

• During its more than 14 years of experience in Vietnam, Sunbytes has helped more than 300+ successful projects across diverse industries and regions
• Due to our Dutch ownership and origin, we ensure adherence to Western business standards, transparency, and clear communication.
• By combining in-depth knowledge of Vietnam’s regulatory landscape with international compliance best practices, we ensure comprehensive compliance protection for our clients. Proven by ISO 27001, Cybersecurity Certification, and FD Gazelle recognition for financial stability and growth

If your FDI business wants a low-risk, fast, and fully compliant way to hire in Vietnam. Sunbytes can help you build and grow local teams without extra paperwork or legal worries.

Contact Sunbytes to schedule a consultation and explore how our solutions can support your Vietnam expansion strategy with confidence.