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Guide to Payroll in Vietnam

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Guide to Payroll in Vietnam

Guide to Payroll in Vietnam (1)

Payroll management in Vietnam is a critical function that goes beyond the distribution of monthly salaries. It requires a sound understanding of wage structures, statutory contributions, and local labour regulations to ensure compliance and fairness.

For organisations establishing a presence, expanding teams, or managing a local workforce, effective payroll processes from the outset are essential. Transparent and accurate practices build employee confidence, foster trust, and support organisational efficiency.

This guide outlines the principal aspects of payroll in Vietnam, including minimum wage requirements, salary benchmarks, statutory deductions, reporting obligations, and final settlements. It also considers the advantages of outsourcing payroll, offering businesses a practical means of reducing administrative complexity while maintaining compliance and operational focus.

Table Of Content

How Payroll Works in Vietnam?

Payroll in Vietnam operates within a structured legal framework that requires employers to comply with social insurance obligations, tax regulations, and labour laws. A well-defined payroll system is essential to ensure accuracy and compliance with these requirements.

Most companies process payroll on a monthly basis, with salaries typically paid by the final working day of the month. In addition to gross wages, payroll calculations must include mandatory deductions for personal income tax, social insurance, health insurance, and unemployment insurance, as stipulated by Vietnamese law.

Here’s what the process usually looks like:

 

1. Start with the Gross Salary

It begins by calculating each employee’s total earnings—this includes their base salary, fixed allowances, overtime, and any bonuses agreed upon in the contract.

 

2. Apply Employee Deductions

Next, certain mandatory deductions are made from the employee’s salary. These usually cover:

  • Social Insurance
  • Health Insurance
  • Unemployment Insurance
  • Personal Income Tax

The rates are set by the government and need to be reported and paid monthly.

 

3. Add Employer Contributions

Additionally, employers are required to contribute to the same insurance schemes on behalf of their employees. These costs are separate from what is deducted from the salary.

 

4. Issue Payslips

Once deductions are done, employees receive a payslip with a breakdown of gross pay, deductions, and net pay. This step keeps things transparent and helps avoid confusion.

 

5. Submit Reports

Companies must regularly report payroll data to tax and insurance authorities. There’s also an annual income tax reconciliation, especially for employees with changing or multiple income sources.

 

6. Stay Updated on Regulations

Payroll regulations in Vietnam are subject to frequent and sometimes unexpected changes. For businesses—especially those newly entering the market—it is essential to remain vigilant and up to date to avoid compliance risks.

What Is the Minimum Wage and Average Salary in Vietnam?

Minimum Wage in Vietnam

Vietnam’s minimum wage structure is divided into two main categories:

1. Common Minimum Wage

  • This is set at VND 2,340,000 (approximately US$93) and is used to calculate salaries for employees in state-owned organisations and enterprises. It also forms the basis for calculating social insurance contributions for all enterprises (with the maximum social contribution set at 20 times the standard minimum wage).

2. Regional Minimum Wage

  • Employees of non-state businesses are subject to the regional minimum wage, which is determined by four regions designated by the government. Following a two-year freeze in spite of inflation, these were raised by 6% beginning in July 2024. The updated prices are:
Region 2022 Minimum (VND) 2022 Minimum (US$) 2024 Minimum (VND) 2024 Minimum (US$)
Region I 4,680,000 192 4,960,000 196
Region II 4,160,000 171 4,410,000 175
Region III 3,640,000 150 3,860,000 153
Region IV 3,250,000 134 3,450,000 137

3. Hourly Minimum Wages (by region, July 2024):

  • Region I: VND 23,800 (US$0.94)
  • Region II: VND 21,200 (US$0.84)
  • Region III: VND 18,600 (US$0.74)
  • Region IV: VND 16,600 (US$0.66)
Even if workers are paid on a daily or weekly basis, employers are still required to make sure that they all receive at least these minimums. The workplace’s location determines the applicable regional minimum; if a business serves several subregions, all employees must be covered by the highest applicable rate.

Average Salary in Vietnam

Depending on the sector, region, and degree of experience, salaries in Vietnam can differ significantly. Although there isn’t a set national average, the following are essential things to remember:

By Region

LocationMonthly Average Salary (VND)Equivalent in USDNotable Insights
Hanoi & Ho Chi Minh City10,500,000 – 18,000,000$415 – $710Salaries are significantly higher in these tier-1 cities, especially in sectors like tech, finance, and real estate.
Secondary Cities
(e.g. Da Nang, Hai Phong)		8,000,000 – 12,000,000$316 – $474Slightly lower cost of living leads to more moderate pay, but strong growth in logistics and tourism.

By Sector

SectorMonthly Average Salary (VND)Equivalent in USDTalent Market Insights
Information Technology20,000,000 – 35,000,000$790 – $1,380There is a high demand for skilled developers and tech engineers.
Manufacturing & Logistics9,000,000 – 15,000,000$355 – $590One of the largest employment sectors is characterised by steady wage growth.
Hospitality & Retail6,000,000 – 10,000,000$236 – $395Entry-level dominated; seasonal wage fluctuations are common.
Accounting & Finance10,000,000 – 18,000,000$395 – $710Competitive salaries, especially in international or regional firms.

Key Takeaways for Employers

  1. The Vietnamese government has established a strictly regulated wage system.
  2. Employers must adhere to region-specific minimum wage requirements, irrespective of the frequency of payment.
  3. While compliance is mandatory, offering wages above the legal minimum is often necessary to attract and retain skilled employees.
  4. Payroll calculations must consider factors such as regional wage levels, job role, and statutory contributions including health and social insurance.

Working Hours, Overtime Pay, and Employer Compliance in Vietnam

Establishing a workforce that is both efficient and compliant requires a clear understanding of Vietnam’s labour regulations. The Labour Code of 2019, together with guidance issued by the Ministry of Labour, Invalids, and Social Affairs (MOLISA), sets out the legal framework governing standard working hours, overtime provisions, and employer obligations. The key requirements are outlined below.

Standard Working Hours

Category Details
Normal Working Hours Up to 8 hours per day, 48 hours per week
Shortened Working Week Common in sectors involving dangerous or hazardous conditions; typically 6–7 hours/day
Flexible Arrangements Allowed if agreed upon in employment contracts, ensuring total hours don’t exceed weekly or monthly caps

Note: A Monday to Friday workweek is not mandated by law, but it is recommended when practical because it promotes work-life balance and is standard procedure.

