Ms. Nguyen Viet Nga (in Bac Ninh Provinces) would like to ask: Are there any documents regulating a package contract? Which cases can the employment contract apply? What are the regulations on personal income tax payment for individuals who receive employment contracts from the company?

Lawyer Tran Van Toan, the Khanh Hung Lawyer’s  Office - Hanoi Bar Association answers the question Ms. Nga asked as follows:

A package contract (also called a contract hires work package) is an agreement between the two parties. Accordingly, the contracting party is obliged to complete a certain task at the request of the contracting party and, upon completion, it must hand over to the contracting party the results of such work. The contracting party receives the work results and is obliged to pay to the contracted contractual payee.

There are two cases of employment contract application, including:

- Package contract: The contractparty assigns all expenses to the contractor, including materials costs; labor costs; Labor tool costs are involved to complete the job.

The contracting party shall pay to the contractor a sum of money, including: expenses for raw materials and materials; labor costs; labor tool expenses, profits arising from the contracting.

- Contracting of workers: The contractor must self-secure labor tools to complete the job. The contractual employer pays the recipient a labor compensation, which includes the depreciation of the labor tools.

The  Labor Code 2012does not specify the type of employment contract. Comparing the nature and characteristics of job contract with labor contract can realize:

An employment contract is a contract whereby the employee, who takes on the role of the employee, only needs to use his labor to complete all material factors for the performance of the work assigned by the employer.

A contract of employment is a contract whereby the employee, in addition to the use of human labor, must also procure labor equipment (for the case of labor contract) and expenses for raw materials and materials (in case of package contracts) to complete the contracting job.

The choice of application of a labor contract, or a contract of employment, must be based on the nature and characteristics of each type of contract.

In fact, there are a few businesses that pretend to enter into a contract of employment instead of signing a labor contract, in order to evade the obligation to pay social insurance, health insurance and unemployment insurance to employees. If fraudulent acts are discovered, penalties for administrative violations may be imposed due to violations of labor contract regulations under Article 5 of the Decree 95/2013 / ND-CP amended by Clause 4, Article 1 of Decree 88/2015 / ND-CP.

Regarding personal income tax, currently taxable income from wages, salaries and other remuneration-based amounts received from job contracts must comply with Article 11 of the Law on Personal Income Tax. In 2007, 2014 and the guidance in Article 11 of the Decree 65/2013 / ND-CP was amended by Clause 8, Article 2 of the Decree 12/2015 / ND-CP.

According to a lawyer, for the case of concluding a package contract (including contracting labor costs; costs of raw materials, materials; labor tool costs) in order to correctly determine taxable income from the wages that need to clearly define the labor cost (wages) in that contract.

Lawyer Tran Van Toan,

The Khanh Hung Lawyer’s Office - Hanoi Bar Association