Importance of Selecting a Chief RO in a Representative Office

Selecting and hiring the Chief RO of a representative in Vietnam is important.

As you may have seen in some of my other posts,  I (as the owner of Matraex, Inc) am not allowed by Vietnam statute to be the Chief RO of the entity in Vietnam,  however I must have a Chief RO

Some of the factors to consider.

• The Chief RO,  must be present to pickup the seal.  When they pick it up,  they must sign the official papers and registers to start the entity.  As they are signing they actually must use the stamp as well to stamp next to their signature on the official records at the Police headquarters.
• The Chief RO must make a decent wage.  When I wanted to add the responsibility of being the Chief RO to my wife's monthly responsibilities,  the added duties were not much.   Review the books monthly,   perform any signatures as directed by the company through corporate resolution.  These requirements would be minimal and would require at most 5 to 10 hours per month.  So I suggested that I would increase her yearly wage by $5000 for the added responsibilities.  It turned out that our Vietnam attorney thought that idea would not pass scrutiny by the Hanoi Authority.   They suggested an income of $2000 / month and they indicated that this would be one of the lowest incomes of any of the Representative Office companies already in Hanoi.
• The Chief RO must be the one to sign official contracts in Vietnam.  As a Representative Office in Hanoi,  our company will not be allowed to make agreements between the Hanoi entity and another Vietnam entity,  the Vietname Representative Office is not recognized as its own entity.   Instead Matraex must make the agreement between Matraex headquarters and any other company in Hanoi.  However,  in at least one case we found that a Vietnamese company was only willing to accept a signature from the Chief RO on a contract.  It appears that this is because the Chief RO is the only 'localized' signature that is allowed to represent the company in vietnam.  This makes sense because we had to legalize the Chief RO's passport and submit it with the application.  Even though I am the president of the company they are making an agreement with.  the only locally recognized agent,  with a legal local signature,  is the Chief RO. 
• Because of the last point,  the Chief RO of the company holds all of the power of the company; it will likely be worth while to investigate a way that I might be able to register myself (the president) as a locally approved agent of the company.  However in the mean time,  you must  have ultimate trust in the Chief RO.
• The way that I decided to get my Representative Office started in Hanoi,  coincided with an education trip to Hanoi,  so my Chief RO was a trusted school class mate.  However this meant that I had to file a change to the Chief RO soon after to the long term RO.  This meant that while I was in Hanoi the first time,  I had to either 
• prepare my interim Chief RO to sign agreements as the temporary stand in or
• wait until the Change of Chief RO was processed.
• Changing the Chief RO does not take cost any money with the Hanoi Authority and the form to do it is online here.  
• http://english.hanoi.gov.vn/documents/10180/30802/845.doc?version=1.0
• The form allows for many changes however it indicates some complexities for changing the Chief RO, which imply some items which need consideration when selecting a Chief RO.
• The amount of PIT (Personal Income Tax) that was paid by the previous Chief RO.  The form also requires a certification that the PIT was paid.
• A reason that the Chief RO is being changed is required - so basically the decision to change the Chief RO will be scrutinized and it should not be taken lightly.
• The company office location change form is included with the template to change the Chief RO,  which indicates that it may be somewhat common for the ChiefRO and the address to change at the same time
• When changing the Chief RO,  I have to certify that the previous person filed and paid all PIT. This issue somewhat explains why it was important to make a larger salary for the Chief RO.   Because this may allow the government to collect a higher tax on the salary.  I am not positive whether there will be a requirement for the payment to the Chief RO to be made subject to Vietnam payroll taxes and roles.  However because of this,  an important factor to consider when selecting a Chief RO,  is whether to select a local,  or an ExPat.  In the case that an ExPat is selected,  then a whole slew of tax relates issues becomes an issue.
• Is the Chief RO allowed to collect the income in the US since the though the services are all performed from the US?
• If the taxes must be paid to the Hanoi Authority, are taxes paid in Vietnam retaxable in the US?
• How does the company account for and report salary paid to the same individual using two different methods and tax rates.
• Each of these issues potentially creates complexity for the company that selecting a local may not.

Making a job offer - Pay - Employees request a formal offer and need between 30 to 45 days

Employment is a much more formally contracted affair in Vietnam than it is in the USA.

Most professional positions require a contract,  which addresses some very specific points.  If you are hiring an employee away from an existing job,   their existing contract requires either 45 days (if they were hired on a PERManent position) or 30 days if they were hired on a fixed length contract.

Employees seem to want an official job offer which details the terms of a new position before they are willing to give notice (this seems reasonable even for a US employee) however it seems that a formal job offer may have some 'teeth' behind it. Once a job offer is made,  an formal employment contract must be filled out and address:

• Length of Contract
• PERManent contract will require some severe errors by the employee to fire.
• Fixed Length will also require some severe errors to fire,  but will work well for a startup which is unsure of the duration while getting things moving
• Pay Rate - The pay rate and frequency of pay should be documented
• Bonuses -  a 13th month bonus is customary (and possibly mandatory)
• Pension - a pension fund should be calculated at the rate of 1 month salary per year
• Raises - the contract should dictate when reviews and raises are considered (i am not positive if this is required, or just happens to be customary in all of the ones I have seen)
• Job Description - The job description shsould be spelled out closely.  If you have any problems with the employee and need to write them up or let them go,  the Government (or union) authority will use this Job Description in evaluating whether the person was doing their job.

