Bui Duc Giang
Attorney at law and Ph.D in law1
KEY POINTS:
- Only companies licensed to sublease labor may do so on a profit-making basis;
- The law sets out various requirements for the carrying out of this business and remains strict on this field;
- While ordinary companies are not allowed to exchange personnel with one another, an employee may enter into labor contracts with more than one company.
A company may wish to use some staff of another company, especially when they belong to the same group. What form of labor exchange is recognized by Vietnamese law? This practical note tries to provide an answer to the question.
As a matter of principle, under Article 18 of the Labor Code, before accepting an employee to work for it, an employer and such employee must enter directly into a labor contract.
A labor contract means an agreement between an employee and an employer on a paid job, on working conditions, and on the rights and obligations of each party to the labor relationship.
The only exception to this principle is labor sublease scheme whereby a company may use staff of another company.
Under Clause 1, Article 53 of the Labor Code, labor sublease means the scheme under which an employee recruited by a company licensed to carry out labor sublease (the staffing company) shortly thereafter works for another company (the subleasing company), and is immediately subject to management by such other company but maintains the labor relationship with the first company.
Clause 2, Article 53 of the Labor Code further indicates that labor sublease is a business subject to conditions and may only be carried out in respect of a number of specified jobs.
Clause 1, Article 25 of Decree No. 55/2013/ND-CP dated May 22, 2013, on labor sublease, as amended in 2014 (Decree 55) provides a list of jobs for which labor sublease is permitted. Those jobs include:
- Translator - interpreter - stenographer;
- Secretary- administrative assistant;
- Receptionist;
- Tour guide;
- Sales assistant;
- Project assistant;
- Programmer for manufacturing machinery systems;
- Technician for manufacture or installation of television or telecommunications equipment;
- Technician for operating, testing or repairing construction machinery and equipment or manufacturing electrical systems;
- Sanitation worker for buildings and factories;
- Data editor;
- Security guard/bodyguard;
- Telemarketer/customer service worker via telephone;
- Processor of financial or tax issues;
- Technician for repairing or testing automobiles;
- Industrial technical scanner or drawer, interior designer; and,
- Driver.
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| Garment workers at the Made Clothing Vietnam Co., Ltd., in Binh Duong province __Photo: Hai Au/VNA |
Legal requirements
Article 54 of the Labor Code requires the staffing company to pay an escrow and be licensed to carry out labor sublease activity. The escrow amount must be VND 2 billion (Clause 1, Article 5 of Decree 55) and shall be deposited at a commercial bank where the staffing company has opened its main current account (Clause 1, Article 16 of Decree 55) to secure the staffing company’s obligation to pay wages to subleased employees or to pay compensation to subleased employees in case it breaches the labor contract already signed with such employees or if it causes damage by its failure to ensure the legitimate rights and interests of its subleased employees (Article 15 of Decree 55). Furthermore, under Clause 2, Article 5 and Clause 1, Article 6 of Decree 55, the staffing company must maintain a charter capital of at least VND 2 billion throughout its term of operation.
The Minister of Labor, War Invalids and Social Affairs has authority to grant labor sublease licenses which are valid for a maximum period of 36 months (Articles 12 and 13 of Decree 55).
Under Article 55 of the Labor Code, the staffing company and subleasing company are required to enter into a labor sublease contract made in two written copies, with each party holding one copy, and such contract must have the following principal details:
- Workplace, and the job which requires a subleased employee; description of the job, and specific requirements on the subleased employee;
- Term of the labor sublease, and date of commencement of work by the employee;
- Working hours, rest breaks, and conditions on occupational safety and hygiene at the workplace; and,
- Obligations of each party toward the employee.
It is also prescribed that a labor sublease contract must not contain provisions on the rights and interests of the employee which are less favorable than those provided in the labor contract which the staffing company has signed with the employee concerned.
The consent of the employee to be subleased is required for the validity of the labor sublease contract and the staffing company may not collect any fee from the subleased employee (Point c, Clause 1, Article 4 of Decree 55).