Overtime Pay Regulations

Vietnam enforces strict regulations on overtime to protect employee welfare. The framework operates as follows:

Overtime ScenarioOvertime Rate (as % of Base Hourly Wage)
Weekdays (Normal Working Days)150%
Weekends (Saturday/Sunday)200%
Public Holidays or Paid Leave Days300%
Night Shift Overtime (any day)An additional 20% on top of the applicable rate


1. Daily cap: Overtime must not exceed 12 hours/day

2. Monthly cap: Overtime must not exceed 40 hours/month

3. Annual cap: Overtime must not exceed 300 hours/year for most sectors (expanded from 200 hours under recent law)

Employer Compliance:  Key Requirements in Vietnam

1. Clearly define employment terms

All contracts must include working hours, rest periods, and overtime terms in writing.

2. Maintain accurate timekeeping records

Employers must track daily attendance, working hours, and all overtime performed.

3. Obtain written consent for overtime

Overtime requires the employee’s written consent, unless it’s an emergency.

4. Mandatory rest periods

Workers must receive at least one full 24-hour break every 7 consecutive working days.

5. Breaks during long shifts

Employees working 6+ continuous hours must get a minimum 30-minute break.

6. Health & safety precautions

Employers must conduct health and safety checks before assigning overtime in hazardous work conditions.

Penalties for Non-Compliance

Non-compliance with regulations on working hours and overtime may lead to:

1. Administrative fines ranging from VND 2 million to 75 million (approx. USD 80–3,000)

2. Temporary suspension of business operations in severe cases

3. Mandatory back payment of underpaid wages with interest

 

Strategic Insight for Employers

For organisations managing teams in Vietnam—particularly those with shift-based operations or expanding workforces—several practical measures can enhance payroll accuracy and compliance:

1. Implement automated payroll and attendance systems to minimise manual errors.

2. Ensure employment contracts are updated in line with the latest legal requirements.

3. Provide regular compliance training for HR personnel and line managers.

4. Engage local payroll or HR specialists to navigate regulatory obligations more effectively.


What Are the Employee Deductions and Employer Contributions in Vietnam?

Under the Labour Code and social insurance regulations, both employer and employee salary deductions must be taken into account when managing payroll in Vietnam. These deductions apply universally, irrespective of industry or company size.

 

Employee Salary Deductions:

Employees in Vietnam typically see deductions for three main types of compulsory insurance:

1. Social Insurance (SI): 8%

2. Health Insurance (HI): 1.5%

3. Unemployment Insurance (UI): 1%

These are deducted directly from the employee’s gross monthly salary.

 

Employer Contributions:

In addition to employee deductions, employers are legally required to contribute a larger share toward the same insurance categories, along with other funds:

1. Social Insurance: 17.5%

2. Health Insurance: 3%

3. Unemployment Insurance: 1%

4. Occupational Accident and Disease Fund: 0.5%

5. Trade Union Fee (if applicable): 2% (based on company policy or union presence)

Altogether, this brings the total employer contribution to approximately 22% of each employee’s salary.

 

Important Note on Salary Basis

While the government sets clear caps, contribution amounts are determined by an employee’s monthly salary. Social and health insurance contributions are capped at 20 times the basic salary, whereas unemployment insurance is calculated up to 20 times the regional minimum wage. These limits ensure the system remains fair and manageable for both employers and employees.

 

Key Insight

Maintaining payroll compliance in Vietnam requires close attention to changes in wage levels, contribution ceilings, and insurance regulations, many of which are subject to annual revision. Accurate calculations and timely submissions are essential to avoid penalties.

For organisations with expanding teams or cross-border operations, engaging professional payroll services in Vietnam can streamline compliance, reporting, and overall workforce management.

How Are Payroll Reports, Tax Filings, and Final Settlements Handled in Vietnam?

Processing monthly salaries is only one element of payroll management in Vietnam. Employers must also comply with government requirements relating to taxation, payroll reporting, and employee terminations. The key obligations are summarised below:

 

1. Monthly Payroll Reports

  • Companies prepare detailed monthly reports showing employee earnings, deductions (like tax and insurance), and net salaries.
  • These records should be accurate and well-maintained, as local authorities may request them during audits.
 

2. Filing Personal Income Tax (PIT)

  • Employers are responsible for declaring and paying PIT on behalf of employees.
  • Filing frequency, whether monthly or quarterly, depends on the size of the business.
  • At the same time, employers must submit social, health, and unemployment insurance contributions.
 

3. Year-End Tax Finalisation

  • At the close of each financial year, a reconciliation process ensures the correct amount of tax has been paid.
  • Employers submit a final PIT report and issue a form to employees for personal tax records or refunds.
 

4. Final Settlements When Employees Leave

  • Businesses must calculate and disburse outstanding amounts such as unpaid salary, bonuses, or leave encashments.
  • PIT is finalised, and social insurance records are updated or closed.
  • This process is generally completed within 7 working days from the employee’s last day.
 

5. Staying Updated

  • Vietnam’s payroll regulations are revised frequently.
  • Many businesses choose to work with payroll service providers to ensure ongoing compliance and reduce administrative risk.

What Happens to Payroll During Termination and Final Settlement?

In Vietnam, employers are required by the Labour Code to complete all payroll settlements within 14 working days of an employee’s final day of service. This obligation applies irrespective of the reason for separation—whether resignation, termination, or contract expiry—and ensures fairness and transparency in the termination process.

The final payroll generally includes:

1. Unpaid salary for the days worked up to the departure date

2. Payment for unused annual leave, based on the remaining balance

3. Severance pay, if the employee has completed at least 12 months of service and the termination was not due to misconduct

4. Any pending bonuses or allowances that were contractually agreed upon

5. Statutory deductions, including personal income tax and social insurance contributions

Employers must ensure that all documentation is completed correctly, records are accurate, and the final payment is clearly communicated to the departing employee. Effective management of termination settlements not only upholds legal compliance but also reflects respect for the individual and helps protect the organisation’s reputation.

What are the Best Practices for Compliance and Accuracy for Payroll Services in Vietnam?

