For foreign companies venturing into the Vietnamese market, understanding the complexities of local employment laws can be daunting. With Vietnam’s rapidly evolving regulatory landscape and unprecedented foreign investment inflows reaching $21.5 billion in H1 2025 (up 32.6% year-on-year), employing an Employer of Record (EOR) has become increasingly critical for international businesses. An EOR simplifies the employment process by managing legal and HR responsibilities, enabling businesses to focus on their core operations without establishing a local entity. Vietnam’s unemployment rate dropped to just 2.22% in H1 2025, creating an extremely tight labor market that demands agile and compliant hiring solutions. This approach not only streamlines the expansion process but also ensures compliance with Vietnam’s employment regulations, presenting a viable solution for companies looking to seamlessly integrate into the Vietnamese market.
See InCorp Vietnam’s Employer of Record Services in Vietnam here!
What is Employer of Record – EOR?
An employer of record (EOR) is an instrumental entity that assumes the legal responsibility of employing workers on behalf of another business. This arrangement is designed to streamline and simplify various aspects of employment, encompassing crucial elements such as compliance, payroll management, tax obligations, and benefits administration.
EORs offer businesses the option to engage their services within the same country or across international borders, each scenario presenting unique advantages and considerations. In essence, an EOR assumes the responsibilities associated with conventional employment tasks and liabilities by providing comprehensive EOR services.
Key Responsibilities of an EOR include:
– The EOR efficiently manages the intricacies of payroll, ensuring timely processing and funding to guarantee that employees receive their compensation promptly.
– Handling tax-related obligations is a crucial facet of the EOR’s role, encompassing the accurate depositing and filing of taxes in adherence to local regulations.
– The EOR assumes accountability for matters related to unemployment and workers’ compensation, navigating the complexities of these areas to safeguard both employer and employee interests.
– Managing local tax documentation, maintaining employment contracts compliant with Vietnamese labor laws, and ensuring adherence to Vietnam’s social insurance requirements are meticulously handled by the EOR.
– From seamless onboarding of new hires to the meticulous process of employee termination, the EOR oversees these critical transitions, ensuring compliance and professionalism throughout.
– Maintaining the certificate of insurance and complying with verification processes like E-Verify are integral components that contribute to the EOR’s commitment to regulatory adherence.
– Upholding standards of safety and integrity, the EOR conducts thorough background checks and drug screenings as part of the comprehensive employment process.
– The EOR extends its services to include the offering and administration of benefits, contributing to a holistic and employee-centric approach to foreign employment.
These multifaceted responsibilities are streamlined through dedicated software platforms. These platforms empower clients, employees, and recruiting partners to efficiently manage their communication aspects for the duration of the work assignment. Moreover, the software offers valuable insights and analytics, providing a comprehensive overview of employees on assignment, associated costs, and other pertinent information.
Employer of Record (EOR) Payroll Services
The functions undertaken by an EOR are diverse, adapting to the specific requirements of services and locations. Here are key tasks typically managed by a proficient EOR:
- Ensuring Compliance with Local Employment Laws
An EOR serves as a reliable guide, steering businesses through the intricacies of local employment laws. With Vietnam’s new Trade Union Law taking effect July 1, 2025, which allows foreign workers with 12+ month contracts to join Vietnamese trade unions, compliance requirements have become more complex. This involves ensuring that each employee is hired in strict accordance with the prevailing regulations in every country or jurisdiction and providing businesses with compliant employment contracts. The EOR must also navigate Vietnam’s updated Social Insurance Law, which reduces the minimum contribution period for pension eligibility from 20 years to 15 years and introduces new reference wage calculations. As the legal employer, the EOR takes charge of the intricate legal aspects, offering peace of mind to the client’s business.
- Efficient Onboarding
From facilitating the employment agreement to orchestrating the essential processes for a seamless transition, the EOR plays a pivotal role in onboarding new team members. In Vietnam’s current tight labor market, where skilled talent is in high demand across IT, manufacturing, and digital transformation sectors, efficient onboarding has become crucial for talent retention. This process is meticulously managed to guarantee that new hires are integrated smoothly into the company.
- International Payroll Management
Handling payroll on an international scale is a complex task, involving compliance with local tax regulations for both employees and employers. Vietnam’s regional minimum wage for 2025 ranges from VND 3.45 million ($136) to VND 4.96 million ($195) per month, depending on the region, and EORs must ensure accurate calculations based on these updated rates. The EOR takes charge of this intricate process, managing payroll and ensuring that team members are paid accurately and receive comprehensive payslips.
