"Outsourcing headcount" — many companies use one phrase for two entirely different legal models: labor sub-leasing and work contracting. Confusing them is not a terminology slip — it is the source of administrative penalties, labor disputes, and recharacterized employment relationships.
This article distinguishes the two models under the Labor Code 2019, with updates from the Investment Law 2025.
Table of contents
- 1. Two models, two legal natures
- 2. Detailed comparison table
- 3. Labor sub-leasing: conditions and limits
- 4. Work contracting: when it fits
- 5. The "disguised contracting" trap
- 6. Changes from the Investment Law 2025
- 7. Risks and sanctions
- 8. Model-selection checklist
- 9. FAQs
- 10. When to work with counsel
- References
- Language versions
1. Two models, two legal natures
Labor sub-leasing (Article 52, Labor Code 2019): a licensed sub-leasing enterprise sends its employees to work for a host enterprise for a defined term. Employees keep their employment relationship with the sub-leasing enterprise.
Work contracting: the contractor organizes its own personnel and means to complete a work or deliver a specific result. The client manages the result, not the people.
The core distinction: who manages the employees during the work.
2. Detailed comparison table
| Criterion | Labor sub-leasing | Work contracting |
|---|---|---|
| Legal relationship | Tripartite employment relationship | Bilateral civil/commercial contract |
| Who manages employees | Host enterprise directs daily work | Contractor manages its own personnel |
| Maximum term | 12 months (Art. 53, Labor Code 2019) | As agreed |
| Entity conditions | Sub-leasing enterprise must meet statutory conditions | No special conditions |
| Social insurance, accident liability | Apportioned between leasing and host enterprises | Contractor liable for its own personnel |
| Termination | Per sub-leasing rules | Per the contract |
3. Labor sub-leasing: conditions and limits
- 12-month maximum (Art. 53) — mandatory; cannot be circumvented by chaining contracts for the same position and employee;
- Sub-leasing permitted only for allowed jobs — not every position qualifies;
- The sub-leasing enterprise must meet statutory conditions (capital, deposit, and others per guiding texts);
- Sub-leased employees are guaranteed rights no less favorable than the host's employees in equivalent jobs.
4. Work contracting: when it fits
Work contracting fits when the company needs a complete deliverable: construction packages, system maintenance, bundled cleaning–security services, product processing. The client accepts the result — it does not timekeep the contractor's individual employees.
A good work contract specifies: scope, acceptance standards, schedule, lump-sum price, and the contractor's responsibility for its personnel (work safety, social insurance).
5. The "disguised contracting" trap
A common reality: companies sign "work contracts" but daily assign tasks, keep attendance, and discipline the contractor's employees. When disputes or inspections arise, authorities and courts examine actual substance, not the contract's title:
- Substance = sub-leasing by an unqualified lessor → unlicensed labor sub-leasing;
- Substance = direct labor use → recharacterization as a direct employment relationship with full obligations (labor contracts, social insurance, severance).
Form cannot hide substance — a principle companies must internalize.
6. Changes from the Investment Law 2025
From 01/3/2026, the Investment Law 2025 removed labor sub-leasing from the conditional business lines list.
Critical note: removing investment conditions does not repeal the Labor Code 2019 sub-leasing framework. The 12-month cap, sub-leased employees' rights, and parties' liabilities still fully apply. Companies should not misread "no more conditions" as "no more rules".
7. Risks and sanctions
- Sub-leased labor beyond 12 months or in non-permitted jobs → administrative penalties (check the current penalty text for amounts);
- Unqualified sub-leasing → penalties and forced termination;
- Work-accident / unilateral-termination disputes with sub-leased employees → the liability boundary between the two enterprises is contentious; define it in the sub-lease contract;
- "Disguised contracting" → recharacterization, social-insurance arrears, and labor obligations.
8. Model-selection checklist
- ☐ Define the need: temporary headcount under your direction, or a complete deliverable?
- ☐ Headcount → sub-leasing: verify partner qualifications, permitted jobs, ≤ 12-month term
- ☐ Deliverable → work contracting: ensure no management of the contractor's personnel
- ☐ Allocate social-insurance, work-safety, and accident liability clearly in the contract
- ☐ Periodic review: does actual performance still match the signed model?
9. FAQs
What is the core difference between labor sub-leasing and work contracting? The employment relationship: in labor sub-leasing, the leasing enterprise "lends" its employees to the host enterprise — employees remain on the leasing enterprise's payroll. In work contracting, the contractor organizes its own personnel to deliver a specific work or result — the client manages the result, not the people.
What is the maximum term of a labor sub-lease? Under Article 53 of the Labor Code 2019, the maximum sub-leasing term is 12 months. This is mandatory — parties cannot circumvent it by chaining consecutive sub-leases for the same position with the same employee. Breaching the cap may trigger administrative penalties.
Can a company simply label an arrangement "work contracting" to avoid sub-leasing rules? No. Authorities and courts look at the actual substance, not the contract's title. If a "work contract" in fact has the client directly managing, directing, and timekeeping the contractor's employees, the relationship may be recharacterized as (unlicensed) labor sub-leasing or even a direct employment relationship.
Is labor sub-leasing still a conditional business line? Under the Investment Law 2025, labor sub-leasing was removed from the conditional business lines list, effective 01/3/2026. But removing investment conditions does not repeal the Labor Code 2019 framework — the 12-month cap, sub-leased employees' rights, and parties' liabilities still fully apply.
What are the biggest risks of using sub-leased labor? Three risk groups: (1) exceeding the 12-month cap or using sub-leased labor for non-permitted jobs — administrative penalties; (2) disputes over liability for work accidents or unilateral termination; (3) recharacterization as direct employment if actual management exceeds the sub-leasing framework.
Which model should a company choose? Choose by real need: temporary headcount integrated into your operations under your direction — consider sub-leasing within the 12-month cap; a complete deliverable without managing personnel — work contracting fits better. Choosing the wrong model at the outset is the surest way to manufacture a dispute.
10. When to work with counsel
Choosing a labor-use model is a legal decision — not a mere HR administrative one. Counsel helps: assess the suitable model, verify the sub-leasing partner's qualifications, draft sub-lease/work contracts with clear liability boundaries, and handle inspections or disputes.
For labor-model advice, contact FLAT Law Firm — hotline 0988424851.
References
- Labor Code No. 45/2019/QH14 (effective 01/01/2021) — Articles 52–57 on labor sub-leasing.
- Investment Law 2025 — conditional business lines list (sub-leasing removed from 01/3/2026).
