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Trang ChủSharing of expertiseLabourQuestion 59: If a parent company abroad has a representative office and...

Question 59: If a parent company abroad has a representative office and a subsidiary in Vietnam, and the same person is hired to be the head of the representative office and the director of the subsidiary at the same time, can it pay the salary 0 dong for the title of the head of the representative office during the time the procedure for closing the representative office is being conducted?

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Pursuant to Decree 07/2016/NĐ-CP of the Government providing for the operations of representative offices and branches of foreign companies in Vietnam, the head of a representative office cannot be the legal representative of an economic organisation established under the law of Vietnam[1]. Therefore, if a person is currently the head of a representative office, and then appointed the director of a foreign-invested company in Vietnam which is considered a legal entity as well as an economic organisation of Vietnam, and this person is also the legal representative of that company, then this appointment is not in accordance with law. Legally, only when the head of a representative office is appointed the director but not the legal representative of a Vietnamese company, will the appointment of one person to be concurrently the representative office head and the company director be considered lawful.

Supposing that the appointment of one person to be concurrently the representative office head and the director of a Vietnamese enterprise is consistent with Decree 07/2016/NĐ-CP as analysed above, the issues about the benefits for the office head and the company director must be considered separately.

Article 90 of the Labor Code prescribes that Employers are obliged to pay Employees to do the jobs agreed upon by the parties. The issue is that this person concurrently holds two different positions, so from the perspective of labour law, the representative office head will enjoy the salary appropriate for this position until the procedure for closing the representative office is done completely, and they will also receive the salary for the position of the director of a Vietnamese enterprise.

If it is stated in writing that the salary for the head of the representative office is 0 dong during the time the procedure for closing the representative office is being conducted, this may be questioned by the local labour management agency or the Department of Industry and Trade (the state authority managing the operations of representative offices) and they may think that this is against the principle of labour law because the office head is still working in this position despite that this time is short or long. Accordingly, the representative office may be subject to an administrative fine of up to VND20 million, and forced to pay salaries along with their interests to the head of the representative office at the highest interest rate of demand deposits announced by state commercial banks at the time the fine is imposed[2].

So, to avoid the mentioned risks, Employers should ensure that the representative office head is paid during the time they are still holding this position. However, to reduce costs for the representative office during the time the closing procedure is conducted, Employers may negotiate with the representative office head to reduce the salary based on the fact that the office will soon stop its operations and the amount of time that this person actually spends working for the office.

[1]Article 33.6(d) Decree 07/2016/NĐ-CP dated 25/01/2016

[2]Article 3.1, 13.3 (a) and 13.7 Decree 95/2013/NĐ-CP dated 22/08/2013 as amended and supplemented by Decree 88/2015/NĐ-CP dated 07/10/2015

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