- Compensation and Benefits Administration
EORs often extend their services to include a spectrum of benefits. While the specifics can vary, these benefits may comprise health insurance, time-off policies, parental leave, and other provisions. Under Vietnam’s new Social Insurance Law, EORs must now manage enhanced maternity benefits, including new provisions for male workers in special circumstances. The EOR ensures that employees receive comprehensive compensation packages aligned with both local norms and the business’s policies.
- Efficient Contract Terminations
When the need arises to terminate an employee’s contract, the EOR steps in to manage all associated details. This includes handling the necessary procedures and paperwork and ensuring a smooth and compliant termination process.
Read More: HR Outsourcing in Vietnam: Optimizing Operations for Business Success
Key Industries That Can Benefit from EOR
With Vietnam’s GDP forecast to grow 6.0-6.5% in 2025 and foreign investment reaching record levels, certain industries are particularly well-positioned to benefit from EOR services:
- Business Process Outsourcing (BPO). Vietnam’s BPO market is projected to reach $639.25 million in 2025, growing at a CAGR of 4.81% through 2030. As a global leader in outsourced services like customer support, IT, and back-office operations, Vietnam allows BPO companies to scale quickly and manage remote teams efficiently with EOR support.
- Technology and Software Development. With Vietnam targeting 80,000 ICT graduates annually by 2030 and launching a major STEM workforce development program, the demand for tech talent is unprecedented. With a robust pool of skilled IT professionals and developers, tech companies can use an EOR to onboard talent swiftly and hassle-free.
- E-commerce. Vietnam’s e-commerce market surpassed $25 billion in 2024, growing 20% year-on-year, with projections to reach $25-32 billion in 2025. Businesses expanding into Vietnam can rely on an EOR to hire local teams for marketing, logistics, and operations, capitalizing on the country’s booming e-commerce sector.
- Startups and SMEs. With over 152,000 new businesses entering Vietnam’s market in H1 2025, representing a 26.5% increase year-on-year, the startup ecosystem is thriving. For smaller businesses exploring Vietnam market, an EOR offers a low-risk, cost-effective way to hire and operate without the need for entity setup or complex payroll management.
Other industries can also leverage EOR services based on their unique requirements, such as tapping into local talent, maintaining compliance, or streamlining administrative processes.
Pros of Employer of Record (EOR)
Engaging an EOR extends a myriad of benefits, particularly catering to businesses navigating the intricacies of global expansion and remote workforce management.
- Comprehensive Compliance Management and Streamlined People Operations
With Vietnam’s complex regulatory environment, including new labor laws, trade union regulations, and social insurance requirements taking effect in 2025, compliance management has become more challenging than ever. EORs specialize in handling the bureaucratic complexities associated with hiring. By managing paperwork and onboarding processes, they save businesses valuable time and resources, allowing them to focus on core operations. They serve as a buffer against the risks associated with employment in complex jurisdictions, ensuring that businesses can operate efficiently without falling afoul of intricate local regulations.
- Efficient Handling of Complex Paperwork
Vietnam’s new Social Insurance Law introduces a “reference wage” system and electronic social insurance books, adding complexity to documentation requirements. For businesses juggling complicated paperwork and diverse employment requirements, an EOR provides a valuable service. This is particularly crucial for companies venturing into new employment regions, whether across different countries or state lines within the US.
- Efficiency in expanding Operations
The EOR expedites the process of expanding operations, allowing businesses to establish a local presence with speed and efficiency. This agility is particularly beneficial for companies aiming for rapid growth or seeking to tap into global talent pools.
- Local Employment Laws Compliance and Mitigation of Employment Risks
Vietnam’s Trade Union Law 2025 allows foreign workers to join local trade unions, creating new compliance requirements that EORs must navigate. EORs provide a crucial layer of support by ensuring compliance with local employment laws. Local experts within the EOR handle intricacies within the bounds of the respective jurisdictions, reducing the risk of legal issues. An EOR provides a proactive approach to mitigating employment risks associated with diverse jurisdictions. By shouldering the responsibility of legal employment, EORs offer a safeguarded environment for both businesses and employees.
