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Staying within the law

Released at: 04:59, 08/10/2014

Staying within the law

Most newly-established companies agree that Vietnam is special market. Local understanding, especially of the local labour market, is regarded as something of a passport to entry...

There can be no doubt that the greatest concern among most foreign companies is the country’s Labour Law. Legal compliance is the top priority, not only in Vietnam but also around the world, in ensuring a company’s sustainable development.

A thorough understanding of Vietnam’s Labour Law is crucial, as it impacts directly on the heart of any organisation: its workforce. However, most foreign companies, especially those that are newly established, find it difficult comprehending and applying the Labour Law (including social insurance, health insurance, and all kinds of taxes), as it remains complex in execution and is still to be fully developed. Many legal documents must be referred to in addressing a single issue. Decrees and circulars are usually followed by official written documents, resulting in difficulties in comprehension, though the government is now working hard to make it more easily understood so it does not get in the way efforts to attract foreign direct investment (FDI). The lack of a systematic process, complex administration procedures, and the need to deal with legal offices are what makes Vietnam different from other countries for a newly-established company.

Furthermore, not only the Labour Law but also many human resources-related matters, such as how to recruit talent and how to determine salary levels and social insurance contributions are a burden for all companies, not just new arrivals. The best and most practical solution adopted by most organisations is outsourcing - an approach where they can leave the unfamiliar to the experts. Good outsourcing vendors not only implement these tasks but do so in a manner most suitable with a client’s status. For example, clients can save a great deal of time in building a payroll system, which is used over a long period of time, when using an outsourcing vendor. Outsourcing also helps new companies to focus their time and effort on their core business and strategies to build up and enhance their positioning in a new market.

Outsourcing has become a popular trend around the world and has begun to earn a higher profile in developing countries like Vietnam. It is especially helpful to newly-established companies, for which the host country and its risks remain largely unknown. Choosing a competent outsourcing vendor that is strong in expertise and commitment and “sensitive” to the company’s status when providing advice is an important matter for any organisation.

(*) This column was prepared in co-operation with Talentnet Corporation. To obtain more advice on Vietnam’s labour market, email nguyen.t.an.ha@talentnet.vn.

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