Payroll in Vietnam extends beyond salary disbursement; it demands strict adherence to legal and regulatory requirements to maintain smooth business operations. Key practices include:

1. Monitoring updates to wage, tax, and insurance regulations

2. Selecting an appropriate payroll system, whether in-house or outsourced

3. Maintaining organised documentation of contracts, salaries, and tax filings

4. Meeting all tax and insurance deadlines to avoid penalties

5. Centralising employee data for efficient management of leave, bonuses, and deductions

6. Processing final settlements for departing employees within seven working days

7. Engaging local payroll experts to navigate Vietnam’s complex requirements and maintain compliance.

 

Also Read : Payroll Outsourcing: A Cost-Effective Solution For Employers

conclusion

Managing payroll in Vietnam goes beyond calculations; it requires close attention to contribution ceilings, reporting obligations, and labour law compliance. These responsibilities not only safeguard legal conformity but also shape the employee experience and support smooth business operations.

As organisations expand in Vietnam, sustaining payroll compliance becomes increasingly important. It mitigates legal risks, strengthens employee trust, and underpins long-term stability. However, keeping pace with evolving regulations and local requirements can be complex without specialist support.


Galaxy Group offers practical, on-the-ground expertise to simplify payroll management. From initial setup through to business expansion, our team ensures compliance remains aligned with organisational objectives—enabling companies to concentrate on growth and people, while we manage the complexities behind the scenes.

Stay Compliant with Vietnam’s Payroll Regulations

Get insights on Vietnam’s 2025 payroll laws, wage updates, and compliance essentials to stay on track.

Explore Payroll Services

FAQ’S

What is the payroll system in Vietnam?

The payroll system in Vietnam handles social insurance contributions, tax deductions, and salary computation. Employers must follow laws pertaining to minimum wages and reporting deadlines. To effectively manage compliance, many businesses use local payroll services.

In Vietnam, salaries are typically paid on a monthly basis and are subject to the government-mandated minimum wage. Additionally, employers manage unemployment insurance, social insurance, health insurance, and personal income tax deductions. The majority of companies adhere to a defined framework to guarantee that workers are paid on time and in compliance.

No, the law in Vietnam does not require 13th-month pay. Nonetheless, it is a typical custom, particularly during Tết, the Lunar New Year. Numerous employers provide it as a bonus in accordance with employee contributions or business performance, or as stipulated in employment contracts or internal policies. It becomes a legally binding obligation if it is expressly mentioned in the contract or company policies.

Not always. Establishing a complete legal entity can seem like a big step if you’re just getting started or testing the waters. For this reason, many businesses choose to partner with an Employer of Record (EOR) or a local payroll provider. It’s a sensible approach to maintain compliance and appropriately compensate your staff without becoming bogged down in time-consuming paperwork and registrations.

The standard workweek is 48 hours, typically spread across six days. Overtime is allowed but must follow labour law guidelines.

Comprehensive Checklist on Employment in Taiwan

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Comprehensive Checklist on Employment in Taiwan

Comprehensive Checklist on Employment in Taiwan webp

Taiwan has rapidly emerged as a key business hub in the Asia-Pacific, offering a skilled workforce, strong infrastructure, and a business-friendly environment. For employers and HR professionals looking to expand into Taiwan, understanding the local employment landscape is a strategic advantage and a legal necessity.

Hiring employees in Taiwan requires compliance with local labour laws, awareness of cultural norms, and the ability to manage contracts, benefits, and payroll accurately.
To simplify this process, this blog presents a comprehensive, step-by-step checklist covering everything from drafting compliant employment contracts to managing tax, overtime, and foreign hires.

Table Of Content

How Can Employers Successfully and Legally Hire Employees in Taiwan?

Here are the 11 essential steps every employer must follow to stay compliant with local labour laws, manage payroll accurately, and onboard talent effectively, whether you’re hiring local staff or foreign professionals. Use this checklist to build a legally sound and efficient hiring process in Taiwan.

1. Understand the Key Labour Laws in Taiwan

Understanding the labour law in Taiwan is the first step toward establishing compliant employment practices. Before hiring, employers must familiarise themselves with the two key statutes governing employment in Taiwan:

Labour Standards Act (LSA)

  1. Regulates working conditions, wage levels, leave policies, and termination procedures.
  2. Sets working hour limits and mandates rest periods.
  3. Requires issuance of payslips and retention of employment records for at least five years (non-compliance can attract fines up to NTD 300,000).

Employment Service Act

  1. Governs the employment of foreign nationals.
  2. Promotes fair hiring practices and prevents discrimination.
  3. Requires employers to provide equal opportunities.

Key Employer Obligations:

  1. Contracts must comply with statutory terms.
  2. Register new hires for labour insurance, health insurance, and pension within 3 days.
  3. Ensure non-discriminatory hiring and workplace practices.

2. Meet the Legal Requirements to Hire Foreign Employees

Hiring international talent in Taiwan can enhance innovation and global reach, but it must be handled in strict accordance with national laws.

To hire foreign employees in Taiwan, employers must:

  1. Obtain a work permit from the Ministry of Labour before the employee begins work.
  2. Assist the employee in applying for an Alien Resident Certificate (ARC) for legal residency and employment.
  3. Ensure the position qualifies under Taiwan’s approved job categories (e.g., tech, education, management roles).

Permits are typically valid for 1–3 years and are renewable. Work without proper authorisation is illegal and may result in fines or deportation.

Employer Responsibilities

  1. Provide a valid employment contract in Taiwan, outlining job duties, compensation, and benefits.
  2. Ensure that foreign hires are registered for labour insurance, health insurance, and pension plans.
  3. Offer bilingual contracts (Mandarin + English) to avoid miscommunication and protect legal interests.
  4. Assist with onboarding and cultural orientation to support smooth integration.

Employers must manage several levels of compliance when onboarding foreign workers. Our foreign hiring guide provides detailed information on the necessary documentation and best practices.

3. Follow a Step-by-Step Hiring Process

Successfully hiring employees in Taiwan requires a structured approach that complies with local labour laws and cultural expectations. Employers must follow a clear path, from posting vacancies to onboarding, while maintaining full regulatory compliance

            Job Posting & Recruitment

 Publish compliant, non-discriminatory job ads (in Mandarin and/or English).

