Hiring in Vietnam Without a Legal Entity: EOR, Contractors, or Subsidiary?

Thinking about hiring in Vietnam, but don’t want the hassle of setting up a company?

You’re not alone. Many foreign businesses want to tap into Vietnam’s growing talent pool, especially in tech and remote roles, but often struggle with legal compliance and local labor laws.

Fortunately, there are flexible hiring solutions available. In this article, we’ll explore the three main options for how to hire employees in Vietnam: partnering with a Vietnam EOR service provider, hiring independent contractors, or establishing a local subsidiary.

We’ll break down how each model works, their risks, and how to stay compliant with Vietnam labor law so you can make the right choice for your business.

An Employer of Record (EOR) is a third-party organization that legally employs workers on behalf of your company. While you maintain full control over your team’s day-to-day tasks, the EOR takes on the responsibility of complying with local labor laws, handling employment contracts, processing payroll, and managing tax contributions. 

This model is beneficial for companies looking to expand quickly into new markets without the time, cost, or complexity of setting up a legal entity.

Using an EOR service in Vietnam allows foreign businesses to hire talent without establishing a local subsidiary or branch. Instead, the EOR becomes the legal employer on paper, while you manage the work performance and output. This makes it an ideal solution for businesses that want to hire remote employees in Vietnam, such as software engineers, designers, or customer support specialists.

Below are several advantages to using an EOR in Vietnam:

• Compliance: The EOR ensures all employment contracts, payroll processes, and social contributions meet Vietnam’s labor law requirements.
• Speed: You can onboard employees in days instead of months.
  Simplicity: No need to register a business, open a local bank account, or deal with government filings.
  Cost-effective: You avoid the fixed overhead costs associated with running a local entity.

Consider using an EOR in Vietnam if your company:

• Wants to hire Vietnamese developers or remote tech talent to support product development or customer operations. 
• Needs to build a local team quickly without going through the lengthy process of setting up a legal entity.
• Prefers to outsource payroll in Vietnam rather than manage taxes, social insurance, and labor compliance internally.
• Aims to stay focused on core business functions while delegating HR, tax, and admin tasks to a local expert. 
• Is testing the Vietnamese market before committing to a full-scale local presence.

This model also supports compliance with tax obligations in Vietnam, as the EOR handles personal income tax, social insurance, health insurance, and unemployment insurance contributions on behalf of the employee. 

This helps reduce legal risk and builds trust with local hires, who receive formal contracts and full employment benefits under Vietnamese law.

Looking to scale your team in Asia without the hassle of setting up a legal entity? 

Cake’s EOR solutions help you tap into local talent, stay compliant, and test new markets with minimal risk. 

Hiring independent contractors in Vietnam means engaging individuals to provide services or complete specific projects without establishing a formal employment relationship. Unlike full-time employees, contractors are not entitled to benefits and are typically governed by a service agreement rather than an employment contract. 

You should consider hiring a contractor in Vietnam if your business:

• Needs support for short-term projects or freelance assignments. 
• Is looking for specialized roles like digital marketing, software development, or design.
• Wants to scale operations without long-term employment commitments. 
• Is a startup or SME aiming to test the Vietnam market before establishing a legal entity. 
• Prefers a flexible setup without the need to manage benefits, payroll, or formal employment contracts in Vietnam. 

✅ Pros of hiring independent contractors in Vietnam:

• Cost-effective: No obligation to provide benefits such as health insurance, social insurance, or paid leave. 
• No need for a legal entity: You can engage contractors without registering a company in Vietnam. 
• Flexibility: Ideal for project-based work or fluctuating workloads

⚠️ Cons and compliance risks:

• Risk of misclassification: If the contractor functions like an employee, you could face fines or legal penalties. 
• Reclassification by authorities: If the contractor works under your control, follows fixed hours, or relies heavily on your business, they may be reclassified as an employee under Vietnam labor law.
• Legal disputes: Misclassification can result in back pay for taxes, benefits, and penalties.

For companies with long-term plans, establishing a legal entity such as a subsidiary or limited liability company can offer full control over operations and hiring in Vietnam. While it requires more time and investment upfront, this option makes sense for businesses planning to build a permanent presence, hire large teams, or sign contracts directly with local clients.

You should consider this route if your business:

• Plans to hire a full in-house team in Vietnam. 
• Needs to issue invoices, open a local bank account, or sign long-term contracts. 
• Wants to build a physical office or local infrastructure. 
• Intends to operate indefinitely in the Vietnamese market. 

To set up a company in Vietnam, foreign investors must go through the following steps:

1. Obtain an Investment Registration Certificate (IRC)
2. Register the business with the Department of Planning and Investment to receive an Enterprise Registration Certificate (ERC)
3. Open a corporate bank account in Vietnam
4. Lease office space (if required by business type)
5. Register for tax code and social insurance

🔎 Cost and Timeline 

Setting up a subsidiary in Vietnam involves both registration fees and ongoing administrative costs. Total startup expenses can range from a few thousand to 10K USD, based on your company’s size and operational scope.

Typical costs include:

• Legal services
• Licensing and government fees
• Office space rental
• Local HR and accounting support

On average, business registration in Vietnam takes 2-4 months, depending on your business type, industry, and location.

🔎 HR & Payroll Setup in Vietnam 

Once your company is registered, you’ll need to handle payroll in Vietnam and comply with local employment regulations. 

This includes: 

• Drafting compliant labor contracts.
• Registering employees with the social insurance authorities. 
• Managing monthly salary payments and tax deductions.
• Filing reports with the tax office.
• Failure to comply with these obligations can lead to fines and reputational risk. 

Comparison of Hiring Options in Vietnam: EOR vs. Contractor vs. Subsidiary

1. Can foreign companies hire in Vietnam without setting up a legal entity?

Yes, foreign companies hiring in Vietnam can do so without a legal entity by using solutions like EOR services. This approach allows businesses to hire in Vietnam without a legal entity, bypassing the need to register a company or subsidiary. 

The EOR becomes the legal employer on paper while you manage the work directly, ensuring compliance with Vietnamese labor regulations.

2. Is hiring remote employees in Vietnam through an EOR service compliant with local laws?

Absolutely! Hiring remote employees in Vietnam through a legitimate Vietnam EOR service is a fully legal and compliant method. 

The EOR handles employment contracts, payroll, and tax contributions, ensuring you meet all hiring compliance requirements. It’s one of the safest ways to build a remote team without setting up a local business.

3. What are the tax and payroll obligations when hiring employees in Vietnam?

When hiring employees in Vietnam, companies must comply with a range of statutory requirements:

• Deduct and remit personal income tax on behalf of the employee. 
• Make employer contributions to social insurance, health insurance, and unemployment insurance. 
• Maintain legally compliant payroll in Vietnam, including monthly reporting and payslips. 
• Ensure all tax filings are submitted to the authorities on time.

These tax obligations in Vietnam apply whether you hire through an EOR or your entity.