Emerging from growing lab demand by enterprises in recent years, the trend of labor leasing has become a vital part of the economy. This solution helps businesses manage their personnel for upcoming production plans in urgent, short-term situations, or when recruitment is inconvenient. Labor leasing fills this role by creating opportunities for both employees and employers to connect easily. This solution has many advantages due to its proactive and flexible nature, allowing for the easy acquisition of quality personnel that meets demand while minimizing risks for the hirer as they are assured by the third-party lessor. However, alongside these advantages, labor leasing also has many limitations and issues. With Vietnam’s complex environment of fixed-term and indefinite-term labor contracts, a few groups have exploited gaps in the regulations, resulting in unprotected workers’ rights and violations of lab our laws.

Legal Provisions on the Establishment of Labor Leasing Enterprises

Labor leasing is a conditional activity where the employee signs a labor contract with an employer who is a labor leasing enterprise, the employee is then transferred to work under the management of another employer while maintaining the labor relationship with the initial employer. According to Article 54 of the 2019 Labor Code and guidelines in Articles 12 and 21 of Decree 145/2020, labor leasing enterprises are established according to the Law on Enterprises and must meet the following conditions:

– Have obtained a labor leasing operation license. Enterprises must have a labor leasing operation license to provide this service. To be granted an operation license, enterprises must meet the conditions specified in Article 21 of Decree 145/2020. Vietnam’s law stipulates that labor leasing is a conditional business sector; therefore, licensed activities must fall within the scope of 20 permitted occupations.

– Have paid the required deposit. Enterprises must make a deposit as specified, which is 2,000,000,000 VND (two billion VND). The deposit is used for purposes such as paying wages, social insurance, health insurance, unemployment insurance, occupational accident insurance, and other benefits for leased workers as agreed in the labor contract, collective agreement, or the enterprise’s internal regulations. It also serves as compensation to leased workers in case the leasing enterprise breaches the labor contract or causes damage by not ensuring the legal rights and interests of leased workers. Leased workers typically engage in seasonal, temporary work with a high risk of job loss. Thus, the law sets stringent conditions for this sector to prevent exploitation and protect workers’ rights.

 – Regarding the legal representative of the enterprise. The legal representative of the labor leasing enterprise must meet the following conditions: be a manager as defined by the Law on Enterprises, have no criminal record, and have at least three years of experience in labor leasing or labor supply management within the last five years before applying for the license.

– Regarding Recruitment and signing labor contracts with employees. This is the most crucial condition in the labor leasing relationship. The labor leasing enterprise directly signs labor contracts with employees, who are then transferred to work under the management of another employer while maintaining the labor relationship with the leasing enterprise. All employee benefits are paid by the leasing enterprise but must comply with the legal provisions regarding labor contracts.

Rights and Obligations of Parties Involved in Labor Leasing

Unlike other labor legal relationships, labor leasing involves three parties: the labor lessor, the lessee, and the employee. Therefore, parties in the labor leasing relationship must adhere to the specific rights and obligations stipulated in Article 6 of the 2019 Labor Code and the unique rights and obligations of labor leasing legal relationships.

Rights and Obligations of Labor Leasing Enterprises

According to Article 56 of the 2019 Labor Code, the rights and obligations of labor leasing enterprises are determined through signed contracts and include the following responsibilities:

– Ensure that the employee has the appropriate qualifications for the lessee’s requirements and the signed labor contract.

– Inform the employee about the content of the labor leasing contract.

– Inform the lessee about the employee’s resume and requirements.

– Ensure that leased employees receive wages not lower than those of the lessee’s employees with similar qualifications and jobs of equivalent value.

– Maintain records detailing the number of leased employees, and the lessees, and periodically report to the provincial labor authorities.

– Discipline leased employees for violations of labor discipline when returned by the lessee for such violations.

Rights and Obligations of the Lessee

Similar to the labor leasing enterprise, Article 56 of the 2019 Labor Code stipulates that the lessee must fulfill the responsibilities agreed upon in the labor leasing contract, including:

– Inform and guide leased employees on labor regulations and other policies.

– Ensure no discrimination in labor conditions between leased employees and their own employees.

– Agree with leased employees on night work, and overtime, as per the Labor Code.

– Negotiate with leased employees and the leasing enterprise for formal recruitment if the leased employee’s contract has not ended.

– Return leased employees who do not meet the agreed requirements or violate labor discipline to the leasing enterprise.

– Provide evidence of labor discipline violations by leased employees to the leasing enterprise for disciplinary consideration.

Rights and Obligations of Leased Employees

In addition to the rights and obligations specified in Article 5 of the Labor Code, leased employees have the following rights and obligations under Article 58 of the 2019 Labor Code:

– Perform the job according to the labor contract signed with the labor leasing enterprise.

– Comply with labor discipline and regulations, and follow the lawful management, supervision, and direction of the lessee.

– Receive wages not lower than those of the lessee’s employees with similar qualifications and jobs of equivalent value.

– Complain to the labor leasing enterprise if the lessee violates agreements in the labor leasing contract.