↓

Candidate Screening & Interviewing

Conduct interviews, ensuring fairness and adherence to anti-discrimination laws.

↓

Offer Letter & Employment Contract

Provide a written employment contract in Taiwan outlining key terms.

↓

                  Labour & Insurance Registration

  Register new hires for labour insurance, health insurance, and pension schemes within 3 days of starting work.

↓

                Formal Onboarding

Introduce company policies, team structure, and work culture, and set performance expectations.

4. Draft a Legal Employment Contract in Taiwan

A valid employment contract in Taiwan may be written or oral; however, written agreements are strongly recommended. The law mandates that contracts include:
  1. Job title & scope of work
  2. Working hours, rest days, and overtime terms
  3. Salary, payment frequency, and method
  4. Leave entitlements (annual, sick, maternity, etc.)
  5. Termination conditions and severance policies
  6. Contributions to social security schemes
For foreign hires, bilingual contracts (Mandarin and English) are strongly encouraged. Contracts should also include a reference to compliance with labour insurance, health insurance, and pension contributions as part of onboarding obligations. This clarity ensures both legal protection and operational transparency for all parties involved.

Did You Know?

Under Taiwan’s Labour Standards Act, employers are required to issue pay slips and retain employment records for at least five years; failure to comply may result in fines of up to NTD 300,000.

Taiwan’s labour laws require specific clauses within employment agreements. To understand how these local requirements fit into global standards, refer to our international contracting guide.

5. Comply with Taiwan’s Minimum Wage Requirements

Employers must comply with Taiwan’s minimum wage laws for both full-time and part-time employees. 1. As of 2025, the minimum wage rates are:
  • NTD 28,590 per month (≈ USD 893.44)
  • NTD 190 per hour (≈ USD 5.94)
2. These wage rates are reviewed annually by the Ministry of Labour to reflect inflation and economic changes. 3. Employers are responsible for paying wages at or above the legal minimum, ensuring that bonuses, overtime pay, and allowances are provided in addition to base salary, and maintaining accurate payroll records to demonstrate compliance with Taiwan’s labour laws. 4. Non-compliance with Taiwan’s minimum wage laws can result in serious consequences, including financial penalties, employee back pay claims, and reputational damage. Ensuring timely and accurate wage practices is essential for maintaining legal and professional credibility.

6. Set Up a Legally Compliant Payroll System

A structured approach to payroll is crucial for employers looking to operate compliantly in Taiwan. Below is a breakdown of key requirements:

1. Pay cycle

Most companies follow a monthly payroll system, typically disbursing salaries at the end of each month.

2. Payslip requirement

Employers must issue detailed payslips that show the gross salary, deductions, and net pay.

3. Payroll components

Base salary, overtime pay, bonuses (e.g., 13th-month salary), meal/transport allowances, and insurance contributions.

4. Labour insurance, health insurance, and pension
Mandatory deductions from both employer and employee; employers must register new hires within three days.

7. Follow Working Hour Regulations and Overtime Pay

1. Taiwan’s standard work schedule, which is intended to safeguard the welfare of its employees, is limited to 8 hours per day and 40 hours per week. 2. Overtime is limited to 46 hours per month and must be done with employee consent. 3. Overtime must be fairly compensated:
  • 1.34× the hourly wage for the first two extra hours
  • 1.67× times the hourly wage for any additional hours
4. At least one rest day per week is mandatory by law, no exceptions. 5. If employees work on public holidays or scheduled rest days, employers must provide additional pay or compensatory leave.

8. Provide Mandatory Employee Leave & Benefits

Offering the right mix of leave and benefits is essential for compliance and employee satisfaction in Taiwan. Under the labour law in Taiwan, employers must provide a set of statutory entitlements:
  1. Annual leave: Starts at 3 days for service exceeding 6 months but less than 1 year and increases to 7 days after one year of service, which continues to increase with tenure.
  2. Sick leave: Up to 30 days per year at half pay.
  3. Paid maternity leave of 8 weeks.
  4. Paternity leave: 5 days, fully paid.
  5. Public holidays: Around 12 national holidays annually.
Many companies enhance their packages with additional benefits such as
  1. A 13th-month salary or performance bonus
  2. Meal and transport allowances
  3. Supplemental insurance and wellness support
  4. Contributions to the Labour Pension Fund
These offerings not only fulfil legal requirements but also help attract and retain skilled professionals in a competitive hiring market.

9. Understand and Fulfil Taxation Obligations

Understanding taxation is essential for payroll compliance. Employers must manage income tax withholding and contribute to the country’s social security schemes in line with regulatory requirements.

Income tax:

Progressive rates range from 5% to 40%, depending on the annual income bracket.

Withholding tax:

Employers must withhold income tax at the source and remit it to the National Taxation Bureau.

Social Security contributions:

Employers contribute to labour insurance, national health insurance, and the Labour Pension Fund, and employees contribute a smaller share through automatic payroll deductions.

10. Comply with Overtime and Termination Rules

In Taiwan, overtime and termination are tightly regulated under the Labour Standards Act. Employees may work overtime only with consent, and it must not exceed 46 hours per month. Compensation is legally mandated.
  1. Dismissals must be lawful and justified. Employers must: Give 3 to 30 days’ notice (or pay in lieu)
  2. Provide a written explanation.
  3. Pay severance, typically half a month’s salary per year of service
Improper termination can result in fines, reinstatement, or compensation.

Quick-Reference Hiring Checklist for Employers to Hire in Taiwan

Stay compliant with Taiwan’s employment laws using this quick-reference checklist:

ItemStatus
Understand the labour laws in Taiwan
Meet the Legal Requirements to Hire Foreign Employees
Draft a legal employment contract in Taiwan
Comply with Taiwan’s Minimum Wage Requirements
Ensure the correct payroll setup in Taiwan
Follow the legal working hour limits in Taiwan
Register for health, labour, and pension contributions
Provide leave and benefits in accordance with the law
Fulfil the tax obligations
Manage termination and severance correctly

Conclusion

Navigating employment in Taiwan demands not only an understanding of the local market but also a precise grasp of legal, tax, and procedural requirements. From defining the minimum wage in Taiwan to crafting a compliant employment contract in Taiwan, every step matters, especially when expanding operations or onboarding foreign talent.

