Paying a remote employee in Vietnam, Indonesia, or the Philippines without a local bank account is entirely possible, but only if you choose the right legal structure from the start. Your three main options are: using an Employer of Record (EOR) to handle all local payroll and compliance on your behalf, hiring the worker as an independent contractor (where regulations permit), or setting up a local legal entity yourself. Most companies hiring their first few employees in Southeast Asia use an EOR, since it removes the need for a local bank account, local entity, or in-country payroll expertise entirely.
TL;DR
- You cannot simply wire USD or EUR directly to an employee’s personal account and call it compliant payroll in Vietnam, Indonesia, or the Philippines.
- An Employer of Record legally employs workers on your behalf, handles local payroll in local currency, and manages statutory contributions.
- Independent contractor arrangements are a faster and cheaper option, but they carry misclassification risk if the working relationship resembles full-time employment.
- Employer of record costs vary by market and provider, but typically include a flat monthly service fee on top of gross salary and mandatory contributions.
- Setting up a local entity gives you full control but is the slowest and most expensive path for early-stage hiring.
About the Author: High Five is a platform that helps founders and operators identify and hire top talent across Southeast Asia, with deep working knowledge of employment compliance, EOR structures, and payroll frameworks across Vietnam, Indonesia, Malaysia, the Philippines, and Singapore.
Why Can’t You Just Pay Overseas Employees Directly From Your Home Country?
Direct international bank transfers to employees may feel simple, but they are not legally sufficient in most Southeast Asian jurisdictions. The core issue is that employment creates obligations beyond payment: statutory contributions, tax withholding, social insurance, and written employment contracts governed by local labor law.
In Vietnam, wages must be paid in Vietnamese Dong (VND) through a licensed local bank [recruitgo.com]. In Indonesia and the Philippines, similar rules apply under their respective labor codes. If you pay in USD to a foreign account and something goes wrong, such as a dispute or a tax audit, you have no legal standing as an employer in that country, and the worker may have no access to their statutory benefits.
The three compliant pathways are:
| Pathway | Best For | Speed to Hire | Monthly Cost |
|---|---|---|---|
| Employer of Record | Full-time employees requiring benefits | Fast (days to weeks) | Service fee + contributions |
| Independent Contractor | Project-based or consultancy work | Fastest | Contractor’s invoice rate |
| Local Legal Entity | Large teams, long-term presence | Slowest (months) | High setup + ongoing overhead |
What Is an Employer of Record, and How Does It Work in Vietnam?
An Employer of Record (EOR) is a local legal entity that formally employs workers on behalf of a foreign company, enabling you to hire compliantly in-country without registering a business yourself. The EOR handles the employment contract, runs payroll in local currency, withholds income tax, pays statutory social contributions, and ensures compliance with local labor law. You retain day-to-day management of the worker; the EOR handles the legal employment relationship.
Building on this structure, the appeal for foreign companies is straightforward: you get a compliant employee in-country without local business registration. For Vietnam specifically, this matters because the 2019 Labour Code imposes strict requirements on written contracts, mandatory insurance contributions, and termination procedures [remotepeople.com]. A reliable employer of record vietnam service absorbs all of that complexity.
Key statutory employer contributions in Vietnam include:
- Social Insurance: 17.5% (employer portion)
- Health Insurance: 3% (employer portion)
- Unemployment Insurance: 1% (employer portion)
- Trade Union Fund: 2%
These rates are applied to the social insurance salary base, which is subject to statutory caps. Social Insurance, Health Insurance, and the Trade Union Fund are capped at 20 times the statutory base salary, while Unemployment Insurance is capped at 20 times the regional minimum wage. Certain allowances and bonuses are excluded from this calculation base [skuad.io].
These contributions are on top of the employee’s gross salary, and they apply regardless of whether the employer is foreign or domestic [skuad.io].
What Are Typical Employer of Record Costs?
Employer of record costs have two components: the mandatory statutory contributions outlined above, and the EOR provider’s service fee. Understanding both prevents budget surprises.
