Compliance Guidance for Enterprises Using Labor Outsourcing Services

Enterprises using labor outsourcing services must manage compliance carefully to avoid fines, backdated social insurance liabilities, and direct workplace disputes. This arrangement is valid only when the service provider has a lawful license, the outsourced positions are within permitted job categories, each assignment does not exceed 12 months, and the client properly monitors occupational safety, working time, and employee data obligations under labor regulations and the Law on Enterprises and Businesses. Long Phan Consulting assists companies in reviewing contracts, service providers, and internal compliance controls.

Legal Nature and Identification Signs of the Labor Subleasing Model

Enterprises must accurately identify the legal nature of their model before signing personnel contracts. Misclassifying the structure can cause a standard service contract to be legally reassessed as an illegal labor subleasing operation.

Concepts and Management Structure in the Tripartite Relationship

Labor subleasing constitutes a tripartite model involving the labor subleasing enterprise, the subleasing party, and the employee. The critical identification point is that the employee signs a contract with the labor subleasing enterprise but works under the direct management and control of the subleasing party.

Administratively, the subleasing party holds the authority to assign daily tasks at the factory, store, warehouse, or construction site. However, the employment relationship remains exclusively with the labor subleasing enterprise. It does not convert into a direct labor contract with the subleasing party. This structure is established under Clause 1, Article 52 of the 2019 Labor Code.

Severe risks arise when the operations department confuses daily management authority with the power to terminate. The subleasing party may supervise, assign shifts, and evaluate violations. They must never arbitrarily issue disciplinary decisions or terminate the employment relationship.

Criteria for Distinguishing from Outsourcing and Service Contracts

The fundamental legal distinction lies in personnel management authority. If an enterprise directly manages the partner’s employees during daily operations, the model exhibits clear signs of labor subleasing.

Labor subleasing is a conditional business line. It mandates formal licensing and is strictly confined to specific jobs, pursuant to Clause 2, Article 52 of the 2019 Labor Code. Consequently, the contract title does not dictate the legal nature if actual operations involve the transfer of direct management authority.

Solutions to Identify and Prevent Model Confusion Risks

Enterprises should begin with core governance questions. Who directs the personnel daily? Who is responsible for the final output? Who handles labor discipline? These three criteria distinctly separate a lawful service contract from a labor subleasing service.

Mandatory signs to review prior to signing include:

• The partner’s personnel utilize the enterprise’s email, access cards, uniforms, or internal tools.
• The enterprise’s direct managers assign tasks, track attendance, allocate shifts, or approve overtime.
• The contract is titled as a service agreement but lacks independent work deliverables.
• The enterprise intends to replace internal employees with third-party personnel for extended periods.
• The partner supplies workers but fails to provide an appropriate operating license.

If the model is misclassified, enterprises face severe disputes regarding wages, social insurance arrears, occupational accidents, and administrative fines consistently advises executing a rigorous operational audit before choosing between service contracts, outsourcing, or a labor subleasing structure.

Crucial Conditions for Enterprises to Lawfully Utilize Labor Subleasing Services

The subleasing party must rigorously audit legal conditions before integrating subleased personnel into their operations. The focal point is not merely the service price. Enterprises must verify the vendor’s license, permitted job categories, maximum subleasing terms, and statutory prohibited boundaries under labor laws.

Mandatory Requirements for the HR Vendor’s License

Enterprises must exclusively partner with a lawful labor subleasing enterprise. The core prerequisite is possessing a valid Labor Subleasing License and maintaining the statutory escrow deposit.

The vendor must secure this license and complete a 2,000,000,000 VND escrow deposit, pursuant to Clause 1, Article 54 of the 2019 Labor Code and Clause 2, Article 21 of Decree No. 145/2020/ND-CP. This serves as the foundational condition to validate the vendor’s legality.

Licenses do not hold indefinite validity. The maximum term of a Labor Subleasing License is 60 months, with each extension strictly capped at 60 months, pursuant to Clause 3, Article 23 of Decree No. 145/2020/ND-CP.

Regarding jurisdiction, the Chairman of the Provincial People’s Committee holds the authority to issue, extend, and revoke this license, pursuant to Article 22 of Decree No. 145/2020/ND-CP. Therefore, buyers must verify the license copy against the issuing authority, validity period, and authorized scope before signing contracts.

