Question:
I would like to seek your advice on the following matter:
Our company is currently under a system maintenance service contract with an IT company. However, as this company is now being dissolved, we are planning to sign a technical consulting service contract directly with an individual to continue the system maintenance services.
The proposed service contract will have a one-year term, with an annual renewal option. Company will pay the individual a monthly service fee, subject to a 10% withholding tax.
I would like to ask whether company is permitted to enter into a service contract under these circumstances.
Additionally, I am unsure whether such a contract might be considered an employment contract under the law. Could you please advise?
Answer:
Under Vietnamese law, it is entirely legal for a company to enter into a service contract with an individual. According to SB Law’s research, it is currently quite common for companies to engage individuals under service contracts for IT-related tasks, and such arrangements are not treated as employment contracts.
However, depending on the specific circumstances, if a service contract’s terms are overly restrictive—controlling working hours, work location, etc.—there is a high risk that it will be re-characterized as an employment contract. Therefore, to preserve the true nature of a service contract, you must: Clearly define the scope of work to be performed and require complete payment documentation, including at least: (i) a payment request, and (ii) a work acceptance report duly signed by both parties.
