Legal notable relating to the establishment of a foreign-invested employment services company in Vietnam

Legal notable relating to the establishment of a foreign-invested employment services company in Vietnam

As defined by the Vietnam Labor Code 2012, employment service organizations include employment service centers and employment service enterprises. In particular, employment services centers are established and operated under the Government’s regulations, while employment service enterprises are established and operate in accordance with the law of enterprise. Although one side is a public non-business unit and the other is an enterprise, both have the function of advising, recommending jobs and vocational training for workers; supplying and recruiting employees at the request of employers; collecting and providing information about the labor market and performing other duties as prescribed by law. It can be said that employment service organizations are the bridge between workers and employers in the context of increasing demand for employment, workers seeking jobs suitable for themselves when employers look for candidates who fit their culture. This has helped boost employment service businesses for strong growth in recent years and is a potential market for investors.

For a foreign investor to conduct business investment in Vietnam, it is necessary to identify the business investment industry in which Vietnam has opened the market in international commitments or treaties to which Vietnam is a member yet? Normally, the Schedule of Specific Commitments on Services of Vietnam to the World Trade Organization (WTO) will be applied to see if the industry has been opened to foreign investors. In this case, Vietnam has not yet committed to opening up to the “employment services” business. However, Vietnamese law does not impose any restrictions on foreign investors when investing in “employment services” and, in fact, many foreign investors are allowed to set up a company with 100% foreign capital to provide employment services. Therefore, based on the most favored nation principle, the ability of the Government of Vietnam to permit foreign investors to set up employment service enterprises is very high. Especially for investors from Japan and Korea, the two countries are Vietnam’s strategic partners in economic and social development.

In addition to ensuring the conditions that must be met when investing in Vietnam, foreign investors must apply for employment service licenses and meet the conditions including:

  • Locations of head offices and branches must be stable and have a term of 03 years (36 months) or more; If it is a house owned by the person in whose name the enterprise is registered, a valid application must be submitted in the application for licensing; if it is a rented house, there must be a lease with a term of 03 years (36) month) or more;
  • Deposit 300,000,000 dong (three hundred million dong) at the commercial bank where the enterprise opens the main trading account for the purpose of using to solve risks and compensation amounts that may occur in employment service operation process of the enterprise. For this deposit, the enterprise still gets interest from the deposit as agreed with the bank.

For deposits, after fulfilling all financial obligations related to the employment service activities of the enterprise, the enterprise will be refunded the deposit in the following cases: (i) There is a written notice of the competent State agencies to grant employment service provision licenses for enterprises not to be granted, re-granted or extended licenses; or (ii) There is a document of a competent state agency issuing a job service license on the enterprise’s submission or revocation of its license.

Previously, in addition to the conditions for corporate headquarters and escrow, the law required businesses to have specialised machinery operating employment services. However, this condition was abolished because, in practice, it did not guarantee the effectiveness of licensing evaluation but created many procedures for businesses.

During its operation, the employment services enterprises should ensure to regularly report to the Department of Labor, Invalids and Social Affairs where the enterprises are located. In case of relocation of headquarter, branch, the head of the enterprise must send a written request to the competent state agency to grant the employment service license to the new location within ten working days prior to the date of the relocation.

Therefore, it can be concluded that employment services are potential business activities for investors and will contribute significantly to society in the near future. However, during operation, businesses will need to strictly comply with the conditions prescribed by law and make reports to the licensing authorities.

If you have any questions or require any additional information, please contact Apolat Legal – An International Law Firm in Viet Nam.

This article is for general information only and is not a substitute for legal advice.