- Enhanced Staffing Flexibility
Temporary and Project Staffing: In Vietnam’s dynamic job market, where 57% of businesses plan to hire new employees in Q2 2025, flexibility is crucial. EORs enhance staffing flexibility by facilitating the hiring of international contractors on a temporary or project basis. This is particularly advantageous for startups looking to navigate workforce fluctuations efficiently.
- Cost Saving and Facilitation of Global Expansion
Setting up a Vietnam entity can cost over $40,000 and take 2+ months, while EOR services enable immediate market entry. The cost of engaging an EOR in is significantly lower than establishing a legal entity in a specific country. Global employment services, like Oyster, further amplify cost savings by enabling businesses to build teams globally without the extensive financial investment required for entity setup.
As companies increasingly establish operations abroad or embrace remote work, compliance goes beyond mere tax registrations. EORs efficiently address the multifaceted requirements, offering a streamlined approach to expanding businesses with local staff while ensuring compliance with intricate local laws.
- Efficient Payroll Management
EORs efficiently manage payroll in different countries, capitalizing on the varying cost of living to potentially achieve more cost-effective compensation structures.
- Accelerated Expansion
Vietnam’s work permit processing time may be reduced from 36 days to just 10 days under new proposed regulations, but EORs can help businesses start immediately. EORs expedite the onboarding process, enabling businesses to swiftly integrate new team members. The efficiency in global hiring allows for faster team expansion, critical for businesses aiming for rapid growth.
- Diverse Global Talent Pool
Building a global team through EOR services naturally injects diversity into the workforce. A more diverse team brings varied perspectives and cultural insights, fostering innovation and enriching the overall workplace environment.
Cons of Employer of Record (EOR)
While an Employer of Record (EOR) can offer numerous advantages, it’s essential to acknowledge potential drawbacks, as this solution may not align with every business’s preferences and needs.
- Perceived Loss of Control
Utilizing an EOR may lead to a perceived loss of control within the business. Even with varying levels of involvement, delegating core administrative processes to an external entity can pose challenges for those accustomed to maintaining direct control over these aspects.
- Impact on Internal Teams, Especially HR
The extensive support provided by an EOR can result in a reduction of workload for internal teams, particularly HR. While this isn’t inherently negative, it does mean that certain responsibilities are outsourced. This shift may necessitate a reassessment of the in-house HR department’s structure to ensure continued effectiveness.
- Potential Shifts in Company Culture
With Vietnam’s new Trade Union Law allowing foreign workers to participate in local trade unions, company culture dynamics may shift as employees gain new rights and representation. Inviting an external entity into critical aspects of the employment relationship may lead to shifts in company culture. Employees might perceive changes in their relationship with the employer, impacting their view of the company. Proactive efforts are essential to align the new arrangement with the company’s vision and values.
- Flexibility Constraints Due to Regulations
Vietnam’s stringent labor laws and new social insurance requirements may limit workforce flexibility. In adherence to various countries’ regulations, the EOR model may introduce limitations such as tenure constraints and specific obligations outlined in employee contracts. These restrictions can potentially hinder the overall flexibility and utilization of your workforce.
The tasks a seconded worker can perform may be subject to limitations imposed by the EOR model, influencing the range of roles employees can undertake within the organization.
- Operational Implications and Agility Challenges
Engaging an EOR may come with operational limitations that affect business processes, project management, and resource allocation. This can pose challenges to the agility of your team, potentially slowing down decision-making and responsiveness.
Opting for a less experienced Employer of Record (EOR) may introduce potential risks. Here are two critical concerns that businesses should carefully address:
- Data Protection and Legal Disputes
Trust in Sensitive Data Management: Entrusting a less experienced EOR with sensitive employee data requires a high level of trust. Ensure that the chosen EOR has robust data protection measures in place, safeguarding against data breaches and ensuring compliance with relevant regulations.
- Poor Employee Management Practices
Risks of Rushed Onboarding: Some less experienced EORs may prioritize rapid setup times, potentially leading to rushed employee onboarding processes. This haste can result in critical details being overlooked, impacting the overall employee experience.
In a bid for efficiency, less experienced EORs may neglect essential HR tasks, eroding trust among employees and deterring prospective candidates.
EOR vs. PEO (Professional Employer Organization)
The distinction between EOR and PEO models has become increasingly important as businesses evaluate global expansion strategies in 2025.