– Negotiate the termination of the labor contract with the leasing enterprise to sign a labor contract with the lessee.

Penalties for Violations of Labor Leasing Regulations

In labor leasing activities, the law specifically stipulates the conditions, responsibilities, and obligations of participating parties. Violations of these regulations will be penalized according to Decree 12/2022/ND-CP:

For the lessee:

A fine of 3,000,000 VND to 5,000,000 VND for one of the following violations:

– Failing to inform or guide leased employees on labor regulations, hazardous factors, safety measures, or other policies.

– Not organizing safety training for leased employees as required by law.

– Failure to provide timely first aid and emergency care to the injured; failure to report or investigate accidents when occupational accidents or technical incidents occur that compromise safety and occupational hygiene for leased employees in accordance with legal regulations.

– Discriminating against leased employees compared to their own employees.

A fine of 40,000,000 VND to 50,000,000 VND for the following violations:

– Employing leased employees to perform tasks not included in the list of permissible leased labor activities.

– Employing leased employees provided by a company without a valid labor leasing operation license or with an expired labor leasing operation license.

– Employing leased employees to replace workers who are exercising their right to strike or are involved in resolving labor disputes.

– Employing leased employees to replace workers who have been laid off due to structural or technological changes, economic reasons, or company division, separation, merger, or acquisition.

– Transferring leased employees to another employer.

– Employing leased employees without a specific agreement on the responsibility for compensation for occupational accidents and diseases with the labor leasing company.

– Employing leased employees outside of the following circumstances: temporarily meeting a sudden increase in labor demand for a certain period; replacing workers during maternity leave, occupational accidents, occupational diseases, or when performing civic duties; or when there is a need for employees with high professional or technical qualifications.

For the labor leasing enterprise:

A fine of 1,000,000 VND to 3,000,000 VND for the following violations:

– Failing to create records detailing the number of leased employees and the leasing employers.

– Failing to report the status of labor leasing as required by law.

– Failing to publicly display the original license at the main office and authenticated copies of the license at branches and representative offices (if any) of the labor leasing company.

– Failing to send an authenticated copy of the license to the Department of Labor, War Invalids and Social Affairs where the company operates in case of operating in a different province.

– Failing to coordinate with the leasing employer in investigating occupational accidents that seriously injure a leased employee as required by law.

– Failing to inform the leased employees of the safety and occupational hygiene assurances in the labor leasing contract.

– Failing to appoint a person to regularly supervise, coordinate, or check the safety and occupational hygiene assurance for the leased employees by the leasing employer.

Fines range from 10,000,000 VND to 100,000,000 VND. The amount varies from 10,000,000 VND to 1,000,000,000 VND depending on the scale of the violation involving 1 to 100 employees for the labor leasing enterprise engaged in any of the following acts: paying leased employees less than the wage of employees with the same qualifications doing the same or similar jobs for the leasing employer; not complying with the legal regulations regarding benefits for employees injured in occupational accidents or suffering from occupational diseases; not informing or providing false information to employees about the contents of the labor leasing contract.

Fines range from 50,000,000 VND to 75,000,000 VND for the following acts:

– Operating a labor leasing service without a valid labor leasing operation license.

– Using an expired labor leasing operation license to conduct labor leasing activities.

Fines range from 80,000,000 VND to 100,000,000 VND for the following acts:

– Allowing other enterprises, organizations, or individuals to use the labor leasing operation license for labor leasing activities.

– Leasing employees for jobs not listed in the permissible labor leasing activities.

– Leasing employees for a period exceeding 12 months.

– Altering or falsifying documents in the application for obtaining, extending, or reissuing a labor leasing operation license without reaching the level of criminal liability.

– Altering or falsifying the content of an already issued labor leasing operation license without reaching the level of criminal liability.

– Forging a labor leasing operation license without reaching the level of criminal liability.

– Forging documents in the application for obtaining, extending, or reissuing a labor leasing operation license without reaching the level of criminal liability.

– Not meeting one of the conditions for license issuance as required by law.

Fines from 40,000,000 VND to 50,000,000 VND for forging a labor leasing operation license without reaching the level of criminal liability.

In addition to fines, the enterprise must also face supplementary penalties and remedial measures as follows:

– Suspension of the labor leasing operation license for a period of 6 to 12 months for violations specified in point c, clause 6 of this article.

– Confiscation of counterfeit materials and means used for administrative violations related to labor leasing operation licenses for violations specified in points e, clause 6, and clause 7 of this article.

– Requiring the labor leasing enterprise to pay the wage difference to leased employees when paying them less than the wage of employees with the same qualifications doing the same or similar jobs for the leasing employer as specified in clause 4 of this article.

– Requiring the repayment of illicit gains obtained from labor leasing activities to the state budget for violations specified in clause 5 of this article.

– Requiring the return of the labor leasing operation license to the issuing authority in cases of violations specified in point đ, clause 6 of this article.

Labor leasing is a cost-effective, flexible, and efficient solution that allows businesses to quickly meet appropriate staffing needs. However, it is essential to comply with the regulations regarding labor leasing activities to avoid legal violations.

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