The mandatory contributions are non-negotiable and set by law in each country. The provider’s service fee varies. Most EOR providers charge either a flat monthly fee per employee or a percentage of gross salary. Flat fees typically range from a few hundred to several hundred USD per employee per month, depending on the market and level of service. Percentage-based models often add a meaningful premium on top of gross payroll.
What affects the total cost:
- Country: Vietnam, Indonesia, and the Philippines each have different contribution structures and labor law complexity.
- Salary level: Percentage-based fees scale with salary, so flat-fee models often become more cost-effective for higher earners.
- Benefits required: Mandatory benefits differ; additional supplementary benefits (private health cover, allowances) add to the total.
- Provider: Established global providers tend to charge more than regional specialists, though regional specialists often have deeper local knowledge.
A practical way to think about it: the total cost of employing someone through an EOR is typically the employee’s gross salary, plus statutory employer contributions, plus the EOR service fee. Budget accordingly, and always ask providers to itemize all three components separately.
When Does an Independent Contractor Arrangement Make More Sense?
Stepping back from the EOR model, a separate and frequently misunderstood option is engaging workers as independent contractors. In Vietnam, Indonesia, and the Philippines, you can legally pay a contractor through international wire transfer, PayPal, Wise, or other cross-border payment services without a local bank account [rippling.com].
Contractors invoice you directly, manage their own taxes, and are not entitled to statutory employment benefits. This is genuinely simpler and cheaper for short-term or project-based work.
The risk is misclassification. If a contractor:
- Works exclusively for you
- Follows your working hours and processes
- Uses your equipment
- Has been engaged continuously for an extended period
…then local authorities in Vietnam, Indonesia, or the Philippines may reclassify them as an employee, exposing you to back-payment of contributions, penalties, and potential legal liability [vietnam.incorp.asia]. Vietnam’s labor laws, in particular, look at the substance of the relationship rather than just the label on the contract [remote.com].
A contractor arrangement is appropriate for genuine freelancers, consultants, or project-based specialists. For someone doing full-time, ongoing work embedded in your team, an EOR is the safer and more defensible choice [nativeteams.com].
Frequently Asked Questions
Can I pay a Vietnamese employee in USD? No. Vietnamese labor law requires wages to be paid in VND through a licensed local bank. You can peg salary to a USD amount, but disbursement must be in local currency [recruitgo.com].
Do I need a local bank account to use an EOR? No. The EOR holds the local bank account and processes payroll locally. You pay the EOR in your own currency, and they handle the rest.
What is the main risk of misclassifying an employee as a contractor? Back-payment of all statutory contributions that should have been paid, plus penalties and interest. In serious cases, personal liability for company directors.
How quickly can an EOR hire an employee in Vietnam or the Philippines? Most established EOR providers can onboard a new employee within one to three weeks, depending on document readiness and contract negotiation.
Is an EOR the same as a staffing agency? No. An EOR is a legal employer of record for compliance purposes. The working relationship and day-to-day management remain with you as the client company.
Can I use an EOR for just one employee? Yes. EORs are particularly well-suited for companies hiring one to ten employees in a new market, where setting up a local entity would be disproportionately expensive.
What happens if I want to terminate an employee hired through an EOR? The EOR manages the termination process in compliance with local labor law, including notice periods and any statutory severance obligations.
About High Five
High Five is a platform that helps founders, operators, and growing teams identify and hire top talent across Southeast Asia on a flat monthly subscription, with no success fees and no placement fees. The platform combines AI-assisted candidate matching with human expert review to surface qualified candidates across Vietnam, Indonesia, the Philippines, Malaysia, and Singapore. Beyond finding the right people, High Five publishes practical guides on employment compliance, EOR structures, payroll, and remote team management, helping clients navigate the full hiring lifecycle from first search to compliant onboarding.
Ready to hire compliantly in Southeast Asia without the overhead? Learn more at https://highfive.global/.