At Galaxy Group, we believe in simplifying complexity. This checklist serves as a practical tool to help HR teams, global employers, and decision-makers establish compliant, efficient hiring practices in Taiwan.

Expand Your Team with Global Talent

Ensure compliance with Taiwan’s laws when onboarding international professionals.

Learn more

FAQ’S

How is payroll managed in Taiwan?

Payroll in Taiwan is typically processed on a monthly basis, with employers responsible for deducting and remitting taxes, labour insurance, health insurance, and pension contributions. Payslips must be provided.

To hire employees in Taiwan, foreign companies must comply with local employment laws, draft legally sound contracts, register with tax and social insurance authorities, and—if hiring foreign talent—secure valid work permits and ARCs.

Taxation in Taiwan requires employers to withhold progressive income tax (ranging from 5% to 40%) and make contributions to national health insurance, labour insurance, and the Labour Pension Fund. Errors or delays may result in penalties.

A valid employment contract in Taiwan must include job role, salary, working hours, leave, insurance, and termination terms. Bilingual agreements are recommended for foreign hires.

The working hour limits in Taiwan are 8 hours per day, 40 hours per week, with a cap of 46 overtime hours per month, paid at premium rates.

PEO vs EOR: A Comparative Guide for Global HR Solutions

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PEO vs EOR : A Comparative Guide for Global HR Solutions

PEO vs EOR A Comparative Guide for Global HR Solutions

PEO vs EOR: A Comparative Guide for Global HR Solutions

The prompt and unified world economy today presents varied options for businesses to accelerate across continents and resort to different services to simplify their administrative processes.

 

Hiring and managing the international workforce is one of the biggest challenges businesses encounter during expansion. It involves compliance with state or country-specific laws and regulations, handling payroll, onboarding and managing the workforce, termination, paying taxes, etc. Therefore, to save time and cost, organisations resort to HR outsourcing solutions like Professional Employer Organization (PEO) and Employer of Record (EOR).

 

Both PEO and EOR have gained substantial traction across the global business landscape. As indicated by Straits Research – the global PEO market size was valued at USD 66.23 billion in 2024 and is expected to reach USD 152.14 billion by 2033. It is also expected to grow at a CAGR of 12.3% during the forecasted period (2022 to 2033) in the APAC region. (Read more….)

 

Countries like Thailand, Indonesia and China have seen increased adoption of EOR services due to their complex labour laws.

Although PEOs and EORs differ in terms of operations and both cater to different specific needs, they are nevertheless advantageous in simplifying business operations. However, employers might get confused about which one to opt for.

 

This article details the functional similarities, key differences, and various considerations when choosing a PEO or EOR which best aligns with your talent needs.

Table Of Content

Parallel Functions of a PEO and an EOR

PEOs and EORs generally perform parallel functions because both help businesses manage employment and HR-related tasks. Let’s have a look at the similar functions performed by them:

 

Ø  Payroll and Tax Filing: Manages payroll, salary calculations, tax deductions, and disbursements also ensures compliance with local tax regulations.

 

Ø  HR Administration: Facilitates hiring, visas & work permits, onboarding, performance management, termination, policy enforcement, etc.

 

Ø  HR Compliance: ensures compliance with local labour laws and tax regulations.

 

Ø  Employee Benefits Administration: offer and manage benefits like health insurance, retirement plans, and other perks.

 

Ø  Risk Mitigation: Minimises risks associated with employment, such as wrongful termination or workplace disputes.

Key Differences between a PEO and an EOR

Even though PEO and EOR service providers help employers, they also possess functional differences where their roles and legal responsibilities significantly differ. Let’s find out the key differences between them in these areas:

1. Definitions

PEO: A PEO is an outsourced partner of a business entity hired to co-employ and manage the workforce and provide other HR support services.

 

EOR: EOR is a third party service provider who takes charge with the legal responsibilities around employment related services, in a specified country. This arrangement allows businesses to hire workers in countries where they don’t have a legal entity.

 

2. Legal Employer and Employment Contracts

An EOR acts as an official legal employer of the employees. It hires employees on behalf of the parent employer (the client) and as the legal employer, the EOR signs the employment contracts directly with the employees. In this manner, the EOR assumes full legal responsibility and must be compliant of local labour laws and employment regulations.

PEOs on the other hand, operate as co-employers. The Client Company retains the legal employer status and signs the employment contracts with the employees. While the PEO manages the HR functions under a co-employment agreement. It shares the legal responsibility of the employees with the Client Company.

3. Accountability

It is the sole responsibility of the Employer of Record to ensure compliance with state-specific labour laws, tax regulations, and other statutory requirements. Therefore, it is fully accountable for employment risks like wrongful termination, misclassification, and non-compliance of local labour laws.

The PEO cannot be held fully liable for any risk or wrongful act of the Client Company as it only facilitates compliance and reduces administrative burdens; significant liability thus remains with the Client Company.

4.  Scope of Hiring

EORs are particularly useful for companies looking to hire international employees. The EOR enables their customers to expand easily to new countries without having to establish a legal entity, thus allowing them needful bandwidth for core operations.

PEOs generally operate within the same country or region and support businesses in hiring and managing the workforce.

5. Payments to Employees

Being an official legal employer, an EOR ensures direct payment to employees in the local currencies. Unlike EOR, a PEO might not be authorised to pay the employee directly and payments still have to be transferred through the Client Company’s account.  

Here is a quick snapshot of the differences between a PEO and an EOR:

Aspect PEO EOR
Definition Co-employer managing HR functions. Legal employer for workforce in a country.
Legal Employer Company retains legal employer status. EOR is the legal employer.
Accountability Shared compliance, liability on the Client Company. Full compliance and liability on the EOR.
Scope Domestic hiring support. International hiring, without need for an entity.
Payments Facilitates payments via the Client Company. Direct payments to the employee, in local currencies.

Why Would Businesses in APAC Need PEO and EOR Services?

Well known as a region of dynamic economies, grouping of diverse & complex labour laws, and compelling talent pools, the Asia Pacific region delivers unique opportunities (and challenges) for businesses. Countries like China, Japan, Thailand and Indonesia have distinct regulations and economic conditions that require customised HR solutions.

Choosing Between a PEO and an EOR

Businesses must analyse their need for international expansion, legal compliance and operational control to make an appropriate decision.

