You are using an outdated browser and your browsing experience will not be optimal. Please update to the latest version of Microsoft Edge, Google Chrome or Mozilla Firefox. Install Microsoft Edge

August 27, 2012

Employment Subleasing: A New Form of Labor Supply in Vietnam

Informed Counsel

On June 18, 2012, the National Assembly of Vietnam adopted a new Labor Code which will take effect on May 1, 2013. One of the most notable issues of the new Labor Code is a provision allowing for the sublease of employees—a practice that is commonly known as labor outsourcing in other jurisdictions.

This is indeed good news for foreign investors involved in the manufacturing and construction sectors, as the nature of their business often requires seasonal workers who can provide services for a short period of time to help meet project deadlines.

Subleasing of employees has become popular in Vietnam’s industrial areas, namely, Hanoi, Ho Chi Minh City, Dong Nai, Binh Duong, and Can Tho provinces. Until recently, however, subleasing of employees has been illegal. Traditionally, the government had taken the view that this form of labor supply benefits both the employee lessor (the company providing the employees) and the employee lessee (the company receiving the employees), while the employees being outsourced are “exploited.” This is because the hiring company, typically a Vietnam-based foreign company, does not have to pay high salaries and provide correspondingly high statutory insurance schemes, which would need to be provided if they employed the workers directly. Instead, the company providing the employees, usually a local company, pays the sublet employees low salaries and provides minimal insurance schemes, while enjoying the high leasing fees themselves.

The New Subleasing Regime

In order to deal with this imbalance, while also providing companies with a commercially efficient and legally viable option, the new Labor Code stipulates that the employee lessor must pay salary to a sublet employee equal to the salary the employee lessee pays for its own employees at the same level, job, or position of equal value as the sublet employee. In addition to the salary, the employee lessor must pay statutory payment allowances and insurance for the sublet employees.

The new Labor Code legalizes the leasing of labor on the basis of the company being able to meet certain conditions as listed in the Code. Mainly, the Code necessitates a deposit from the hiring company prior to obtaining a license to lease labor. Then, it delegates the government to elaborate other conditions such as the list of the business sectors in which outsourcing is permitted.

In subleasing employees, the employee lessor and the employee lessee must enter into a written sublease agreement that contains the place of work, type of work, work and rest time, labor safety and workplace conditions, term of sublease (12 months at maximum), and the respective rights and obligations of each party toward the sublet employees, among other conditions. The sublease agreement must not contain provisions that adversely affect the rights and benefits of the sublet employees provided in their own labor contracts. In addition, the company supplying employees must notify the sublet employees of “the contents” of the sublease agreement before seconding them to the company outsourcing the employees.

At work, the sublet employee will receive instructions from the hiring company. They must follow the hiring company’s work rules and collective labor agreements provided by the employee lessee. However, in the case of a breach, the employee lessor will act as the real employer of the sublet employee, and has the power to impose disciplinary measures against the violating employee.

Unresolved Issues

In delineating the rights and duties of the related parties to the labor sublease agreement, the new Labor Code still reveals the following shortcomings that the Vietnamese government needs to address in its draft legislation guiding the Code.

First, it is hard to understand why the lawmakers impose a 12-month employment term limit in the sublease agreement, particularly since the sublet employees’ salaries cannot be lower than the salaries of the actual long-term employees of the hiring company. Also, the new Labor Code is silent on the possibility of renewal of the labor sublease agreement.

Second, there is no clear statement on how the Vietnamese labor authorities can enforce the mandatory requirement that the salaries paid to the sublet employees by the employee lessor be equal to (or more than) the employees of the employee lessee (who have the same positions or jobs). The legislation fails to outline a systematic method on how the authorities will identify which employees are at the same level. Moreover, this raises a question as to how this requirement will be applied in cases where no such employee and work position already exists in the hiring company.

Third, as mentioned above, the employee lessor must notify the sublet employees of “the contents” of the sublease agreement. This requirement seems very impractical since there is confidential information inside the sublease agreement that does not necessarily need to be disclosed to a third party, including the sublet employees. The employees’ knowledge should be limited to their rights and benefits following the sublease. They should not know any other information that might relate to trade secrets or the contract price in the sublease agreement. The Vietnamese government should therefore define the mandatory information in the sublease agreement that the employee lessor must disclose to the sublet employees.

Moving in the Right Direction

Despite these shortcomings, however, the new subleasing regime reflects the willingness of the Vietnamese legislature to provide benefits and commercial advantages to foreign investors. The new labor subleasing regime will allow investors to overcome the difficulties that lie with long-term hiring by allowing them to accommodate for seasonal demands for labor in the construction and manufacturing fields. This will not only improve operations management and encourage development initiatives for the investor, but will also enrich employment opportunities for the laborers in Vietnam without sacrificing the protections that labor gets under the Labor Code. With a few revisions, which may occur over time, the new Labor Code provisions on labor outsourcing will be a significant positive legislative development.

