Hiring an independent contractor in Vietnam can give your company access to leading professionals in the region. If you’re considering hiring a contractor, ensure you understand the laws, worker classifications, and responsibilities you’ll need to address during the process.
Hiring contractors in Vietnam
Your company should clearly understand how working with a contractor differs from bringing an employee onto a team. Ensure you know the legal differentiators between the two.
Independent contractors vs. full-time employees
An employee is generally an individual who works for an employer under an agreement, is paid wages or salary, and is subject to the employer’s management, administration, and supervision. The substance of the relationship may matter even if the parties use a different contract label. Independent contractors provide services to another company and generally determine their own schedule, methods for completing the services, and work without direction or supervision. Independent contractors are generally not entitled to statutory employment rights or benefits such as leave, compulsory social insurance, or severance upon termination. However, if the relationship is reclassified as employment, the company may owe employee entitlements and face penalties.
Penalties for misclassification
Proper classification of each worker in your company is critical. If you incorrectly identify an employee as a contractor, your company could face legal action, administrative penalties, tax and payroll exposure, and labor disputes. You may also need to retroactively pay statutory benefits and employment entitlements from the worker’s hiring date.
How to hire independent contractors in Vietnam
As you begin the contractor hiring process, keep in mind that it will look somewhat different than hiring an employee. Follow these 3 key steps to navigate your relationships with independent contractors successfully.
1. Carefully conduct interviews.
Contractors typically offer CVs that outline project-specific skills and capabilities. You’ll want to focus on their specializations in interviews rather than discussing more employee-based concerns, such as their personality or culture fit with the company. Prioritize how they can address the specific project your company needs them to handle.
2. Create a service agreement.
Both parties should discuss conditions of service and agree to their responsibilities. Use a written service agreement before work starts. It should define the commercial services relationship, scope of work, deliverables, fees, payment terms, term, contractor control, tax, invoicing, confidentiality, IP ownership, data protection, liability, and termination.
- Pay rates and arrangements
- Services the contractor will provide
- Length of the contract
- Termination conditions
3. Introduce necessities.
After deciding which contractor to hire, you’ll want to ensure they are equipped to perform according to expectations. Introduce them to a point of contact for project questions and ensure they’re familiar with company-specific tools and workflows. It’s best to avoid in-depth training and onboarding, which might imply more oversight than necessary for an independent contractor.
How to pay independent contractors in Vietnam
Contractors are not on employee payroll, so you might consider using a money transfer provider or other services to compensate them. Keep in mind that some restrictions may apply when transferring money internationally. You should generally agree and pay your company’s contractor in Vietnamese dong for work performed locally. Foreign currency payments are restricted and should only be used where a specific legal exception applies.
While you will not usually need to provide employee benefits or handle payroll withholding for genuine independent contractors, contractor tax treatment depends on their legal status and invoicing setup. You must also meet the payment terms in your service agreement.
Terminating independent contractors
In most cases, independent contractors offer services for a set period of time or on a project-by-project basis. Your company and the contractor can generally set your own terms for termination or extension of the contract. Those terms must comply with mandatory Vietnamese law and public policy. If the relationship functions like employment, labor-law protections may apply despite the contractor label.
It’s best practice to lay out the procedures for termination in your service agreement. If you have a problem with contractor negligence or a contractual breach and need to terminate services early, you’ll have a straightforward process to follow.
Turn to G-P when hiring independent contractors in Vietnam.
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