 

Co-employ a PEO if:

  • You have an established business or entity in the target country.
  • You need HR support while retaining control over your workforce.
  • Your aim to enhance operational efficiency, employee satisfaction and reduce administrative burden.

Partner with an EOR if:

  • You aim for international expansion and want to hire employees in a different country without setting up a legal entity there.
  • You aim to probe before making a long-term investment.
  • You wish to remain focused on the core operations of your business.

Conclusion

Small or big, every business faces challenges in workforce expansion and management. PEOs and EORs have distinct advantages for businesses finding employment solutions.

 

A PEO is ideal for domestic businesses looking to enhance their HR operations while maintaining control over their workers. On the other hand, an EOR is perfect for quick market entry, where businesses want to hire employees without going through the hassle of setting up a legal entity.

 

The scope of operations and the level of control a company wishes to retain over their workforce must align well with the service they decide to choose. By understanding the distinctive features of EOR and PEO, the customer can make a better informed decision.

 

Partner with Galaxy and experience our best-of-class customer service coupled with deep local knowledge around Human Resource and corporate services across the Asia Pacific region. 

 

Check out this post on How to Hire International Employees : A Comprehensive Guide

Need PEO or EOR Services?

Galaxy is your Ideal Partner for Both Services!

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FAQ’S

1.Can a PEO help in hiring in multiple countries?

PEOs are ideal for businesses already operating in a country and want to outsource their HR management operations. Some PEOs might offer services across different countries and facilitate international hiring.

A PEO offers the Client Company more control over their employees in respects to hiring, termination and legalities. With an EOR, the client company has substantial control over their employees but the EOR has the ultimate responsibility to execute the legal aspects relating to hiring, termination and local law compliance.  

The EOR solution provides access to overseas talent and compliance security in a foreign country where the Client Company does not have practical reach. The EOR thus takes full legal responsibility for all related employment, taxes and payroll. This is a popular solution with businesses who want to gain quick entry into a foreign market and overseas workforce. The PEO on the other hand offers more of a HR outsourcing support service when managing a domestic in-country workforce.

Should You Opt for EOR Services? Here are 5 Key Factors to Consider

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Should You Opt for EOR Services? Here are 5 Key Factors to Consider

Should You Opt for EOR Services Here are 5 Key Factors to Consider

In an increasingly interconnected world, businesses are expanding across borders to take advantage of potential markets and explore new talents. However, managing an international workforce comes with regulatory and administrative challenges, especially for businesses with limited access to or knowledge about new territories. This is where an Employer of Record (EOR) services plays a pivotal role.

Engaging an EOR not only simplifies global hiring but also removes the operational burden of managing employment compliance, payroll, and legal formalities in foreign countries.

However, finding a perfect EOR can be challenging and has certain limitations.

So, let’s explore core reasons why you should be engaging an employer of record and the disadvantages they come with.

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5 Core Reasons Why You Should be Engaging an Employer of Record (EOR)?

Partnering with an EOR simplifies business processes, especially for international hiring. Let’s explore how engaging an EOR can advance business growth and efficiency.

1. Acceleration of Global Expansion Plans

An EOR allows businesses to expand into new markets without the need to establish a legal entity, shouldering the administrative and employment compliance burden.  This initiative helps boost business outreach plans, enabling companies to channel their energies in other required areas.

 

2. Ease of Handling Legal Markets

Handling labour laws can be challenging due to significant variations in regulatory frameworks between countries. For example, France has strict labour laws mandating minimum severance pay and employee benefits, while Singapore offers more flexibility in employment contracts. An EOR ensures compliance with such local regulations as well as tax regulations, payroll processing, benefits administration, etc. allowing businesses to operate legally without establishing a physical presence and minimising the risk of legal issues for the company.

3. Facilitates Hiring:

(a) In No Time

With expertise in global hiring, EOR makes international staffing quick and easy through its connectivity network and simplified processes, which otherwise would be stringent and lengthy for any foreign company. For instance, in countries like Brazil, where obtaining a work permit can be a lengthy process, an EOR can simplify and expedite the onboarding of employees through an expert network of local partners. This ensures businesses secure skilled professionals, giving them a competitive edge in fast-paced markets.

(b) In Budget

Employers of Record (EORs) open access to global talent pools, allowing businesses to recruit skilled workers at competitive salaries. This is particularly advantageous for startups and SMEs aiming to maximise their hiring budgets.

 

(c) Equitably

By standardising payroll, benefits, and HR processes across borders, an EOR ensures that employees in different countries, such as India and Japan, enjoy equitable treatment despite varying local laws. This consistency enhances satisfaction and loyalty among global teams.

 

(d) Synergy

EOR aims to ensure that employees have a smooth, consistent, and positive experience across all stages of their employment, creating a stronger connection between the employee and the organisation. EORs employ tested and proven technologies or processes to effectively bring these different touchpoints together.

 

(e) Mobility

Relocating employees can be challenging, especially in countries with stringent visa requirements like the United States. An EOR takes charge of work permits and immigration paperwork, simplifying the process for businesses and employees.

 

4. Cost Efficiency and Reduced Administrative Burden

Establishing a subsidiary in countries like Switzerland, known for its stringent regulatory frameworks, can be costly and time-intensive. An EOR provides a cost-effective alternative, allowing businesses to explore new markets without the heavy financial and operational commitments of setting up a local entity.

Moreover, EORs significantly reduce administrative burdens by managing essential tasks such as payroll processing, employment and regulatory compliance, benefits administration, and tax filings. 

5. Avoids Employee Misclassification

Misclassifying employees as independent contractors can lead to fines and penalties in countries like Australia, France and Japan. An EOR eliminates this risk by ensuring correct classification under local laws. The EOR structures agreements for contractors to align with independent contractor laws, avoiding practices that could reclassify them as employees, such as controlling their work schedules and providing benefits.

In an increasingly interconnected world, businesses are expanding across borders to exploit potential markets and explore a wider pool of skilled workers. However, the regulatory and administrative complexities of managing a workforce in foreign countries can be challenging for those needing more access to and knowledge about new territories. This is where an Employer of Record (EOR) plays a significant role.

