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Employment for Tech Companies and Startups: 7 Key Issues

5 min readFLAT LAW FIRM
Bàn làm việc startup công nghệ với hai màn hình hiển thị mã nguồn, chồng tài liệu hợp đồng, kẹp giấy và sổ tay; tông xanh dương hiện đại.

Employment for Tech Companies and Startups: 7 Legal Issues to Fix Early

Tech startups pour everything into product and fundraising, leaving labor law "for later". When disputes erupt with key staff, social insurance arrears hit the "collaborator" dev team, or source code walks out to a competitor — the price dwarfs prevention costs. These 7 issues need handling from day one.

Contents

1. Collaborator contracts for developers: the employment trap

Many startups sign "collaborator" or "service" contracts with developers to avoid social insurance. But the law determines employment by substance, not title: regular work under management for periodic pay = employment, whatever the contract says.

Consequences of reclassification: social, health and UI insurance arrears; administrative penalties; and full labor-contract rights for the worker (severance, unlawful-termination compensation…). The Labor Code 2019 recognizes only two labor contract types (Article 20) — use them correctly.

Article 25 of the Labor Code 2019:

  • No more than 60 days for jobs requiring college-level or higher expertise (most dev and engineering roles);
  • No more than 30 days for intermediate-level roles;
  • No more than 6 days for other jobs;
  • Only one probation per job.

Common startup mistakes: 2–3 month "probation to be sure", or a second probation after the first expires. Excess time counts as official employment with full rights — and skipping social insurance for it is a violation.

3. Confidentiality and non-compete: NDA + non-compete

For tech companies, non-disclosure agreements (NDA) are mandatory: define confidential information (source code, algorithms, customer data, product strategy), duties during and after employment, and breach remedies.

Post-employment non-competes need caution: Vietnamese law has no detailed framework; a 2-year ban on joining competitors without commensurate compensation is hard to enforce and may be seen as restricting the right to work. Smart design: narrow scope (direct competitors, territory, reasonable duration) + financial compensation.

4. Intellectual property: who owns employee creations?

Source code, inventions and technical solutions created in performing duties are governed by IP law with assignment mechanisms to the employer — but conditions, scope and remuneration should be stated clearly in the labor contract or a separate agreement. Silence = disputes when key staff leave with their "brainchildren", or when fundraisers ask "is the IP clean?".

5. ESOP: equity rewards and the tax question

ESOPs are startups' talent-retention tool, but need upfront design:

  • PIT: the spread between market price and preferential exercise price may count as salary income — triggering PIT;
  • Vesting: tied to tenure and KPIs — draft tightly to avoid disputes when employees leave mid-way;
  • Dilution: issuance mechanics and dilution ratios need existing shareholders' approval.

6. Remote work: state it in the contract

Remote/hybrid models are common in tech, yet many contracts still list "company office" as the workplace. Needed:

  • State the workplace (remote / hybrid) in the contract or appendix;
  • Agree on working-hour management and output evaluation;
  • Regulate information security outside the office (VPN, devices, data storage);
  • Employer equipment responsibilities.

7. Terminating key personnel

Terminating key staff (CTO, lead devs) is the riskiest moment: they hold source code, customer relationships, trade secrets. Principles:

  • Unilateral termination only on lawful grounds (Article 36) with required notice periods;
  • Revoke assets and system access immediately at termination;
  • Activate handover clauses for work and IP assets;
  • Settle all entitlements fully to avoid prolonged claims.

8. Frequently asked questions

Q: What are the risks of hiring developers as collaborators?

A: The relationship may be reclassified as employment by substance: if developers work regularly, under management, for periodic pay, authorities may treat it as a labor contract regardless of title — triggering social insurance arrears and penalties.

Q: What is the maximum probation for tech staff?

A: Under the Labor Code 2019: no more than 60 days for jobs requiring college-level or higher expertise; 30 days for intermediate level; 6 days for other jobs. Only one probation per job.

Q: Are post-employment non-compete clauses enforceable?

A: Hard to enforce in practice without commensurate compensation. Vietnamese law lacks a detailed framework; absolute bans without compensation may be seen as restricting the right to work. Design with compensation and reasonable scope.

Q: Who owns products created by employees?

A: Depends on agreements and IP law: inventions and utility solutions created in performing duties typically transfer to the employer, but the labor contract must state this clearly to avoid disputes.

Q: Does ESOP trigger personal income tax?

A: PIT may arise when employees exercise options at preferential prices (the spread may count as salary income). Design ESOP with a tax plan from the start.

Q: What should remote work arrangements note?

A: State the workplace clearly in the contract/appendix; agree on working-hour management, information security outside the office; ensure infosec conditions and equipment.

9. When to work with a lawyer

Work with a lawyer when: building labor contract, NDA and IP agreement templates for startups; designing ESOP programs; terminating key personnel; or facing social insurance inspections over "collaborator" teams. FLAT Law Firm advises tech companies and startups on labor — contact hotline 0988424851.

References

  • Labor Code 2019 (45/2019/QH14).
  • Law on Intellectual Property and amendments.
  • Content cross-checked at time of writing (28/9/2026).

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