Business Expansion Guide For Software Development In Vietnam – JDI Group

Vietnam is emerging as one of Southeast Asia’s hottest business expansion spots within startup ecosystems. With the continuously increase of strong government support on startup activities, this country has been attracting many foreign investments recently.

Vietnam does prove its potential by having many emerging startup unicorns: VNG Corporation, and promising startups such as Ami, Jio Health, Hiip, Luxstay. As expected by many experts, Vietnam has the potential to become a hub for technology in the upcoming years.

Companies planning to expand overseas, especially for offshore it team, often face many obstacles such as understanding the business landscape of an entirely new market, tax and local policies, cultural differences, language barriers, and the battles to retain talent. 

In this article, we will go through some of the most asked questions on how to open offshore company and obstacles that they face when venturing overseas. 

 

Hiring The Right People For Your Offshore Software Development

Hiring the right people for offshore software development and retaining top performers are key factors in growing your business. Although Vietnam is home to a large pool of tech talent, their engineers have little exposure to big international companies such as Google, Facebook or Microsoft. 

We recommend hiring a very strong Vietnamese technical lead to handle your offshore it team, who can help tear down cultural barriers, and guide teams toward the right directions. 

Headhunting companies usually have a wide range of network and a large pool of talent that are ready for your projects. They also have processes to source, do background checks, and interviews that ensure you have the right candidates. This can save companies time & effort in finding tech talents. 

Some of the popular headhunting companies in Vietnam include: Harvey Nash, Navigos Search, Hr2B, First Alliances, NIC, Asahi Tec VN, Iconic, etc.

Headhunting companies often charge 18-22% annual gross salary or 2 months of gross salary including 13th month salary and bonuses.

Some Japanese headhunters such as NIC, Asahi Tec, Iconic, Kosaido charge 2 months of gross salary or a minimum of 30.000.000 VND.

JDI, however, follows a different business expansion model. They are a Venture Studio that helps start-ups and corporates to venture into new markets. They help with market access, human resource administration and operations, and fundraising advisory service. They offer headhunting as part of their services with a recruitment fee of 1.5 month gross salary.  

 

Gross Salary VS. Net Salary

In Vietnam, employees often prefer to talk in NET terms, and employers prefer to talk in GROSS terms. 

        • NET SALARY is the take-home pay after all deductions including PIT (Personal Income Tax) and SIHIUI (Social Insurance, Health Insurance, Unemployment Insurance)

        • GROSS SALARY is the amount paid by employers to employees, before any deduction. Besides the GROSS SALARY, employers have to pay an extra 23.5% employer SIHIUI to the government.

 

Finance, Payroll, And Reports

how to open offshore companyhow to open offshore company

Vietnam has a complex web of tax and local laws on how to open offshore company here. Once you  choose the country for your business expansion, it is required to do monthly, quarterly, and yearly reports. 

        1. Monthly/quarterly reports include: Value Added Tax (VAT) declaration, Personal Income Tax (PIT) declaration, invoice reports, etc. 

        2. Yearly reports are: financial statements, Corporate Income Tax (CIT) declaration, audit reports, etc. 

We recommend having a competitive accounting staff to avoid unnecessary fine. Or locally outsource this operation to a third party service provider to help you lift up the business expansion burden.

Trade unions are established to protect employee rights, benefits and ensure that employers follow labor laws. It’s not required by law to establish a trade union, but it’s required that companies contribute to trade union funds every month. That amount is often 2% of the total gross salary of all employees. 

Trade union funds are used for birthday gifts, sick pay, maternity gifts or to celebrate popular festivals in Vietnam. Companies are required to report the use of trade union funds to the Vietnam General Confederation of Labour. 

If employees are treated unfairly (being fired without reason or mutual agreement, reduce salary), they can submit complaints to the Vietnam General Confederation of Labour. The General Confederation of Labour will arrange a thorough inspection of the company. 

During the inspection, if it’s discovered that the company fails to ensure labor laws, a fine and warning will occur.

 

Working Hours

The maximum working hours per week are 8 hours per day, and 6 days per week. It’s required by law that employees get one full day off per week which is usually Sunday. 

However, many international and big companies practice the same working hours as American companies, which are 8 hours per day, and 5 days per week.

It’s also required by law that employees must get at least 12 days of annual leave per year in addition to public holidays. Some companies even have up to 20 days of annual leave per year. 

 

Labor Laws

Before making your business expansion plan, it is worth noting that Vietnam has very strict labor laws, and strongly protects laborers. Violation can result in huge fines and legal consequences. Employers can add additional internal policies in labor contracts as long as these internal rules don’t violate the laws. 

Employers have to submit these extra policies to the labor department for approval. Examples of additional terms in labor contracts are: dress code, working hours, company property protection, overtime pay for offshore software development projects, etc. 

In Vietnam, wrongful dismissal can result in more expenses (compensation for employees) and legal consequences. Employers can unilaterally terminate employment contracts in case of an accident (employees are unable to continue to work), natural calamity (employers need to scale down), or when employees continuously fail their duties stated in the labor contract. 

When employees show continuously low performance, bad attitudes, and don’t finish work; employers have to carry out processes of personal talks and warnings. Sit down and have talks with employees about their performance & failed expectations. Find out if they have personal problems that you can help or tolerate. 

Make sure to let them know that their performances are unacceptable. If low performance and bad attitudes continue, you will have to issue a series of verbal and paper warnings, before legally firing the employees. A notice period of 30-45 days is required by law.  

If no concrete proof or no notice (30-45 days) is provided, employers may have to reinstall the employees, and pay a compensation of at least two months’ salary. Also, if employees submit a complaint, an inspection from the Vietnam General Confederation of Labour will likely occur. 

We recommend foreign companies to have a thorough understanding of the complex landscape of Vietnam tax and labor laws. Hence, building internal policies that fit their international culture, work styles, and business requirements. 

Additionally, in case you are planning to tap into Vietnam’s tech talent pool, do not miss out on our Vietnamese Developer Salary Report that we recently released. This report will equip you with everything you need to know about Vietnam’s IT landscape and salary rates in 2023 with the latest insights and data.

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