Sub Leasing

1. Sub Leasing
What do you need to know ?
Nicola Connolly – Adecco Vietnam

2. Responsible for the signing of the historic first public – private partnership
MOU with MOLISA in Vietnam within record time for an international company
 Vice Chair of the Executive Committee in 2013
 Chairwoman of the HR & Training Committee from 2010 of the European
Chamber of Commerce in Vietnam;
 Head of Vietnam Business Forum’s HR Sub Working Group
 Business Women of the Year 2013 by VCCI
Introduction

3. The Process …
Over 80 consultations with MOLISA, ILO and VCCI over the
last 3 years….

4. Highlights …
 Extensive consultation with stakeholders and ILO
 Clearer definitions in Labor Code
 MOLISA active in approach and changes needed
 Draft decrees are being circulated for opinion on MOLISA/ EuroCham
website
 MOLISA wants a framework law but companies to agree internal details
 Road Map of HR in Vietnam 2015 & 2020
 Minimum Wage
 Government Statutory Insurances
 Health + Safety

5.  Total sales revenues of € 203 billion
 Employs 9.5 m people in 2013
 72.000 private employment agencies [PrEAs] worldwide
 69.000 branches
 700,000 jobs alone were created through the use of HR Providers
Japan and the USA are the global leaders by total annual sales revenues, accounting
for 24% and 22% respectively, followed the UK 12%
Europe is the leading regional entity with 40% of total worldwide sales revenues
Conditional services worldwide
Self Governing Industry
© 2011-Adecco
HR Services Providers Worldwide

6. Temporary Workers
• Temporary workers (also called "contingency
staffing" or "temps") are work force that fill up the
shortages of labour that arise due to business
needs or staff shortage. While these workers may
have full-time or part-time jobs with companies,
they are paid by HR employment agencies which
recruit and place these temporary staff. The
companies using the temporary workers pay fees to
these agencies.
• All statutory insurance and benefits are accrued and
charged back to the client. The employment
relationship that exist is between the “temps” and
Agency. Minimum bookings normally apply and
charged/ paid hourly.
© 2011-Adecco

7. Outsourcing
The transfer of a business function to an
external service provider. This is also called
Business Process Outsourcing. The agreement
is normally made on Service Level Agreements
on production, output, limitations and liabilities
etc. Outsourcing involves an organization
passing the provision of a service or the
execution of a task previously undertaken
in-house to a third party to perform on its
behalf.
The client and the service provider have a
service level agreement which clearly defines
the employment related responsibilities of each
party. The service provider carries the entire
employment responsibility. © 2011-Adecco

8. Contract Workers
Contract Employees
Contract employees are hired to perform
specific functions in a contractual
relationship and for a defined period of
time. Day to Day management is by the
client on site. Contract employees can be
hired through HR employment agencies.
© 2011-Adecco

9. Managed Service Provider
Managed services is the practice of transferring day-to-day related management
responsibility as a strategic method for improved effective and efficient operations. The
person or organization that accepts and provides the managed service is regarded as
the service provider.
Typically, the client remains accountable for the functionality and performance of
managed service and does not relinquish the overall management responsibility of
the organization or system.
HR Services Providers
© 2011-Adecco
July 13, 2011

10. HR Services Providers Industry
Vietnam
• Total sales revenues of $80million
• Employs 20,000 people in 2013
• 350 private employment agencies [PrEAs]
• 2,000 jobs alone were created through the use of HR Providers
 Main Business lines
− Employment Placement (Recruitment)
− BPO (headcount, payroll)
− Consulting
 Immature market and consultants
 Some services conditional
 Low standards
 Rouge Agencies in market
HR Services Providers
© 2011-Adecco

11. The past…
 Transactional service for most companies since 2002
 Labour Contract Management only
 Moved agencies every 12 - 24 months but kept the same workers
 Most agencies worked under consulting licenses for services or managed business
as no law until March 2014 governing sub leasing
 Ask for a deposit as no factoring allowed in Vietnam
 Cost of borrowing high in Vietnam
 No credit check available for credit ratings on clients
 Some issues with rouge agencies not paying workers or un declaring salaries
 No workers protection and unclear rights or HSE

12. New Labour Code and Decress
HR Industry Background
HR Terminology Vietnam
Economic Code
WTO Deposit Requirements /
Comments
Recruitment Employment
Placement
Conditional Services
governed by
MOLISA
300m Escrowed Employment Permit
by DOLISA – once
satisfied certain
criteria
New Employment
law 1ST Jan 2015
Consulting HR Consulting
Services
Non conditional NA Governed under
WTO
Payroll NA NA NA NA
Managed Business
Services
Management of …..
Services
Conditional
dependant on
service offered i.e.
Call centre
NA Conditional by
Ministry
Outsourcing N/A NA NA Only Manpower has
through MOLISA
but not under DPI
Economic Code
now subleasing

