Weighing Up the Pros and Cons of Payroll Outsourcing to a Provider in Vietnam

In Vietnam, as your business continues to grow, you will have to be responsible for more and more business functions. For startups and SMEs (small and medium enterprises) in particular, it’s sometimes challenging to keep up with these functions with only your in-house teams. They might not have the necessary expertise or present enough agility and flexibility for demanding tasks such as payroll processing and tax finalization. 

To make sure all business processes progress smoothly in your company, one common solution among business owners is to make use of additional support. 

Much like other business functions such as recruitment, accounting, customer service, IT, and content marketing, payroll is not just a one-off or periodical task but a monthly duty that has to be carried out seriously and meticulously. Careless payroll handling and management may have detrimental consequences. You might end up with unmotivated and dissatisfied employees or even non-compliance with the complex tax structures in Vietnam. 

As a result, payroll outsourcing in Vietnam is a smart move for many businesses: it enables them to focus more on core business activities and strategies for growth. Not sure if you really need it? Here are the pros and cons of payroll outsourcing in Vietnam for you to consider.

Advantages of Outsourcing Payroll in Vietnam

Expertise and Experience

Of course, the main job of service providers is to organize accurate and timely salaries for your employees. Alongside paychecks, they also keep track of and submit personal income tax (PIT) and employee insurance. In Vietnam, there are three types of compulsory insurance for workers, which are commonly known collectively as SHUI (Social, Health, and Unemployment Insurance).

Payroll outsourcing providers offer you expert advice and consultation to help accustom you to the complexity of payroll and taxes, especially if you have several locations worldwide. 

One problem met by many foreign-owned companies in Vietnam is that most administrative processes are done in Vietnamese. The right outsourcing provider should offer you fully bilingual services, ensuring proper understanding between clients and authorities.

Time and Cost Savings

Many companies in Vietnam, especially small and medium ones, struggle with the time and costs required to manage their payroll in-house. 

A lot of resources go into employing a full-time payroll manager: the monthly salary, the initial onboarding and training, and the compensation for the person’s (un)reliability. 

As a result, the final amount of time and money spent can exceed your expectations and/or your budget. Outsourcing payroll relieves much of the strain, so you can divert your resources to other areas such as marketing, specialized training, or strategic planning.

High adaptability

For SMEs in Vietnam, outsourcing payroll means you can quickly adjust to the changes in the market and deal with various aspects related to employees and their payroll seamlessly. 

To be more specific, several industries, such as software and marketing, have constantly changing demands, which poses a threat to a rigid workforce. Companies may lose revenue if they are unable to meet the demand. Employing contractors and consultants can help in bearing seasonal and cyclical challenges. Labor costs will be comparatively cheaper, more stable, and more efficient.

RELATED: Should You Choose In-House or Outsourced Payroll and HR Management?

Timely payroll compliance

Payroll experts also make sure your company complies with the frequent legal updates within the payroll sector. With their experience and knowledge, you can avoid unnecessary and heavy penalties for non-compliance. 

Firstly, meeting tax deadlines is crucial. A service provider can draft and file accurate tax returns to the relevant tax officials in compliance with local tax regulations for you.

Secondly, recruitment and employee management reports are also part of the yearly compliance obligations. As stated in Article 8, Decree 12/2022/ND-CP, legal violations can be fined up to VND 10 million:

• A fine ranging from VND 1 million to 3 million must be paid if an employer:

a) Fails to declare the hiring and placement of employees as prescribed;

b) Fails to adequately record and enter information about employees into the employee management book from the starting date of employment;

c) Fails to present the employee management book at the request of competent authorities.

• A fine ranging from VND 5 million to 10 million must be paid if an employer:

a) Fails to submit reports on changes in the number of employees as prescribed;

b) Fails to make an employee management book or fails to make an employee management book on schedule, or fails to include basic contents as prescribed by law in the employee management book.

Disadvantages of Outsourcing Payroll in Vietnam

Privacy and Security Concerns

Companies may have concerns regarding identity theft and payroll data breaches when it comes to outsourcing. Some service providers may publish a client’s information and files to the entire agency. 

If any such event happens, it may risk your employees’ privacy and security and expose your company to reputational threats. Partnering with a trustworthy and transparent service provider can help relieve your concerns.

Lack of Complete Control

No complete control over payroll management is also one of the reasons why companies are reluctant to outsource. For example, if you want to make urgent modifications to specific payroll data required outside the provider’s office hours, you will have to wait until the next day.

Although not nearly as flexible as managing payroll by yourself, outsourcing still has certain advantages over hiring in-house staff for this task. Compared to working with employees, the lower level of control when outsourcing may actually be beneficial. 

You can spend less time ensuring your employees are on the right track just by setting an autonomous goal for the service provider.

Lack of budget 

You may still have to attribute significant expenses to outsourcing your payroll handling, even though it costs far less than employing an in-house team. Payroll outsourcing may not be viable for SMEs in Vietnam with a limited budget.

Over-reliance on outsourcing 

When you rely too heavily on a payroll outsourcing provider, you may have to learn the knowledge and skills from scratch when you need to set up a payroll department for your company as your business grows.

To avoid over-reliance, you need a provider that puts your needs first and offers transparency throughout all activities. 

The Verdict on Payroll Outsourcing

In the longer run, the pros of payroll outsourcing in Vietnam always outweigh the cons. Here are other benefits a company can enjoy when partnering with an outsourcing provider:

• Reduction in payroll errors
• Reduction in overhead costs
• Regulatory compliance in check
• Seamless payroll tax filing
• Keep up with payroll demand when your business expands

Like any country, Vietnam’s tax regulations keep on changing. Moreover, tax requirements differ between the types and scales of the business. Hence, managing employees’ payroll in a foreign country could be a tedious yet daunting task. 

To avoid fines for time-sensitive payroll processes, you always have the option of utilizing an experienced service provider. InCorp Vietnam can work either alongside your in-house HR personnel or as your on-demand administrator.