Limitations on Job Categories and the Maximum Subleasing Duration

The subleasing party cannot utilize subleased personnel for all corporate positions. The law strictly confines this model to a narrow scope to fulfill temporary or highly technical demands.

Enterprises may only utilize subleased labor within 20 specific job categories, pursuant to Appendix II of Decree No. 145/2020/ND-CP. Common operational roles include:

• Receptionists, secretaries, and administrative assistants.
• Tour guides, sales support, and project support.
• Drivers, security guards, and industrial cleaners.
• Repair, maintenance, and technical system operators.
• Interpreters, translators, and document editors.

This statutory list must be cross-referenced against the actual job description, not merely the contract title. If personnel perform unlisted tasks, the enterprise will be penalized for illegal labor subleasing.

The subleasing term for each employee is strictly capped at a maximum of 12 months, pursuant to Clause 1, Article 53 of the 2019 Labor Code. Upon reaching this threshold, enterprises must either sign a direct labor contract, transition to lawful outsourcing, or terminate the usage properly.

Auditing Prohibited Boundaries for Using Subleased Personnel

The primary risk is not hiring short-term staff, but abusing this model to evade long-term labor governance obligations. Enterprises must verify the usage purpose during the initial HR approval phase.

The subleasing party may only use this service to address sudden personnel surges, replace employees on maternity leave or treating occupational accidents, or secure highly skilled labor, pursuant to Clause 2, Article 53 of the 2019 Labor Code.

The internal approval checklist must strictly block the following prohibited use cases:

• Replacing employees who are currently on strike.
• Replacing employees currently undergoing labor dispute resolution.
• Replacing personnel dismissed due to structural changes, technological shifts, or economic reasons.
• Transferring the subleased employee to any third-party user.
• Utilizing personnel without a specific agreement on occupational accident compensation liabilities.

These strict boundaries are established under Clauses 3 and 4, Article 53 of the 2019 Labor Code. If enterprises exploit this service to bypass formal workforce reduction procedures, they face severe administrative fines and joint labor disputes.

Joint Responsibilities and Liabilities of the Subleasing Party at the Workplace

When subleased personnel operate within factories, warehouses, or retail stores, the subleasing party directly controls the operational environment. Consequently, compliance responsibilities extend far beyond the commercial contract with the vendor.

Occupational Safety and Health (OSH) Governance and Working Hours

The subleasing party must notify, instruct on internal labor regulations, and guarantee equal working conditions for subleased personnel. This obligation arises because the employee operates under direct management at the subleasing party’s facility.

If overtime or night shifts are required, the subleasing party must negotiate directly with the subleased employee, pursuant to Clause 3, Article 57 of the 2019 Labor Code. Operations departments frequently overlook this critical step by solely communicating with the HR vendor.

Regarding safety, employers must implement comprehensive measures to ensure occupational safety and health (OSH) at the workplace for all active personnel, pursuant to Clause 1, Article 134 of the 2019 Labor Code. Enterprises must establish coordination protocols for shift work, safety training, and incident response to mitigate joint liability for occupational accident compensation.

Disciplinary Authority and Personnel Coordination Mechanisms

The subleasing party holds daily management authority but lacks the right to issue direct disciplinary decisions. Disciplinary authority remains exclusively with the labor subleasing enterprise, as they maintain the formal employment relationship.

When workplace violations occur, the disciplinary protocol should strictly follow these steps:

• Record the incident using internal minutes, security cameras, attendance data, or direct managerial confirmation.
• Notify the labor subleasing enterprise regarding the violation and request formal coordination.
• Return the subleased employee if their conduct violates operational requirements or facility regulations.
• Transfer violation evidence to allow the vendor to execute disciplinary procedures under their statutory authority.
• Archive all coordination records to serve as evidence during labor inspections or disputes.

This approach complies with Clauses 5 and 6, Article 57 of the 2019 Labor Code, which grants the subleasing party the right to return employees and provide violation evidence. Arbitrary dismissal immediately shifts dispute liabilities onto the subleasing party.

