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​ 

October 29, 2025
On September 15, 2025, Thailand’s Senate approved a draft amendment to the Labor Protection Act (LPA), which is currently awaiting publication in the Government Gazette. The amendment, which will take effect 30 days after publication, extends labor protections to certain service contractors working for state entities, enhances maternity and spousal support leave, and updates employer reporting obligations. Expanded Protections for State-Contracted Service Providers The amendment adds a section to the LPA that extends core labor protections to individuals engaged by government bodies under service contracts. This provision covers workers hired by central, regional, and local government agencies; state enterprises governed by the State Enterprise Labor Relations Act; public organizations; and other state agencies when these entities retain individuals under service procurement contracts (or similar arrangements) and exercise supervision, direction, and control over their work. In such cases, the hiring agencies must provide terms no less favorable than those required under the LPA for remuneration, weekly holidays, traditional holidays, annual leave, sick leave, maternity leave, working days and hours, and rest periods. Ministerial regulations will establish specific criteria for implementation. Disputes regarding rights and duties under this provision will fall under Labor Court jurisdiction. This change aligns the treatment of controlled service contractors with that of regular employees, addressing a longstanding coverage gap in the public sector. Enhanced Maternity Leave and New Caregiving Provisions The amendment includes a maternity leave entitlement of up to 120 days per pregnancy (an increase from the previous 98 days), unless otherwise prescribed by royal decree, and also introduces a new postnatal caregiving leave for mothers in complex medical situations who have used their childbirth leave, granting up to 15 additional days to care for children who are at risk of complications, have abnormalities, or have disabilities. This supplemental leave requires support from a medical
October 20, 2025
Attorneys from Tilleke & Gibbins’ Yangon office have contributed Employment and Employee Benefits in Myanmar: Overview, a Q&A-style guide published by Thomson Reuters Practical Law. The resource provides a concise overview of key legal and practical considerations for employers operating in Myanmar and reflects the country’s most recent regulatory developments in employment law. The chapter addresses the following core topics: Scope of employment regulation: Application of Myanmar labor laws to foreign nationals and Myanmar citizens working abroad. Employment status: Classification of workers, statutory employment rights, and requirements for official employment contracts. Regulation of the employment relationship: Mandatory contract provisions, collective agreements, and procedures for amending employment terms. Wages and working hours: National minimum wage updates, overtime rules, and leave entitlements. Termination of employment: Notice requirements, severance payments, and protections against dismissal. Discrimination and harassment: Statutory protections and remedies under Myanmar labor law. Health and safety: Employer obligations under the Occupational Safety and Health Law and related regulations. Tax and social security: Income tax rates for resident and non-resident employees, and mandatory employer and employee contributions. Intellectual property and post-employment restrictions: Ownership of employee-created IP and enforceability of non-compete clauses. Practical Law, a leading legal reference resource from Thomson Reuters, publishes a wide range of comparative guides for jurisdictions and practice areas worldwide. Its Employment and Employee Benefits series provides practical insights into employment law regimes across numerous countries. To view the latest version of the Myanmar overview, please visit the Practical Law website and enroll in a free trial for full access.
October 15, 2025
Myanmar’s National Committee for Setting the Minimum Wage has introduced another MMK 1,000 daily allowance for private-sector workers, bringing the total minimum daily wage to MMK 7,800 (approx. USD 3.72). Notification No. 1/2025 marks the third such increase in recent years as the government continues adjusting compensation across both public and private sectors. Although the notification was issued on October 14, 2025, it takes retroactive effect from October 1, 2025. Current Minimum Wage Structure In May 2018, the committee established a base minimum wage of MMK 4,800 (approximately USD 2.29) for an eight-hour workday (MMK 600 per hour), applying to all workers regardless of location or job type. The committee has subsequently announced additional daily allowances for private-sector workers: MMK 1,000 effective October 1, 2023, and another MMK 1,000 effective August 1, 2024. With the latest MMK 1,000 daily allowance from October 1, 2025, the total additional allowance reaches MMK 3,000, resulting in a new combined minimum daily wage of MMK 7,800. Alignment with Public Sector Increases The new allowance aligns with increases granted to government personnel. The Ministry of Finance and Revenue’s Notification No. 110/2025 previously granted monthly increases of MMK 30,000 to service and Tatmadaw personnel starting in October 2023 and August 2024. With the latest increase effective October 1, 2025, the total monthly allowance for these personnel now amounts to MMK 90,000. Daily wage employees in government departments received MMK 1,000 increases in the same periods, totaling MMK 3,000 in daily allowances—mirroring the private-sector adjustment. Key Implementation Details The latest announcement confirms several important aspects of the allowance structure: Employees are entitled to the base wage and additional allowances during their entitled leave and holidays, in accordance with the 1951 Leave and Holidays Act. The MMK 3,000 daily allowance is excluded from overtime calculations, which must
October 8, 2025
On September 24, 2025, Thailand’s House of Representatives voted to approve two draft amendments to the Labor Protection Act in their first reading, aiming to enhance workers’ rights and quality of life through improved working conditions, expanded leave entitlements, and stronger antidiscrimination protections. Key provisions of the draft amendments are outlined below. Draft Bill on Workers’ Rights This draft bill focuses on improving working conditions, working hours, and annual leave entitlements. The key provisions include: Limiting normal working hours to no more than 40 hours per week, reduced from the current 48 hours per week. For hazardous work, as defined by ministerial regulations, the maximum working hours are set at 35 hours per week, reduced from the current 42 hours per week. Mandating at least 2 days off per week, with no more than 5 consecutive working days between rest days. This is an increase from the current requirement of at least 1 day off per week, with the interval between days off not exceeding 6 days. Providing annual leave entitlement of at least 10 working days after the completion of 120 consecutive working days, compared to the current entitlement of 6 days after 1 year of employment. Draft Bill on Workers’ Quality of Life This draft bill is designed to enhance workers’ quality of life and promote equality and nondiscrimination in the workplace. The new additions to the Labor Protection Act include: Menstrual leave for female employees: Up to 3 days per month, which shall not be counted as sick leave or deducted from other statutory leave entitlements. Family caregiving leave: Employees are entitled to up to 15 working days per year to care for close family members or loved ones. For absences of 5 or more days, employers may request supporting documents such as a medical certificate