A Professional Employer Organization (PEO) serves as a recruitment provider, offering comprehensive assistance to Small and Medium-sized Enterprises (SMEs) in the recruitment process.
PEOs collaborate with established small and medium-sized enterprises, providing co-employment services. The primary focus of a PEO is to assist in managing contracts, with the employment contract being between the employee and the client utilizing PEO services. This arrangement effectively reduces legal risks and streamlines administrative processes.
The key distinction lies in the legal employer status. In the case of EOR, the service provider acts as the full legal employer for workers on the payroll. This makes EOR services an expedient and efficient way to establish a workforce in a foreign country without the need to establish a physical presence.
Conversely, a PEO vendor does not hold the status of a full legal employer. Instead, it shares employer risks and provides additional protection in case of an employee lawsuit. PEOs require the client company to have a registered legal entity in the target country, while EORs enable hiring without local entity setup. The PEO vendor is not explicitly mentioned in the employment contract and therefore, does not bear legal liabilities.
Co-employment, as facilitated by PEOs, presents a significant drawback due to the shared employee risk between the client company and the PEO. This division of responsibility can lead to challenges, and in certain instances, legal exposure.
The shared risk model inherent in PEO arrangements can result in legal complications, as both the client company and PEO may face liability in employment disputes. The legal and compliance challenges associated with the PEO model prompted the emergence of EOR services as a viable alternative.
In contrast to PEOs, EOR services offer a distinct advantage by going beyond general HR outsourcing. EORs assume a more comprehensive role by taking on the full risk associated with hiring employees overseas. This allows the client company to concentrate on its day-to-day operations without being burdened by the complexities of international employment.
The EOR model provides a streamlined and efficient solution, offering businesses the freedom to expand globally while mitigating legal and compliance risks associated with overseas employment.
Selecting the Right Employer of Record Partner
With Vietnam’s complex regulatory environment and booming economy, selecting the right EOR partner is more critical than ever. When assessing potential EOR partners, it is imperative to consider specific qualities that can safeguard your organization throughout the expansion process. One crucial factor is the depth of the provider’s knowledge in the countries targeted for expansion. Given Vietnam’s rapid regulatory changes, including new labor laws and social insurance requirements, ensure your EOR partner has up-to-date expertise in Vietnamese employment regulations. To gauge this, inquire about the duration of the provider’s presence in each country, as a longer tenure signifies a more comprehensive understanding of local regulations and intricacies.
Another pivotal aspect is the existence of a permanent in-country entity. Ensure that the provider’s in-country entity, such as an LLC or service branch, is permanent, allowing for local invoicing and the provision of comprehensive HR services. A permanent entity reflects the provider’s commitment to servicing the country, demonstrating dedication through the establishment of a lasting presence.
Assessing the staff’s level of local knowledge is equally crucial. A reputable EOR provider should have knowledgeable staff at the local level capable of managing HR and payroll services. The provider’s depth of experience is evident through years of direct employment in the country and a portfolio of client examples showcasing their expertise.
Technology integration: Ensure your EOR partner offers modern, integrated platforms that can handle Vietnam’s new electronic social insurance requirements and digital transformation initiatives.
Compliance track record: Verify the EOR’s ability to navigate Vietnam’s evolving regulatory landscape, including the new Trade Union Law and Social Insurance Law changes.
By carefully considering these factors and asking pertinent questions, your organization can make informed decisions and establish a reliable EOR partnership to navigate the complexities of international expansion confidently.
Key questions to ask potential EOR partners:
- How do you ensure compliance with Vietnam’s new Trade Union Law and Social Insurance Law changes?
- What is your experience with Vietnam’s regional minimum wage calculations and social insurance contributions?
- How do you handle the transition to electronic social insurance books and new reference wage systems?
- What local partnerships do you have to ensure access to Vietnam’s skilled talent pool?
- How quickly can you onboard employees given Vietnam’s tight labor market?
Conclusion
Vietnam’s economic growth, regulatory evolution, and tight labor market make 2025 a pivotal year for international expansion. With foreign investment reaching record levels and unemployment at historic lows, businesses need agile, compliant solutions to succeed in this dynamic market. An EOR provides the expertise, local knowledge, and regulatory compliance necessary to navigate Vietnam’s complex employment landscape while capitalizing on its tremendous growth opportunities.
clients worldwide
professional staff
incorporated entities in 10 years
compliance transactions yearly
