New Decree on labour outsourcing services

Asia Vietnam

In brief 4 min read

Taking effect from 5 May 2019, Decree 29/2019/ND-CP (Decree 29) on labour outsourcing services has been introduced, replacing Decree 55/2013/ND-CP (Decree 55). Key changes include a relaxation of licence application conditions, but also the imposition of further restrictions in relation to the deposit aimed at providing greater protection for contract employees. Partner Melissa Keane and Associate Hoa Nguyen discuss the new requirements.

Longer licence term and labour outsourcing periods

Term of licence

Under the new Decree 29, the term of a labour outsourcing licence is 60 months, with additional (and unlimited) 60 month extensions available thereafter. This is a significant improvement from Decree 55, which only allows a maximum licence term of 84 months (ie, 7 years), with an original term of 36 months and a maximum of two extensions of no more than 24 months each time.

The changes under Decree 29 allow a labour outsourcing company to have a stable ongoing operation without limitation of term.

Labour outsourcing period

Decree 29 removes the 12 month restriction on the outsourcing of an employee, as previously required under Decree 55. Decree 29 is instead silent on the maximum period of time an employee is permitted to be outsourced. While there is no express limitation in Decree 29 in this regard, long-term outsourcing of employees may still be subject to challenge by the authorities as contrary to the purpose of labour outsourcing to satisfy the temporary shortage of employees.

More jobs permitted to be outsourced

Decree 55 set out 17 jobs permitted to be outsourced, meaning a labour outsourcing company was unable to outsource a job not on the list.

Decree 29 provides for the following three additional jobs, bringing the total number of jobs able to be outsourced to 20:

  • Management, operation, maintenance and service staff on an oceangoing vessel;
  • Management, operation, supervision, repair, maintenance and service staff on oil rigs; and
  • Aircraft pilot, service staff on aircraft; maintenance, repair of aircraft and aircraft equipment; flight dispatchers/surveillance personnel.

Easing of conditions to apply for a labour outsourcing licence

The long list of strict conditions to be met when applying for a labour outsourcing licence under Decree 55 has been reduced under Decree 29. In order to qualify for a licence, Decree 29 only requires the satisfaction of the following two conditions:

  1. escrow deposit of VND 2 billion (approx US$90,000) to be lodged at a commercial bank or foreign bank branch lawfully established and operating in Vietnam; and
  2. appointment of a legal representative who meets the following qualifications:
    1. has previously held a managerial position in an enterprise;
    2. does not have a criminal record; and
    3. has at least three years' experience in the labour outsourcing sector within the previous five years immediately prior to application for the licence.

The following Decree 55 requirements are no longer required:

  • Minimum legal capital of VND 2 billion (approx US$90,000) in the case of a local company, and minimum legal capital and assets of VND 10 billion (approx US$450,000) in the case of a foreign invested company;
  • Prior experience in providing labour outsourcing services of at least five years;
  • In the case of a foreign labour outsourcing company, submission of a certificate issued by the company's country of establishment to evidence that the company, and members representing its capital in the company, have not violated the laws of such country; and
  • Having an office lease (where the labour outsourcing company leases its premises) with a minimum term of two years.

Further regulation on the deposit providing greater protection for employees

Use of deposit

The escrow deposit can now be applied not only to payment of salaries and compensation of employees in case of breach of a labour contract by the labour outsourcing company, as provided under Decree 55, but also to cover the payment of allowances, social insurance, health insurance, unemployment insurance and insurance for a work related accident or occupational disease.

Deposit certificate

Labour outsourcing companies are required to keep the deposit certificate issued by the bank up to date under Decree 29. Accordingly, any change to the name of the company, headquarter address, the deposit account number or other contents set out in the deposit certificate must be notified by the company to the bank with supporting documents evidencing the change. We note this requirement only applies in respect of the deposit certificate contents and there is no requirement for the company to keep the licencing authority similarly updated.

Withdrawal of deposit monies

Both Decree 55 and Decree 29 prescribe the circumstances in which the company is allowed to make withdrawals of deposit monies. However, under Decree 29, withdrawals for payment of legal benefits to employees (eg, payment of salaries, allowances, insurance premiums) must now be made directly to the employees by the bank. This minimises the risk that the labour outsourcing company will make a withdrawal for such purpose but fail to actually pay the employee.

If you have any questions on the changes or labour outsourcing services more generally, please do not hesitate to contact us.