The Cons of Hiring an EOR

Having an Employer of Record (EOR) with you has numerous benefits, but at the same time, one might face certain limitations. So, let’s dive into possible disadvantages associated with hiring an EOR: 

1. Lack of Control

Since the EOR becomes the legal employer, businesses might lack direct control over employment-related decisions. Heavy reliance on a third-party service provider also carries inherent risks if the EOR underperforms or fails to meet its obligations.

 

2. Complexity in Large-Scale Operations

Managing a workforce through an EOR across multiple countries, such as India, Australia and the UK, can create operational complexities. Ensuring consistency in employee policies and practices may become challenging as the scale grows if the EOR is not competent enough to manage large-scale international engagements. Choosing a competent EOR for international employee engagements is critical for success.

3. Employee Perception Issues

Employees may perceive the EOR as a barrier between them and the Company. In countries like Germany, where employment stability is highly valued, such perceptions could impact morale and loyalty. It is thus important that an adequate EOR equipped with best-of-class employee interaction practices is chosen for the undertaking.

4. Data Protection and Legal Disputes

Sharing sensitive employee data with a third party can raise concerns about privacy and protection. Additionally, disputes between the EOR and the company may lead to legal complications. These areas must be clearly stated and agreed upon in the Master Services Agreement to ensure that such lapses do not occur.

Conclusion

Although an EOR can extremely benefit businesses, companies might have to face certain hiring limitations. Therefore, before partnering, one must conduct rigorous due diligence and enquiry about the EOR to find the suitable one that can understand and satisfy the Company’s expectations.

 

Businesses should evaluate their operational needs, workforce size, and long-term goals. Tailoring the partnership to align with these factors can help maximise the benefits while minimising the risks. For companies eager to explore global markets, an EOR offers a flexible and cost-effective solution to handle the complexities of international employment.

 

Make Galaxy Payroll Group your trusted partner for global expansion offering world class HR excellence and corporate solutions across the Asia Pacific region today! 

Searching for a suitable EOR for your business?

Partner with Galaxy – the leading HR Excellence and Business Advisory Services in Asia Pacific with 30+ years of experience!! 

Contact Us Today

FAQ’S

1. Why should I engage an EOR?

One should engage an EOR to energise business expansion plans. By transferring the administrative burden of employment compliance in a foreign country, you will be able to focus on the core business operations.

Yes, underperformance by an EOR is a potential risk. Do ensure that the provider has a presence in the target country, deep knowledge of local employment nuance, expertise in managing an international workforce, and service offerings aligned with your business needs. 

The right EOR (employer of record)  must have good experience in hiring and managing employees as well as expertise in labour law compliances. It’s service and cost offerings must match your budget and business needs.

What is an Employer of Record: A Complete Guide to Simplified International Hiring

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What is an Employer of Record: A Complete Guide to Simplified International Hiring

What-is-an-Employer-of-Record-A-Complete-Guide-to-Simplified-International-Hiring

Every business today shows comparatively high growth after stepping out of its boundaries. However, business owners remain so much involved in the core business operations that even after realizing the need for business expansion, they find it challenging to devote time and resources to researching and understanding the complexities of setting up a new legal entity in a new area or a different country altogether about which they have limited knowledge.

 

This is where Employer of Record (EOR) services offer a solution, helping employers manage their global hiring needs while remaining focused on their core business.

Still, ‘EOR’ sounds new to you?! Let us discover what an EOR is all about. 

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What is an EOR?

Fully known as “Employer of Record,” EOR offers proficient and customized employment management services. It takes charge and legal responsibility for global hiring like hiring workers locally or internationally on behalf of the employer, handling its payroll management , taxes, benefits, banking, insurance, contracts, and compliance with local labour laws and regulations of a specified region. 

 

Since the EOR is responsible for issuing employment contracts, paying salaries, remitting taxes, and providing statutory benefits like health insurance and pensions, regulatory authorities officially recognize the EOR as the employer of the workers. Even though the EOR works under the direction of another parent organization, it acts as the registered employer for legal, tax, and compliance purposes. It is, therefore, called the employer of record.

 

While this sounds so simple, EOR involves overlapping processes. It is not about just hiring employees and their payroll; it’s a much wider term, which you will learn about in this overview. 

What are the core functions of an Employer of Record (EOR)?

1. Setting up a new location

Where a company wishes to expand its business operations on foreign land, the employer of record (EOR) facilitates the parent company in establishing a functional presence there without setting up a new legal entity. EOR services hire local talent on the client’s behalf to determine the new location’s purpose. EOR services ensure that the company can expand without the complex process of business incorporation in the target country. EOR, if needed, can also facilitate the physical presence of the client company in the target country and be used for operational and branding purposes.  

2. Visas and Work Permits

Employer of record (EOR) takes care of all the immigration mandates and assists employees in getting work permits, visas, etc. if and when required.

3. Employment Compliance

An  Employer of Record (EOR) takes charge of employment requirements per the existing laws of a specific jurisdiction, minimizing the risks of fines, penalties, and lawsuits. For example, the Employer of record (EOR) ensures that the terms of the employment contracts, such as salary, working hours, benefits, termination, etc., comply with local laws. Additionally, the EOR manages payroll management, ensuring all statutory benefits like health insurance, pensions, and leave entitlements are in place.

4. Employment Contracts

It is the Employer of Record (EOR)’s responsibility to not only draft the employment contracts as per the parent employer’s requirements, and adhere to all applicable local laws, but also get them executed, take care of renewals, if any, and terminate or close thereof.

5. Payroll Management 

Employer of record (EOR) reduces administrative burdens by calculating employee payments and ensuring timely payment in local currencies. This includes calculating deductions, gross and net salaries, taxes, contributions to social security schemes like family allowances, retirement, and pensions, payment of overtime and bonuses, filing annual tax documents of employees, and calculating unused leaves and owed wages for final paychecks at the time of termination. In addition, payroll outsourcing through an EOR ensures accuracy and timeliness, keeping both employees and employers compliant.

6. Statutory Benefits

Employer of record (EOR) takes care of statutory benefits for the employees, such as healthcare, pensions, insurance, leave entitlements, etc.

7. Medical Check-Ups

Employer of record (EOR) ensures that the occupational medical checkups are done in accordance with local laws and regulations especially in areas like construction and manufacturing where health and safety of employees is a big concern.

8. Termination and Offboarding

EOR takes full responsibility for an employee until the end of the service contract or termination. It ensures that all termination protocols under the local laws are complied with, handles their final settlement clearance, and facilitates offboarding thereof.