RELATED INSIGHTS​ 

January 16, 2026
Employment law specialists from Tilleke & Gibbins’ office in Vientiane have contributed the Laos chapter to the Guide to Restructuring a Cross-Border Workforce from International Employment Lawyer. This comprehensive global guide, covering 50 jurisdictions worldwide, addresses the complex issue of workplace restructurings, with a particular focus on the needs of multinational companies. The Laos chapter was prepared by associates Naiyane Xaechao and Sayphin Singsouvong. The Q&A-style chapter provides in-depth analysis of key areas related to workplace restructuring, including: Reduction in workforce; Restructuring or reorganization of the business; Changing terms and conditions; and Areas to watch. A PDF of the Laos chapter can be downloaded through the button below. Tilleke & Gibbins also contributed the Cambodia, Myanmar, Thailand, and Vietnam chapters to the Guide to Restructuring a Cross-Border Workforce 2026. To browse the full guide for all 45 jurisdictions, please visit the International Employment Lawyer website.
January 16, 2026
Employment law specialists from Tilleke & Gibbins’ office in Phnom Penh have contributed the Cambodia chapter to the Guide to Restructuring a Cross-Border Workforce from International Employment Lawyer. This comprehensive global guide, covering 50 jurisdictions worldwide, addresses the complex issue of workplace restructurings, with a particular focus on the needs of multinational companies. The Cambodia chapter was authored by Jay Cohen, partner and director of Tilleke & Gibbins’ Phnom Penh office, and Chanvisal Lok, associate. The Q&A-style chapter provides in-depth analysis of key areas related to workplace restructuring, including: Reduction in workforce; Restructuring or reorganization of the business; Changing terms and conditions; and Areas to watch. A PDF of the Cambodia chapter can be downloaded through the button below. Tilleke & Gibbins also contributed the Laos, Myanmar, Thailand, and Vietnam chapters to the Guide to Restructuring a Cross-Border Workforce 2026. To browse the full guide for all 45 jurisdictions, please visit the International Employment Lawyer website.
January 14, 2026
Employers operating in Thailand can enforce post-employment noncompete covenants, but success depends on precise drafting and strong evidentiary support. Thai courts will uphold restraints that protect legitimate employer interests and are fair and reasonable in duration, geographic reach, and substantive scope. Overbroad covenants, however, draw judicial skepticism and may fail unless they are drafted in severable, defensible components tied to the employee’s actual role. This article synthesizes recent trends in Thai case practice, explains how Thai courts assess reasonableness in employment restraints, and provides a practical litigation-focused framework for drafting enforceable covenants, preparing evidence, and pursuing relief through the Labor Court. The Legal Framework and Its Practical Implications Thai courts evaluate noncompete covenants under general principles of contract enforceability and public policy, with particular focus on whether a restraint is necessary to protect a legitimate employer interest and proportionate to that objective. In employment matters, this analysis is shaped by the employee-protective tenor of Thai labor law and by the Labor Court’s equitable discretion in determining appropriate remedies. The practical takeaway is that standardized or broadly drafted covenants rarely survive scrutiny. Courts look for a demonstrable nexus between the employee’s actual exposure to confidential information, trade secrets, or customer relationships and the scope of the restraint. Where that nexus is weak or the restraint operates as a blanket prohibition, courts are inclined to decline enforcement or limit relief to a narrowly tailored prohibition. The employer interests most commonly recognized as legitimate in Thai practice include the protection of trade secrets, confidential business information, and goodwill tied to identifiable customer segments or territories. Courts are more likely to enforce restraints where employers can clearly document what information is at risk, why particular customer relationships matter, and how the employee was involved with those assets. Judges also look closely at the
December 19, 2025
On December 12, 2025, Thailand’s Ministry of Labor published a ministerial regulation prescribing the minimum and maximum wages used as a base for calculating social security contributions. The regulation, which takes effect on January 1, 2026, sets a flat minimum base wage of THB 1,650 per month and a phased increase of the maximum base wage over the following six years, as outlined in the table below. Impact on Social Security Benefits Not only will monthly contributions increase as a result of the adjustment to the maximum wages used as a base for calculating social security contributions, but the maximum benefits available to insured persons will also be enhanced, as shown in the next table. Employer Obligations From January 1, 2026, employers must correctly withhold wages and remit social security contributions for both the employer’s and employees’ portions in compliance with the revised thresholds. Failure to comply may expose employers to penalties under the Social Security Act B.E. 2533 (1990). Employers should ensure that payroll systems are updated as necessary to reflect these changes to the wage ceiling used for social security contribution calculations.