With regard to sublease term, under Clause 2, Article 54 of the Labor Code, the term of any labor sublease must not exceed 12 months. Upon the expiration of the term, the staffing company may not continue to sublease such subleased employee to the subleasing company (Clause 2, Article 26 of Decree 55).
For a staffing company established as a joint-venture company between an overseas company and a local company, Clause 3, Article 6 of Decree 55 imposes the following conditions on the overseas company:
- It must be a company specializing in the business of labor sublease, with a capital and total asset value of at least VND 10 billion;
- It must have at least five years’ experience in providing labor sublease services; and,
- It must have a certificate granted by an authority in its home country proving that it and the representative of its contributed capital portion in the joint venture have not breached the law of the country of origin or the law of the related country.
Article 56 of the Labor Code imposes various obligations on the staffing company, including paying compulsory social insurance, health insurance and unemployment insurance premiums in favor of the subleased employee as well as giving notice of contents of the labor sublease contract to the subleased employee. Pursuant to Clause 4, Article 57 of the Labor Code, the subleasing company may not supply the subleased employee to other companies.
It is noteworthy that the subleased employee may enter directly into a labor contract with the subleasing company once he has terminated his labor contract with the staffing company (Clause 6, Article 58 of the Labor Code).
Labor sublease between ordinary companies
In practice, companies, especially those belonging to a same group, may wish to exchange employees with one another in order to save labor costs. Is such staff exchange lawful?
In light of the above, a company which has not registered sublease as its business line and has not obtained a labor sublease license may not sublease its employees to another company.
Is it possible for a company to lend some staff to another company without collecting any fee or financial consideration for doing so? Obviously, as this kind of agreement doesn’t generate any income in favor of the lending company, one may argue that it would not qualify as a business line (requiring registration) and the parties would avoid the regulated restrictions stated above.
However, this scheme is not lawful as well since as mentioned above, labor sublease remains the only way a company may use staff of another company.
Under Clause 1, Articles 3 and Clause 5, Article 9 of Decree No. 95/2013/ND-CP dated August 22, 2013, on administrative sanctions in the fields of labor, social insurance and overseas manpower supply, as amended in 2015, a fine of between VND 100 million and VND 150 million will be imposed on a company which subleases labor without having been granted a labor sublease license.
It should also be noted that intra-group labor sublease is prohibited (Point e, Clause 1, Article 4 of Decree 55). Failure to comply with this prohibition will result in a fine of between VND 80 million and VND 100 million (Point d, Clause 6, Article 9 of Decree 55).
What alternatives?
Article 21 of the Labor Code allows an employee to sign labor contracts with more than one employer at the same time.
However, this alternative is beneficial exclusively to the employee at stake and the second employer will have to pay him a salary (because as mentioned above, a labor contract implies necessarily payment of a specific salary). Nevertheless, the companies concerned may limit their pay by the following ways:
- The second employer pays the employee a symbolic salary which must however be equal at least to the law-prescribed minimum salary.
- If they belong to the same group, another alternative consists in deducting part of the employee’ salary with the first employer which will then be used to pay the employee’ salary with the second employer, which results in no further financial charge for the group. Please note that this requires the employee’s consent.
Point a, Clause 1, Article 4 of Decree No. 44/2013/ND-CP dated May 10, 2013, on labor contracts (Decree 44) provides for the payment of insurance premiums when a worker signs labor contracts with multiple employers and the employee and employers are eligible for subscribing compulsory social insurance and unemployment insurance as follows:
- The employee and employer signing the first labor contract have to pay social insurance and unemployment insurance premiums; and,
- The employers of the subsequent labor contracts have to pay, at the same time as the date of payment of salaries to the employee, an amount corresponding to the amount of social insurance and unemployment insurance premiums prescribed by law as payable by employers.
Likewise, with regard to health insurance coverage, Point a, Clause 2, Article 4 of Decree 44 states:
- The employee and employer of the labor contract with the highest salary have to pay compulsory health insurance premium; and,
- The employers of the subsequent labor contracts have to pay, at the same time as the date of payment of salaries to the employee, an amount corresponding to the amount of health insurance premium prescribed by the law on health insurance as payable by employers.-