Establishing Mechanisms for Personal Data and Trade Secret Protection

Subleased personnel often access client data, operational protocols, product codes, ERP systems, or internal manufacturing data. This presents a critical commercial risk independent of labor compliance.

The subleasing party must execute transparent personal data transfer agreements defining processing purposes, access scopes, and protection liabilities, pursuant to Clause 1, Article 17 of Decree No. 356/2025/ND-CP. Simultaneously, the receiving enterprise must formulate and archive a personal data processing impact assessment dossier, pursuant to Clause 1, Article 19 of Decree No. 356/2025/ND-CP.

For personnel accessing internal systems, enterprises must implement NDAs, strict account authorization, access logs, and revocation protocols upon term completion. In the event of a personal data breach, the statutory notification deadline is 72 hours from violation detection, pursuant to Clause 1, Article 29 of Decree No. 356/2025/ND-CP.

Legal Risks and Administrative Sanctions in Managing Subleased Labor

Labor subleasing risks typically originate from three critical failures: utilizing personnel for unlisted job categories, exceeding statutory time limits, and selecting unlicensed vendors. For manufacturing, logistics, F&B, or industrial zone operators, these violations instantly trigger severe administrative fines, the collection of social insurance arrears, and catastrophic operational disruptions.

Administrative Sanctions and Risks of Operational Suspension

The subleasing party can face severe penalties even without executing direct labor contracts with the personnel. The labor inspectorate strictly scrutinizes the usage purpose, subleasing term, and the vendor’s operating license.

These massive fines demonstrate that the subleasing party cannot rely on the vendor’s commercial warranties. Corporate legal departments must independently audit licenses, job categories, and individual personnel terms before authorizing operational demands.

Risks of Social Insurance Arrears Collection and Occupational Accident Compensation

Principally, the labor subleasing enterprise directly deducts and remits Social Insurance (SI) contributions for the subleased employee. This statutory obligation is established under Clause 4, Article 13 of the 2024 Social Insurance Law.

However, if the vendor evades or delays SI contributions, the subleasing party’s HR supply chain suffers immediate disruption. Late payments accumulate an interest penalty of 0.03% per day on the overdue amount, pursuant to Clause 1, Article 41 of the 2024 Social Insurance Law.

Enterprises must rigorously audit outstanding balances up to June 30, 2025. Pursuant to Clause 12, Article 141 of the 2024 Social Insurance Law, unpaid or insufficiently paid amounts will be penalized under the new statutory sanction mechanisms.

Regarding occupational accidents, the subleasing party must secure the scene, provide first aid, and coordinate incident declarations. Failing to execute first aid, declaration, or investigation protocols subjects the violating individual to fines of 20,000,000 to 25,000,000 VND, pursuant to Point c, Clause 1, Article 13 of Decree No. 12/2022/ND-CP.

Defense Strategies and Explanations During Specialized Inspections

When subjected to an inspection, enterprises must formulate defenses based on actual operational substance, rather than merely submitting service contracts. The dossier must explicitly prove that jobs are legally permitted, individual terms respect statutory ceilings, and vendors possess valid licenses.

The explanatory dossier must be structured in the following sequence:

• Consolidate the vendor dossier, including the license, escrow deposit proof, labor subleasing contract, and personnel appendices.
• Cross-reference working positions against the permitted job categories in Appendix II of Decree No. 145/2020/ND-CP.
• Audit the usage term of each subleased employee, isolating cases approaching or breaching the 12-month limit.
• Gather operational evidence, including shift schedules, overtime agreements, safety training minutes, and incident response records.
• Formulate a remediation plan, encompassing model transitions, termination of violating usages, or execution of direct labor contracts.

If violations occurred during a transitional regulatory period, enterprises can invoke the favorable principle in administrative sanctions. Article 63 of Decree No. 12/2022/ND-CP permits the application of new regulations if they exempt liability or impose lighter penalties for behaviors under review before a sanction decision is issued.

Contract Review Checklist and Joint Dispute Response Strategies

A labor subleasing contract must function as a rigorous risk allocation instrument, not merely a personnel supply agreement. For the subleasing party, the contract dossier must be sufficiently robust to serve as primary explanatory evidence during labor disputes, specialized inspections, or occupational accidents.