When calculating the Pay Rate,  an interesting conversation has come up that I didn't expect.  It appears that there is term called Gross and Net pay.   Gross is the amount that the employee is paid,  prior to their Government Deductions.  Net is the amount they receive after their deductions.

The interesting thing is that,  when I posted some job descriptions on websites and put a salary / pay rate.  I did not specify whether it was Gross or Net (I did not notice anyone else doing it either), however I received a request from one candidate that when I make a job offer,  that I make the rate a 'Net' rate.  Basically the candidate was just negotiating with me,  which is completely acceptable,  however with out a little research I did not understand what he was really saying.

Here are the basics of it

• An employer / employee contract establishs the Gross Pay Rate
• An employer pays an additional 22% in SMUI Taxes on top of that (Social, Medical and Unemployment Insurance)
• The employee has about 10.5% deducted from their Gross Pay Rate for their portion of SMUI Taxes.  This is the Net Rate (100-10.5 = 89.5% of Gross)
• The employee then has to pay PIT (personal income tax) which is calculated based on a formula that I have not figured out yet.  Most likely it is very complex like the US IRS calc.  I know that it does have some minimum level of income,  possibly a head of household and individual dependendant deductions

Representative office in Hanoi - Beginning Operations

After filing and receiving your seal in Hanoi,  you have 45 days to begin operations.
This is a formal process which requires filling out some documents and filing them with the Departments of Industry and Trade.

Vietname / Hanoi maintains a website for this process,  which does not have a lot of clear instruction.  However they have a template form,  which helps to identify a couple of important steps that need to be followed

• You must submit a form describing the details of beginning operations.  The form has the name of the person doing business,  the bank account,  the date you started,etc
• There are additional portions of the form which can help you to:
• change the head of the Representative Office
• register employees
• change the address of the headquarters

When I started to discuss the need to make several of these changes,  my attorney was quoting $200 for each form,  but it turns out that they can all really be done at the same time,  almost in the same form.

I will be looking for an attorney,  that will be able to review my work in filling out the forms , confirm that they are filled correctly,  receive them by fedEx and then submit them to the authority for me and scan the results to me.

Employee Interviews - Hilton Garden Inn

I received several job applications from the different websites that I submitted jobs postings too.    most of the applicants were quick to reply,   I requested an 'introduction video' so I could evaluate their interest and English Communication skills.
Once I found the people I wanted to interview,  I tentatively scheduled the day for interviews and identified the morning or afternoon.  It seems that more notice is better for employees that already have a job.  
When I showed up in Hanoi at the Garden Inn Hilton,  I evaluated the facilities that they could offer for having an interview.    The only options were some nice offices which required that they had to walk through the eating area,  or a $400 for the afternoon.   I opted for the offices in the back of the room since they were offered complimentary.

The space was nice,  and the staff had water, pens and paper.   It was nice that I had a female helping me interview with the room being tucked into the back of the hotel as I am sure it helped he be more at ease.  When answering questions,  she often felt more comfortable making eye contact with my female associate.

The interviews went very well in that all applicants spoke english well enough that I was could understand them,   they all had (what sounded to me like) a similar Vietnamese accent,  and I was able to understand better after conversing with Vietnamese more (I describe this,  because I imagine an interview will go better,  if the interviewer gains more experience conversing with Vietnamese first)

Driving in Hanoi.   Driving and Traffic are horrendous and I dont know how I would ever be on time.  In one case (one of my best applicants) was 15 minutes late.  I know that she had to take the afternoon off of her normal job to come to the interview,  however she did not mention it,  and I was unsure of how it would flavor the interview if I were to bring it up at the beginning of the interview.  The position I was asking about was for the office manager,  so I asked her about how she would deal with a tardy employee and she said that she would follow the procedure and policy,  which would most likely be to write up the employee.  So it seemed she feels punctuality is important but she was just unable to be punctual.  A way that I should have / could have set an expectation of how important it would be to be right on time.

Another issue that could have been related to traffic,  was that several employees showed up early (one employee 20 minutes early)  In these cases,  the front desk at the hilton,  graciously asked them to wait (the hotel has a comfortable waiting room) and then even showed them up to restaurant floor when needed.

Overall,  the interview location worked out,  however if I had a better understanding of the city and possibly what executive suites were available.  I likely would have tried to find a space such as a more executive board room that may have had a more professional entrance and a bit warmer office.



Some notes about Vietnamese culture,   they are very focused on team and process.  It seems reasonable that if one individual steps of line,   They should bet back into line if they are simply reminded about how it affects the team.