In an effort to optimize costs and increase flexibility, many businesses are using forms such as freelancers, piecework contracts, or service contracts. However, the line between a purely civil contract and a real employment relationship is very thin. Many businesses believe that simply not signing an employment contract is enough to avoid social insurance obligations.
In fact, this is one of the most common mistakes — and also the reason why many businesses are forced to pay back hundreds of millions of dong during inspections.
Once tax and social insurance data are interconnected, giving the contract a different name becomes irrelevant. The important thing isn't the name, but the... the nature of the actual relationship between businesses and employees.
And in many cases, contracts for freelance work, subcontracting, or services are still being "reversed" into employment contracts.
I. The name does not determine the essence.
As of July 1, 2025, the current legal framework has erected an extremely strict legal barrier to prevent the evasion of social insurance contributions by signing contracts under a different name than a labor contract:
- Base Clause 1, Article 13 Labor Code 2019It is affirmed that regardless of the name used by the two parties (Collaboration Contract, Subcontracting Contract, Service Contract, etc.), if the content indicates paid work and management, operation, and supervision by one party, it is automatically considered an employment contract.
- Base Clause 1, Article 2 Law on Social Insurance No. 41/2024/QH15The latest law has "closed" this loophole by stipulating that those subject to mandatory social insurance include cases where agreements are made under different names but are essentially labor relations, or part-time workers whose salaries are equal to or higher than the lowest base salary for social insurance contributions.
Therefore, if a business signs a contract with a collaborator or subcontracts work, or a service contract, and still... Manage working hours, require reports, provide work tools, and pay salaries regularly. Then that contract will be "decoded" as an employment contract. This means that the business Employees must fulfill all obligations regarding social insurance, health insurance, unemployment insurance, and other welfare benefits. as required by law.
Any deliberate act of evasion may be considered the crime of insurance evasion, with severe penalties under the new regulations of the Social Insurance Law No. 41/2024/QH15, which officially came into effect on July 1, 2025.
II. Identifying Labor Contracts and Civil Contracts (Contracts, Contracts, Services)
Businesses need to clearly identify the differences in order to apply the right type of cooperation:
|
Criteria |
Employment Contract | Civil contract |
| The nature of the relationship | Dependent: Workers are subject to the management, supervision, and control of the enterprise. | Equality: The two parties are independent partners, and their relationship is based on a civil/commercial agreement. |
| Tenants | Hiring "Labor": Pay employees for their time and effort. | Rent "Results": Pay for the final product or service completed. |
| Management & Operations | The company decided: What to do, how to do it, when to do it (time, rules). | Businesses are only interested in: When will it be finished and what will the quality be like? |
| Social insurance obligations | Obligatory: Social insurance, health insurance, and unemployment insurance contributions must be paid according to regulations (including any agreed-upon alternative name). | Optional: The service user is not obligated to pay insurance premiums for the service provider. |
|
Work tools |
Businesses are responsible for providing Computers, seating, infrastructure, etc. |
The service provider is 100% self-funded. Means and tools for performing the work. |
| Personal Income Tax |
Calculated according to the progressive tax rate schedule. (after deducting personal allowances). |
10% deduction (if payment is 2 million VND or more per transaction) or according to the invoice. |
|
Welfare regime |
Entitled to: Holiday bonuses, annual leave, maternity leave, sick leave, etc. |
Not entitled to benefits. All costs are included in the service price. |
III. Risks of retroactive collection from the interoperability of Tax and Insurance data
Entering 2026, with the synchronization of digital data, businesses that sign contracts under names other than labor contracts that do not accurately reflect their true nature will face significant risks regarding:
- Social insurance risks: The act of evading social insurance contributions may be subject to penalties as follows: Article 122 Social Insurance Law. Authorities will review personal income tax declarations to collect back taxes if they discover payments of income in the nature of monthly salaries.
- Personal Income Tax Risks: If considered an employment relationship, the tax calculation will follow the progressive tax rate instead of the 10% current rate. The business will be subject to retroactive collection of the difference and penalties for late payment.
IV. 03 signs that make businesses susceptible to fines
Through consulting and reviewing human resource systems for numerous businesses, Expertis has found that the risk often lies not in the use of flexible collaboration methods such as freelancers or outsourcing, but in the fact that the actual nature of the work does not align with the signed contract.
Typical signs include:
- Providing tools and equipment: Provide computers, company email, and name tags for collaborators.
- Administrative management: Require collaborators to attend regular briefings, take attendance, or sign confidentiality agreements just like regular employees.
- Stable payments: The piecework payment is made regularly on a fixed day of the month, similar to the company's payroll.
V. Security solutions for businesses
To leverage outsourced resources while ensuring legal compliance, businesses need to:
- Review all collaborator files, subcontracting agreements, and service contracts: Ensure the contract is a civil contract that focuses solely on describing the deliverables and the unit price for those deliverables.
- Establish independent workflows: Collaborators are not part of the organizational structure and are not under the direct supervision of permanent staff.
- Clear payment documentation: Separate service expenses from the payroll expense list and ensure you have an invoice (if the partner is a sole proprietorship/business) or appropriate tax deduction certificate.
In the digital age, flexibility is strength, but compliance is foundation. Confusion between different contract forms not only leads to financial losses but also impacts a business's reputation and sustainable growth. connect with Expertis To receive assistance in reviewing contract structures and advising on the most optimal solution in accordance with legal regulations.