What is EOR
EOR stands for Employer of Record. This service concept has been popular in Vietnam in the last few years due to the rise of hiring and recruitment demand from overseas companies toward Vietnam’s labor market.
In the nutshell, an Employer of Record is a company (local entity) that is legally responsible, on behalf of its client company, for paying its employees, including dealing with employee taxes, benefits, insurance, visa application, and sponsorship applications, and a great many other transactions and operations concerning human resources.
Read more: Outsource your employment in Vietnam using EOR service
What is Personal EOR
The concept of personal EOR is derived from the mainstream concept. While regular EOR focuses on corporate clients with a need for cross-border recruitment, personal EOR aims to assist individuals living in the area in their search for a solution to be hired by a local entity.
In the traditional EOR model, overseas companies pay a local entity to place their employees in a labor contract and then fulfill the duties of an employer on their behalf (such as pay for state insurance, obtain a work permit, processing salary, and other HR benefits). The hirer in personal EOR, on the other hand, is a person who will pay the local entity to hire himself. As the result, he will be added to the company’s payroll and become an employee of the company.
In brief, the Personal EOR puts a person under a nominee job or in a nominee employment relationship with a local entity from which he will benefit from a full-time job status.
Why Personal EOR is the best solution for ex-pat freelancers and retirees to stay in Vietnam permanently
Vietnam has very few options for long-term stay permits. Currently, there are only three options for permanent residence in Vietnam: stay for investment, stay for work, and stay for family.
Stay for investment purpose: A person must invest in a business to be eligible for this purpose. He or she must be the owner or co-owner of a business, and the business must show evidence of operations.
Read more: 10 steps to fully establish a foreign-owned company in Vietnam
Stay for work purposes: A person must be hired by a business entity in Vietnam to be eligible for this stay permit. This necessitates the acquisition of a work permit
Stay for family reasons: A marriage certificate with a Vietnamese national proves this.
Unfortunately, those who do not fit into the above categories are currently not allowed to stay in Vietnam for a long-term period. And the number of these people is numerous.
The investment approach necessitates a large sum of money to be paid in order to start a business. The minimum cost to start an entity (aside from the investment capital to be dedicated to the company) is estimated to be between $2000-$5000, not including the monthly operational costs to maintain the business. Unless one has a serious business interest, this is not a visa solution for budgeted ex-pats.
In addition, not everyone in Vietnam is looking for full-time work. Many are working remotely for companies in other countries or are nearing retirement age and do not want to work any longer. All they want is to enjoy the low-cost lifestyle in Vietnam and spend their days relaxing without having to worry about finding work.
They are digital nomads who can work from anywhere in the world, freelancers who do not want to be confined to an office job, and retirees who simply want to relax after decades of hard work. All they want to do now is relax, enjoy local foods and culture, and live a simple life surrounded by Vietnamese and local culture.
Sadly, there is no visa type that fits this preference of living in Vietnam. Unlike other countries, such as Thailand, Vietnam does not have a so-called retirement visa or visa that allows freelancers to stay in the country permanently. As a result, a large number of ex-pats have decided to remain on tourist visas or business visas, which are only valid for short-term stays. This is clearly not a sustainable approach for people who rely on these visas; the instability of regulations may cause visa extensions to be revoked at any time, putting them at risk of deportation.
Despite the constraints, personal EOR may be the best option for those who live in Vietnam but do not have a full-time job, investment, or marriage with a Vietnamese. Personal EOR enables a person to obtain a nominee job with a local entity, from which the permanent staying purpose can be declared and secured.
How Personal EOR works
- First, the individual and the local entity will enter into a labor contract. To do so, the EOR company will need to obtain a Work Permit ahead of time.
- Once the Work Permit has been approved, the labor contract will be signed to officially enroll the individual on the entity’s payroll.
- With the Work Permit and Labor Contract in hand, the individual can open a bank account in Vietnam.
- Every month, the person transfers the nominee salary and EOR fee to the company.
- The company will pay for state insurance (as required by labor law) and deduct PIT (Personal Income Tax) from the nominee’s salary.
- The rest salary (net salary) will be paid back to the person to the local bank account opened in step 3
- With the Work Permit obtained, the person can obtain a Work Visa or a Temporary Resident Card which are long-term stay permits in Vietnam.
The EOR company must commit to paying the person’s state insurance and PIT on his or her behalf. It will also complete taxation by the end of the year. These contributions and payments will be tracked and reported on a regular basis. These records serve as proof of the validity of the individual’s work permit and stay permit.
In this way, the person can be technically hired by a company, yet still can enjoy the freedom of a retiree or a freelancer’s life in Vietnam.
Selecting the right EOR company
In recent years, the EOR service has grown in popularity in Vietnam. With just one click, you can easily find a dozen EOR firms. However, in order for a Work Permit sponsor to be successful, the company must be well established and have a reliable business profile (such as the size of capital investment, whether the company has registered business matching with the person’s professional backgrounds).
Furthermore, a professional EOR firm is one that is well prepared to provide the service. It should obtain business lines such as 7830 that allow payroll, hiring, and HR management services (VSIC code). A small capital invested company, a limited number of registered businesses, or the absence of a proper business code can expose legal risks in the long run, making it unsustainable to engage the service.
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