13.  Delivery is agreed output on production. All employees are employed and
managed by the supplier working on client’s behalf. In outsourcing the provider is
assigned a certain production of services or products at a fixed cost or cost per
head count depending on client needs.
 Service Provider is responsible and ensures that agreed production levels or
staffing levels are achieved. And to attract the resources, interview, test,
assessment and reference checks are carried out for all candidates, and in some
cases we perform vocational training to meet specific client needs. Services can
be provided on client premises as well as service providers premises.
 Payroll etc not governed by any particular decree
Outsourcing – currently banned under
MOLISA 2006
HR Services Providers
© 2011-Adecco
July 13, 2011

14. Employment Placement Services –
conditional service
 For recruitment services, Decree 71 allowed 100% Foreign invested to enter market.
 2 international companies have the required licence
 15 companies have the required licences and permits issued by DOLISA
 300 million VND escrowed
 5 staff with relevant degrees
 Employment Permit required
 Fees are set under Circular 75 for perms and outsourcing
HR Services ProvidersJuly 13, 2011

15. Industry at present
 Fragmented Industry
 Very low service standards and bad reputation
 Local companies charging candidates for services
 No ethnical standards or Code of Conduct
 Payment are made to clients for business
 Concerns over fair competition
 Outsourcing licenses issued by DPI but service banned by MOLISA
 Payroll not under any scope of activities within DPI
HR Services ProvidersJuly 13, 2011

16. A new concept is born....

17. Sub-Leasing
Agency
Dispatched
Workers
User Enterprise
Services / Commercial
Agreement
Labour / payment
contract
Management of
Dispatched workers
Defined as the situation when an employee employed by an enterprise licensed to provide outsourcing services
works for another employer and subject to the latter's management while the labour relation with the
outsourcing service provider is maintained.

18. Subleasing in Vietnam
New Form of Work introduced in Vietnam under the Labor Code in May 2013 covers non
Regular form of work i.e.
 Less than 12 months Labor contracts
User enterprises to be fined if not following procedures
 Must be same salary
Restricted to 17 occupations
Governed by Decree 55 effective 15th July 2013
 Circular 102 effective from 1ST March 2014

19. Conditions for License
 Conditional service
 Governed by MOLISA
 Tri pirate relationship (Agency, worker, User Enterprise) need to follow HSE and
salary scale of user enterprise
 User enterprise can not use same agency worker longer than 12 months
 Capital of 2,000,000,000 VND required
 Assets of 10,000,000,000 VND required
 2,000,000 , 000 VND Deposited in commercial bank
 Funds only be used by MOLISA approval
 License valid for 36 months and then re issued twice for 24 months each time
 Operated in Labor Leasing experience for 5 years or more
 Min two year lease agreement

20. Risks for Clients
 Not allowed to use the same Associate for longer than 12 months regardless of
Agency used
 User Enterprises can be fined direct by MOLISA for non compliance
 High attrition with Associates if changed each year
 Low Productivity by Associates if unsure of their job status
 Catchment area needs to grow if you are recruiting all the time
 Co employment liability still exists
 Have to management associates on site
 Do you need to declare as FTE internally

21. Proposed Options
Option 1:
MANAGED BUSINESS SERVICE PROVIDER
to manage to full compliance in
employee’s labor contracts
• Allows to sign longer service agreements
with Adecco, ideally 24 - 36 months service
agreement
• 60 days of termination notice
• Adecco to have 30 days termination notice to
our associates upon contract ends
• All statutory are paid in full but Adecco
deems the salary and benefits
• Client has have no co employment liability
Option 2:
SUBLEASED SERVICES
to follow the requirements
• Only allowed to use Associates for 12
months
• Termination notice is 45 days
• Same salary to be paid as use
enterprises
• Co employment liability
• Trade Unions of User Enterprise to be
informed
• User enterprise to manage Associates

22. Option 1: Pros & Cons
PROs
• Total compliance to the labor law of
Vietnam
• Higher retention to managing the
associates as longer contract terms &
other benefits contribution due to length
of service contract
• Less manpower involvement from both
sides as labor contracts are fully
managed by Adecco
• High productive and efficient workforce
• No employment liability for client
• Strategic partnership not transactional
• Value added services
• Induction
• Product training / sales training
CONs
• Higher project costing due to the
change:
 Social insurance
 Medical insurance
 Unemployment insurance
 Severance allowance
• Trade union
• Adecco’s associate benefits

23. Option 2: Pros & Cons
PROs
• Flexible workforce solutions
• Still in compliance under strict applied
conditions
CONs
• Low retention & employee commitment
• More manpower involved from both
side at contract renewals
• Increasing costs of recruitment activities
• Low productive workforce due to
short-term employment contracts
• Maximum usage of hired staffs are six
months, equal to 2 seasonal
employment contracts. All associates
must be replaced by new hires when
signing 3rd contracts between Adecco
and client

24. QUESTION

25. THANK YOU