Vietnam PEO and EOR service is on the rise

Regardless of the pandemic, a growing number of businesses are looking for opportunities in emerging markets like Vietnam.
In comparison to other Asian countries, Vietnam offers advantages in human resources in terms of volume, increasing quality, and competitive hiring costs. Many large technology companies, including Google, Amazon, and Microsoft, have been looking for IT professionals from Vietnam in particular.

Remote jobs have been widely accepted and encouraged by multinational corporations in the context of the pandemic, giving Vietnam’s labor force more advantages. Furthermore, due to travel restrictions, physical business expansion has been made difficult. This fact discourages multinational corporations from establishing business entities in a new country, even though the need for hiring remains high. As a result, the need for PEO/EOR services in Vietnam has become critical to resolving this issue, and therefore, is on the rise.

The unfavorable facts of Vietnam PEO service to multinational companies

However, come to understand Vietnamese labor law, one may start to realize that the PEO/EOR service in Vietnam is not as easy as it was thought. Below are the most popular facts in PEO/EOR service in Vietnam that are not in favor of multinational companies:

1. The deposit

Many PEO companies in Vietnam require the clients to deposit at least 01month of gross payroll to kick-start the service. This requirement stems from the fact that the PEO company is bound by labor law when it enters into a labor contract on behalf of its clients.
Vietnamese labor law is well-known for being extremely protective of employees. It requires the employer to provide at least one month’s notice before the termination date. To be on the safe side, the PEO company would ask for this deposit to cover the last month’s payment if the client decides to terminate the employment. This practice, on the other hand, places the clients on the financial inefficient side. In many cases, the deposit becomes the deciding factor, and the PEO deal is turned down.

2. The VAT tax

As many PEO companies have been struggling with their own internal processing or fail to obtain proper business code for PEO business, they usually ask the client to pay VAT on the sum amount of transfer. This will significantly increase the budget of the clients. For companies having a large team of staff or high-income employees, this VAT tax imposing would really become the deal-breaker.

3. Service charged by percentage

Another unfavorable thing from some PEO companies in Vietnam is that the PEO or EOR firms typically use a percentage charging scheme. As a result, the PEO firm will take 7-10% (or some places ask for as high as 15%-20%) of the total payroll that the client will pay for the employee. This allows the PEO to avoid financial losses for high-income positions. However, this puts the client on the side of unstable hiring expenses, causing additional stress on their own budget revision and approval.

4. Slow onboarding process

Some PEO company needs 1 week to complete the onboard an employee as it requires all procedure to be done in hardcopies and original signatures (traditional ways)
Language and culture differences with the PEO company: Language has always been the first obstacle while doing business in Vietnam. The same barrier multinational companies will face while working with the PEO company itself. Furthermore, hiring culture, law and practice add up the challenges if they are not properly communicated between the PEO company and the overseas employers. Make sure you will have zero communication problems with your PEO partner. As if your gatekeeper cannot make themselves clear to you, you will get lost with your employees in the market.

Read more: Vietnam PEO partner for your business expansion

VNBG PEO service – what makes us different

With experience in this field since 2018, VNBG takes pride in providing PEO service to our clients with a very different approach.

1. No Deposit: We have solutions for the No-deposit approach when the client does not want to freeze their capital with the PEO company in Vietnam.
2. No VAT tax on the payroll: We understand and agree that charging VAT over the gross payroll paying to the employee is unreasonable.
3. Flat fee: Though we have flexible charging schemes for clients to choose from, we can offer a flat fee for our clients at a very competitive price (from USD 250/person – one of the most competitives in the whole market). Therefore, you will immediately know the PEO/EOR service expense when you change the number of headcounts.
4. 48 hours onboarding process (can be faster): We need a maximum of 48 hours to onboard a new headcount. For the urgent need of hiring, this is the best approach.
5. Our experts: Our experts have been serving PEO/EOr service for our multinational corporate clients for years. Our specialists must follow very strict service protocols and SOPs set forth and enforced by the company to guarantee the highest quality of service delivery. Once you start talking to our consultants, you will know that your business and employees will be in good hands. We are willing to give free consultations on employment law, culture, and HR practice in Vietnam.

For further information and questions, feel free to book a meeting with us by filling the form below.