9. Reporting and Record Maintenance

EOR keeps track of timelines for filing various statutory records and documents required under local laws and reports the same to the employees and the client company. It also regularly informs the client about employee management activities and compliance-related activities so that the client stays informed about the workforce while operating in different countries. It maintains the record of the entire employee management and compliance under its control.

Since the EOR is responsible for issuing employment contracts, paying salaries, remitting taxes, and providing statutory benefits like health insurance and pensions, regulatory authorities officially recognize the EOR as the employer of the workers. Even though the EOR works under the direction of another parent organization, it acts as the registered employer for legal, tax, and compliance purposes. It is, therefore, called the employer of record.

While this sounds so simple, EOR involves overlapping processes. It is not about just hiring employees and their payroll; it’s a much wider term, which you will learn about in this overview. 

What is the Role of an EOR?

  • Compliance Requirements : Compliance challenges vary across countries due to diverse labor laws and tax systems. EOR services specialize in handling these challenges worldwide, offering solutions for business expansion.
  • Bridge between the client company and employees : The EOR acts as an intermediary, managing the legal and administrative aspects of employment on behalf of the client.
  • Communication and Coordination: It is a key liaison between the parent employer and local government authorities. EOR handles the intricacies of global hiring while ensuring the company stays compliant with local regulations.
  • Customization: EOR services provide customized employment-related solutions as per the employer's specific needs.
  • Risk Mitigation: The EOR reduces risks associated with non-compliance, avoiding penalties, fines, and potential employment-related disputes.
  • Advisory: EOR services often provide valuable advice on local business practices, tax laws, and labor regulations, helping the parent company navigate new territories efficiently.

What does a comparative analysis of EOR globally involve?

While the role of an EOR is similar worldwide, its services and methods vary from place to place due to regional variations in labor laws, tax systems, and employment regulations. For instance, Australia’s Fair Work Act focuses on maximum working hours, minimum wages, leave entitlements, etc. Conversely, in India, there are complex labor laws related to mandatory gratuity payments, contributions to the Provident Funds, and Employees’ State Insurance.

Therefore, EOR’s approach to handling tasks in both these countries will be entirely different due to variations in the legal framework and cultural expectations.  Hence, EOR services are globally adaptable and can help with international expansion without the need for business incorporation services in every country.  

Key Benefits of Hiring an Employer of record (EOR)

  • Acceleration of global expansion and global hiring plans
  • No need to set up multiple legal entities to employ global workers
  • No need to access local experts on tax laws and regulations
  • Fast onboarding of the international workforce
  • Less paperwork

Who should hire an Employer of Record (EOR)?

One who:

  • Needs to employ international workers for its business
  • Doesn’t want to set up a new legal local entity in the expansion area
  • Lack expertise in international tax and employment law in the expansion area
  • Want to focus on the core business of the Company and doesn’t want to devote much time to business expansion
  • Whose existing employees generally relocate
  • Needs peace of mind to protect IP globally

Conclusion

So, for those looking for employment solutions, especially in the international market, EOR services are the perfect solution. It will not only ease the hiring process for you but also save you time that would otherwise be spent in understanding the work environment of the target location for expansion and local labor laws. You will be free from the burden of setting up a legal entity in a new country, thereby making the expansion quick and cost-effective. Outsourcing payroll to an EOR further ensures you maintain focus on your core business while they handle the complexities of hiring and employment management for you.

Make international hires in no time with our simplified solutions!

Partner with Galaxy – the leading HR Excellence and Business Advisory Services in Asia Pacific with 30+ years of experience!! 

Connect Now

FAQ’S

1. How is Employer of record (EOR) different from the HR department of a Company?

EOR acts as a legal employer for hirers of the Company in a specified country but the HR department manages employees directly, legal responsibility lies with the Company itself. EOR specializes in international hiring while the HR department focuses on internal processes such as recruitment, payroll, etc. and may lack expertise in foreign legal systems.

 A PEO is a professional employer organization generally outsourced for undertaking the Human Resource responsibility of a Company, a process referred to as co-employment. It does not establish a separate legal entity like an EOR.

Setting up a legal entity can be time-consuming, costly, and risky for someone who has limited knowledge about the legal and business practices of a country in which business expansion is sought. So hiring EOR services can save you time and money while ensuring compliance with local laws and regulations.

Exploring The Role That Payroll Strategies Can Play in Corporate Sustainability Initiatives

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Exploring The Role That Payroll Strategies Can Play in Corporate Sustainability Initiatives

TAx in hong kong

As global attention on environmental protection and social responsibility grows, businesses are increasingly recognising the importance of sustainability for long-term success. Many enterprises are making notable strides in this area. In this context, payroll services and strategies are a critical component of business management, and becoming closely integrated with the sustainability goals of their customers.

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The Benefits Of Effective Payroll Strategies for the Sustainability Agenda

Payroll strategies are not just essential for attracting and retaining talent; they are also a vital tool in driving a company’s sustainability initiatives. By designing and implementing compensation structures that align with sustainability objectives, companies can incentivise behaviors that contribute to environmental and social goals. For example, performance-based bonuses could be tied to metrics such as reducing carbon emissions, improving energy efficiency at work, or engaging in corporate community initiatives as part of our services.

Challenges and Opportunities

While the integration of payroll services and sustainability initiatives offers numerous benefits, it also presents challenges. One of the main challenges is the need for robust data collection and analysis systems to accurately measure and track the employee’s performance against his/her sustainability plan for the year. Additionally, companies must ensure that their compensation structures are fair and transparent, particularly when linking pay to sustainability-focused outcomes.

However, these challenges also present opportunities for innovation. By leveraging on new technologies, such as artificial intelligence and blockchain, companies are now able to easily enhance the accuracy and transparency of their payroll systems. This not only supports sustainability initiatives but also improves overall corporate governance.

Conclusion

As businesses continue to embrace sustainability as an important company goal. Payroll services and strategies will increasingly be part of the toolkit that helps drive performance and results in this area. By integrating sustainability goals into payroll and compensation strategies, companies can drive meaningful change and contribute to a more sustainable future. The journey towards sustainability is complex, but with the right approach, businesses can achieve both financial success and positive environmental and social impact.