Risk Appraisal Criteria in Labor Subleasing Contracts

Corporate legal departments must audit the contract from both commercial and labor compliance perspectives. Vague clauses severely handicap the enterprise’s ability to prove liability limitations when incidents occur at the workplace.

The appraisal checklist should comprise:

• Vendor license: Demand a valid copy of the Labor Subleasing License and strictly verify it against the contracting entity.
• Job categories: Position descriptions must perfectly match the 20 permitted job groups under Appendix II of Decree No. 145/2020/ND-CP.
• Individual term limits: The contract requires a tracking mechanism ensuring no subleased employee exceeds the 12-month threshold, pursuant to Clause 1, Article 53 of the 2019 Labor Code.
• Wages and benefits: The vendor must guarantee that the subleased employee’s wage is not lower than that of internal personnel with equivalent qualifications.
• Occupational accidents and diseases: The contract must explicitly demarcate liabilities for compensation, allowances, and incident investigation coordination.
• Data and confidentiality: Integrate NDAs, access authorization matrices, document return obligations, and data breach processing protocols.

Clauses regarding wages, working conditions, and occupational accident compensation liabilities must be explicitly stated in the contract, pursuant to Clause 2, Article 55 of the 2019 Labor Code. Lacking these mechanisms guarantees joint dispute liabilities for the subleasing party.

Resolution Mechanisms for Individual Labor Disputes Exempt from Conciliation

When a subleased employee files a lawsuit, the subleasing party must not presume all liabilities default to the vendor. The Court will scrutinize actual daily management, working conditions, overtime execution, safety protocols, and workplace evidence.

Disputes between a subleased employee and the subleasing employer are exempt from mandatory conciliation procedures via a labor conciliator, pursuant to Point e, Clause 1, Article 188 of the 2019 Labor Code. The parties possess the right to directly petition the People’s Court for resolution, pursuant to Point e, Clause 1, Article 32 of the 2015 Civil Procedure Code.

Upon the emergence of a dispute, enterprises should immediately deploy the following steps:

• Freeze operational records, including attendance sheets, shift schedules, task assignment emails, and security camera footage.
• Consolidate the B2B contract, personnel appendices, vendor licenses, and service fee payment vouchers.
• Cross-reference the litigation claims against the subleasing party’s actual scope of daily management.
• Demand the vendor coordinate by supplying the direct labor contracts, payrolls, Social Insurance (SI) vouchers, and disciplinary records.
• Formulate a litigation strategy, encompassing liability demarcation, independent claims, or counterclaims if legally grounded.

This rapid response allows enterprises to strictly control evidence before the dispute escalates into massive compensation claims, arrears collections, or the forced establishment of a direct employment relationship.

Restructuring Support and Labor Utilization Model Transitions

As subleased personnel approach the 12-month threshold, enterprises must decide on the subsequent model before expiration. Continuing under the identical structure is categorized as a severe violation of statutory subleasing term limits.

Common transition strategies encompass:

• Signing direct labor contracts with personnel fulfilling long-term operational demands.
• Transitioning to an outsourcing service contract if the enterprise strictly purchases final deliverables and relinquishes direct personnel management.
• Reallocating internal tasks to avoid utilizing subleased labor as a replacement for personnel dismissed due to corporate restructuring.
• Terminating the utilization of subleased personnel when their positions fall outside statutory permitted categories.
• Establishing transitional dossiers to prove the enterprise is not unlawfully extending the subleasing duration.

Selecting the optimal model relies entirely on actual management authority, production demands, and Social Insurance risk levels Long Phan strongly recommends auditing the entire subleased personnel network by specific positions, rather than merely reviewing boilerplate contracts.

Long Phan Consulting Company provides consulting services for establishing labor outsourcing service structures

Labor outsourcing services require businesses to simultaneously control permits, contracts, terms of service, social insurance, occupational safety, and internal data. Long Phan Consulting Company assists businesses in establishing compliance structures that reduce operational risks, protect commercial interests, and prepare explanatory documentation when necessary.

