Under Article 54, Labor Code, enterprises that sublease laborers have to escrow an amount of money. So what is an escrow deposit and why do the enterprises have to escrow?

What is an escrow deposit?

According to the Civil Code 2015, an escrow deposit is when an obligor deposits an amount of money or assets that is blockaded by a credit institution to pay for the entitled party in case payments do not meet the due date.

In other words, an escrow deposit is a method to ensure the rights and benefits of the entitled party are fulfilled.

The assets to be escrowed must be:

• Money;
• Metalware;
• Gemstone;
• Valuable papers.

Escrow deposit of labor outsourcing enterprises

Enterprises’ labor sub-lease is for the following purposes:

• Temporary response to a sudden increase in labor demand;
• Temporary replacement for official employees during maternity leave, leave due to work accidents, occupational diseases, or performing civic duties;
• Demand for highly qualified workers…

To ensure the rights of workers, an escrow deposit is required for the labor outsourcing enterprise. This deposit is used as:

• Payment of salaries, allowances, and insurances for employees;
• Compensation for employees in case the outsourcing enterprise violates the labor contract or causes damage to the employee by failing to ensure the legitimate rights and interests of the employee.

Escrow deposit amount

Pursuant to Article 21, Decree 145/2020/ND-CP. (Detailing and guiding the implementation of a number of articles of the Labor Code on labor conditions and labor relations), the labor outsourcing enterprise must deposit 2 billion VND. This deposit must be made in accordance with the law and the bank’s provisions.

Escrow deposit withdrawal

Escrow deposit withdrawal must be approved by the Chairman of the Provincial People’s Committee in the following 5 cases:

1. The labor outsourcing enterprise is facing temporary difficulties and cannot afford to pay the employees after 30 days from the due date of payment.
2. The labor outsourcing enterprise is facing temporary difficulties and cannot afford to compensate employees after 60 days from the due date of compensation.
3. Enterprises are not licensed to outsource labor.
4. The enterprise’s license is revoked or its license is not renewed.
5. The enterprise has made an escrow deposit at another commercial bank.

In addition, the Labor – Invalids and Social Affairs Department is responsible for checking, verifying and requesting the enterprises to report the payment situation to the employees and supervise such payment.

Read more about: Investment topic (Investment forms; getting IRC…) and topic on enterprises… on website inalaw.net.

To get more details about the procedure to apply for a Labor Outsourcing Permit, please contact INA law firm’s office: Phone: Lawyer Nguyen Trung Nam – 0979.05.05.35. Email: info@inalaw.net.