Employment Contracts vs Service Contracts in Vietnam: Where the Line Is Drawn on Social Insurance Arrears

Many companies prefer signing “service contracts” or “collaborator contracts” with individuals instead of employment contracts: simpler paperwork, no social insurance contributions, easy termination when the person is no longer needed. But Vietnamese labor law looks at the substance of the relationship, not the title on the paper. If the real relationship is an employment relationship, the social insurance authority can force the company to retroactively pay all unpaid social insurance, plus fines and late-payment surcharges. From 10/9/2026, the new penalty framework under Decree 283/2026/ND-CP tightens this even further.

The golden rule: “whatever it is called”

Clause 1 Article 13 of the Labor Code 45/2019/QH14 is clear: where the parties agree under a different name but the content shows paid work, wages and the management, administration and supervision of one party, it is deemed an employment contract. In other words, an employment contract is identified by 3 concurrent signs:

• Paid work — the worker performs work and receives remuneration;
• Wages — the payment has the nature of wages, paid periodically;
• Management, administration, supervision — one party directs and controls the work process of the other.

When all three signs are present, regardless of whether the contract is titled “service contract”, “collaborator contract” or anything else, the law treats it as an employment contract with all accompanying legal consequences.

What does a genuine service contract look like?

A true service contract is governed by the Civil Code 91/2015/QH13. Under Article 513, a service contract is an agreement under which the service provider performs work for the service user and is paid service fees; the object of the contract is work that can be performed, does not violate legal prohibitions and is not contrary to social ethics (Article 514). The Civil Code also allows the parties to unilaterally terminate a service contract in cases prescribed by law (Article 520).

The core signs of a genuine service contract:

• The provider is autonomous in how the work is performed, not subject to the management, administration or supervision of the hirer;
• The provider bears the risk of the work outcome;
• The provider may hire others to perform the work instead — not personally bound to do it themselves.

Employment contract vs service contract

5 common “disguise” indicators

In practice, social insurance authorities and courts typically “peel off” disguised service contracts through these signs:

1. Timekeeping and working hours management: the individual must clock in, request leave, and follow fixed working hours like regular staff.
2. Subject to internal rules and discipline: must follow company rules, KPI reviews and discipline like an employee.
3. Fixed monthly pay: payment does not depend on the volume or outcome of completed work but is paid evenly each month.
4. Prohibited from working elsewhere: the contract or practice requires the individual to work only for one company.
5. Cannot hire substitutes: the work is tied to the individual personally and cannot be delegated or subcontracted.

The more of these signs appear, the higher the risk the contract will be reclassified as an employment contract.

Consequences: arrears collection and two penalty tiers from 10/9/2026

When an employment relationship is established without social insurance contributions, companies face two layers of consequences:

Social insurance arrears collection

Employers are forced to pay in full the late or evaded social insurance amounts, plus an additional sum of 0.03%/day calculated on the amount and the number of days of late payment or evasion into the social insurance and unemployment insurance funds (Articles 40 and 41 of the Social Insurance Law 41/2024/QH15). The longer the delay, the larger the amount grows.

Administrative penalties (Decree 283/2026/ND-CP, effective 10/9/2026)

• Wrong contract type (Article 15): concluding the wrong type of employment contract or one lacking mandatory contents — fines scaled by the number of affected workers; keeping the originals of identity papers, diplomas or certificates of workers is fined VND 20–25 million for individuals and VND 40–50 million for companies, plus mandatory return of the documents.
• Late social insurance payment (Article 43): 12–15% of the late amount, plus retroactive payment and 0.03%/day.
• Social insurance evasion (Article 44): 18–20% of the evaded amount, capped at VND 75 million for individuals; fines for organizations are double those for individuals (clause 1 Article 7).

Note: Decree 283/2026 replaced Decree 12/2022/ND-CP from 10/9/2026 — all old penalty bases under Decree 12/2022 no longer apply.

Exceptions: cases outside compulsory social insurance

Not every contract with an individual triggers compulsory social insurance. Two notable exceptions:

• Probationary contracts: workers during probation are not subject to compulsory social insurance;
• Part-time workers whose monthly wage is lower than the lowest social insurance contribution base (clause 5 Article 3 Decree 158/2025/ND-CP).

Compliance checklist for companies

1. Check substance before naming: if the job requires management, supervision and fixed hours — sign an employment contract from the start instead of disguising it as a service contract.
2. For genuine service contracts: ensure the provider is autonomous, bears outcome risk and may hire substitutes; fees tied to work results, not fixed monthly wages.
3. Register social insurance on time: within 30 days from the date the worker becomes subject to compulsory social insurance (clause 1 Article 28 Social Insurance Law 41/2024).
4. Do not keep originals of workers identity papers when concluding or performing contracts — keep copies only.
5. Periodically review existing service contracts: is the actual management drifting toward an employment relationship?

Conclusion

The line between an employment contract and a service contract lies not in the title on paper but in 3 signs: paid work, wages, and management, administration and supervision. Signing the wrong contract type to dodge social insurance is a risky gamble: companies may be forced to retroactively pay all social insurance plus 0.03%/day, alongside administrative fines under the new framework from 10/9/2026. The safest approach is to identify the real nature of the relationship at signing — and seek legal advice when in doubt before putting pen to paper.

Note: whether a specific relationship is an employment contract or a service contract depends on the assessment of the social insurance authority, inspectors or courts in each specific case.

Legal sources

• Labor Code 45/2019/QH14 (cited per consolidated document 18/VBHN-VPQH of 2026): clause 1 Article 13.
• Civil Code 91/2015/QH13: Article 513 (service contracts), Article 514 (object), Article 520 (unilateral termination).
• Social Insurance Law 41/2024/QH15: point a clause 1 Article 2; clause 1 Article 28; Article 40; Article 41.
• Decree 158/2025/ND-CP guiding compulsory social insurance: clause 5 Article 3.
• Decree 283/2026/ND-CP on administrative penalties in labor and social insurance (effective 10/9/2026, replacing Decree 12/2022/ND-CP): Article 7, Article 15, Article 43, Article 44.

Is your company unsure whether to sign an employment contract or a service contract for its personnel? Reach us via the Contact page of FLAT Law Firm for a review of contract templates, an assessment of social insurance arrears risk, and support in building compliant hiring and personnel management processes.

The legal content of this article is reviewed by FLAT’s AI Legal Council and submitted to the owner for approval; it is not an opinion of a licensed lawyer and does not replace legal advice for specific cases.

For reference only, not legal advice.