Points to note when foreign workers work at a Vietnamese company as an internal transfer
2024/04/02
- Ho Thi Y NhiI
Introduction
The use of foreign workers has become common and essential for many Vietnamese companies, especially in the case of internal transfers from parent companies to Vietnamese subsidiaries. This allows the Vietnamese subsidiary to utilize experienced human resources who have worked at the parent company or other group companies. In addition, having foreign workers who are familiar with internal management rules, business processes and corporate culture working for a Vietnamese company will make it easier for the parent company to manage its Vietnamese subsidiary. This article explains the points to be noted when foreign workers work at Vietnamese companies as internal transfers.
1. Definition of foreign workers for internal transfer
Article 2.1 of the Decree 152/2020/ND-CP stipulates “internal transfer” as one of the forms of employment for foreign workers in Vietnam. Specifically, an internally transferred foreign worker is defined as a foreign worker who meets the following two conditions:
(1) In the case of transferring managers, CEOs, experts and technical workers working for a foreign enterprise (hereinafter referred to as the “parent company”) that has a local base in Vietnam, such as a subsidiary or representative office, to the said local base (the parent company must have a direct capital relationship with the subsidiary to which the transfer is to be made).
(2) If the employee has worked for the parent company for at least 12 consecutive months
Therefore, it is important to note that foreign workers who have not worked for the parent company for at least 12 months, or foreign workers who are transferred from another company in the same group rather than being transferred within the parent company, are not considered “intra-company foreign workers” under Vietnamese law.
2. Points to note when using internally transferred foreign workers
2.1 Work Permit Application Process
For foreign workers to work legally in Vietnam, they must obtain a work permit (or work permit exemption certificate) issued by the subsidiary. The permit application process for foreign workers working as internal transfers requires the following three steps:
◆Step 1: Notification regarding recruitment of Vietnamese workers for positions where foreign workers are expected to be hired
Before proceeding with the application process for a foreign worker’s work permit, the Vietnamese subsidiary (hereinafter referred to as the “Employer”) shall apply for recruitment of Vietnamese workers for the positions for which foreign workers are expected to be hired, to the Employment Department or the respective offices1. Must be notified on the electronic information portal of the local employment service center. Based on the recruitment results, if there are no Vietnamese workers who meet the recruitment criteria, the employer can proceed to the next step of applying for a work permit for foreign workers.
The “Notification on Recruitment of Vietnamese Workers” will be applied from January 1, 2024, and will apply not only to foreign workers who are transferred within the company, but also to foreign workers in all positions and work types working in Vietnam. This is a mandatory procedure. This measure was established to give priority to Vietnamese workers, and employers are not able to hire foreign workers and apply for work permits on their own. Employers can only hire foreign workers if their needs cannot be met with Vietnamese workers.
In addition, a “Notice of Recruitment of Vietnamese Workers” must be submitted at least 15 days prior to the planned submission date of documents in Step 2 below.
◆Step 2: Finalize the plan for using foreign workers
In order to apply for a work permit for a foreign worker, the employer must explain the reason for using foreign workers and submit the application documents, including the plan for using foreign workers, to the competent authority (Labor Invalids, Veterans Affairs, etc.) Approval must be obtained from the Ministry of Social Affairs).
If the content of the documents is not detailed or satisfactory, the competent authority has the right to reject the application.
Therefore, employers must provide detailed information regarding the need to use foreign workers, including qualification requirements, expertise, and experience, and explain why it is necessary to use foreign workers for the position.
The deadline for submitting application documents is 15 days before the foreign worker’s scheduled employment date (the date the foreign worker is scheduled to start working in Vietnam)2.
◆ Step 3: Apply for a work permit (or apply for an exemption from a work permit)
After the permission to hire a foreign worker is granted by the competent authority, the employer must apply for the issuance of a work permit at least 15 days before the foreign worker is expected to start working in Vietnam. In the case of applying for a work permit exemption certificate, the application documents must be submitted to the competent authority at least 10 days in advance. In particular, in the case of foreign workers transferred within the company, the following documents must be attached to Application3.
(1) A document proving that the parent company has decided to have the foreign worker work at the employer’s company (generally referred to as a “letter of appointment”)
(2) Documents from the parent company showing that the foreign worker worked for the parent company for more than 12 consecutive months before coming to work in Vietnam.
In addition, for practical purposes, these documents can be combined into one document as a “letter of appointment and certificate of practical experience.”
2.2 Payment of salaries
Under Vietnamese law, there are no detailed provisions regarding salaries or the conclusion of labor contracts for foreign workers who are transferred within the company. However, many state agencies and civil servants have the implicit view that foreign workers who come to Vietnam on internal transfers are essentially workers of foreign companies (parent companies). Therefore, in principle, the payment of salaries and the conclusion of labor contracts regarding these foreign workers must be implemented and managed by the foreign company (hereinafter referred to as the “parent company”), and the employer must It is considered that it is not possible to pay salaries or conclude labor contracts with employees.
However, in reality, many employers pay foreign workers wages based on the hours and effort they work (in some cases, they even advance all or part of the wages to foreign workers on behalf of the parent company), mainly for the following reasons:
– To clearly identify income derived from work in Vietnam for personal income tax purposes
– To help foreign workers secure funds for daily living in Vietnam
Given this situation of misalignment between law and practice, it is recommended that employers check with the state agency (Ministry of Labor, Invalids and Social Affairs) in advance to ensure that the planned salary payment scheme is acceptable in order to minimize the risks associated with paying salaries to foreign workers who are transferred internally. In addition, the following measures are required.
– When an employer pays a salary to a foreign worker and bears the cost of the salary, it is necessary to enter into a labor contract with the foreign worker (note that if a labor contract is not entered into, there is a risk that the entire salary cost will be deemed to be non-deductible for corporate income tax purposes).
– If an employer advances the foreign worker’s salary on behalf of the parent company but does not bear the cost of the salary, a contract regarding the advance payment must be concluded between the subsidiary and the parent company.
2.3 Social insurance and health insurance
Under Vietnamese law, foreign workers who are transferred within the company are not required to pay compulsory social insurance4 and health insurance5.
Employers are required to keep documents proving the employment status, such as the appointment letter and work experience certificate and work permit (or work permit exemption certificate) mentioned in step 3 of 2.1 above.
Conclusion
When having foreign workers work in Vietnam in the form of internal transfers, there are various Vietnam-specific conditions, regulations, and specific processes that must be kept in mind. Therefore, if an employer needs to hire foreign workers for internal transfers, it is required to have a clear understanding of the relevant regulations and practical practices, and must comply with Vietnamese laws and regulations regarding the employment of foreign workers. In order to promptly respond to the human resources needs of the Vietnamese subsidiary, it is recommended that a plan regarding the employment of foreign workers be drawn up at least four months before the foreign worker’s start date in Vietnam.
1 Article 1, paragraph 2 of Decree 70/2023/ND-CP
2 Article 4, paragraph 1, subparagraph a of Decree 152/2020/ND-CP
3 Cabinet Order 152/2020/ND-CP Article 9
4 Cabinet Order 143/2018/ND-CP Article 2, Paragraph 2, Paragraph a
5 Ministry of Health Official Letter No. 389/BYT-BH dated January 31, 2020 and Ho Chi Minh City Social Insurance Official Letter No. 288/BHXH-QLT dated February 18, 2020
M000111-179
(Created on April 2, 2024)
*This article was translated by Yarakuzen.