Review compliance and conduct legal audits of labor practices

The review process should begin with operational practices, not just standard contracts. The focus should be on determining whether the business is correctly using labor leasing, outsourcing, or service contracts.

Long Phan Consulting Company assists businesses in implementing:

• Assess the vendor’s license, including the validity of the labor leasing license, the licensing authority, and the deposit status.
• Compare the list of jobs with Appendix II of Decree No. 145/2020/ND-CP to determine the positions that are permitted to be used.
• Verify the term of employment for each employee, ensuring it does not exceed 12 months as stipulated in Clause 1, Article 53 of the 2019 Labor Code.
• Review labor leasing contracts, personnel appendices, fee schedules, salary terms, social insurance, and workers’ compensation.
• Establish regulations for coordinated labor management, including shift scheduling, overtime, internal rules, workplace safety, and evidence of violations.

The audit results help the Legal Department and HR Director identify errors before an inspection takes place. This also provides a basis for restructuring contracts with vendors or changing the personnel management model.

Representing clients in dispute resolution and working with inspection agencies

When inspections or disputes arise, businesses need to respond with consistent documentation, evidence, and legal arguments. Unstructured explanations can increase the risk of retroactive tax collection, administrative penalties, or the establishment of joint liability.

Long Phan Consulting Company provides support for the following specific tasks:

• Prepare explanatory documents for the labor inspection team, including vendor licenses, contracts, personnel appendices, time sheets, and safety records.
• The representative will work with the competent authorities when required to provide explanations regarding the use of outsourced labor, social insurance, or workplace accidents.
• Defining responsibilities between parties in disputes regarding wages, overtime, termination of employment, disciplinary actions, or compensation for workplace accidents.
• Participate in internal trade negotiations and mediation with labor leasing companies to minimize financial losses.
• Protecting rights in court when leased workers sue the leasing company directly.

This approach helps businesses control evidence risk from the outset. In particular, operational records at the plant often determine the scope of liability for the lessee.

Optimize costs and transfer risks through a robust contractual system

Optimizing personnel costs doesn’t mean shifting all risk to the vendor. Businesses need to design contracts that properly allocate responsibilities while maintaining operational control.

Long Phan Consulting Company provides consulting services for building a contract system, including:

• A labor leasing contract with clear terms regarding the scope of work, duration, salary, social insurance, and compensation responsibilities.
• The SLA agreement governs operations, defines personnel standards, replacement schedules, handover procedures, and mechanisms for handling violations.
• NDAs and agreements cover data processing, personal data protection, trade secrets, system accounts, and customer information.
• The chargeback and liability exemption clause applies when a vendor violates its license, evades social insurance contributions, or provides unqualified personnel.
• The model transition roadmap includes direct signing, transitioning to outsourcing, or terminating employment when staff reach the 12-month mark.

A sound contract system helps businesses reduce the risk of being perceived as misusing outsourced labor. At the same time, it provides a commercial basis for holding vendors accountable for breaches of compliance.

Your company can send contracts, vendor licenses, and a list of outsourced positions via email: info@longphanpmt.com Or contact via Zalo: 0906.735.386 for a preliminary compliance risk assessment.

Frequently asked questions about compliance guidelines when businesses use labor outsourcing services:

Controlling legal risks when using “labor outsourcing services” determines the continuity of the human resource supply chain and the operational safety of the business. Fluctuations in deposit conditions, time limits, and liability in case of accidents require managers to have strict compliance solutions. Understanding legal loopholes helps businesses proactively prevent administrative sanctions and optimize their labor utilization model.

Conclusion

A labor subleasing arrangement in Vietnam is only secure when the hiring enterprise directly controls vendor licensing validity, statutory job categories, maximum usage terms, social insurance obligations, occupational safety, and internal data security. Within this tripartite model, compliance failures do not rest solely with the HR vendor; they rapidly escalate into catastrophic joint liabilities for the subleasing party if operational records and B2B contracts lack rigorous structural integrity. Enterprises must preemptively audit every outsourced position, individual term limits, and compensation liability clauses before facing specialized labor inspections or joint disputes. To execute a comprehensive HR compliance audit and legally structure your subleasing operations, contact the senior corporate attorneys at Long Phan Consulting Company immediately via Hotline  1900636389.