On 15 October 2018, the Government issued Decree 143/2018, which details regulation on compulsory social insurance (Social Insurance) applicable to foreign employees under the Social Insurance Law 2014. Before the issuance of Decree 143/2018, the Social Insurance Law 2014 only provides that foreign employees would be “allowed” to participate in Vietnam’s Social Insurance from 1 January 2018. For a long time, this vague regulation has given rise to concern as to whether the Social Insurance contribution for foreign employees is compulsory or voluntary. Decree 143/2018 now officially confirms that this is compulsory. In particular,
The Social Insurance contribution will be imposed on both foreign employees and their employers if the foreign employees: (1) are working in Vietnam under indefinite-term labor contracts or definite-term labor contracts with duration of one year or more with Vietnam-based employers; and (2) have (i) a work permit (giấy phép lao động), or (ii) a practicing certificate (chứng chỉ hành nghề), or (iii) a practicing license (giấy phép hành nghề) issued by Vietnamese authorities;
By contribution to Social Insurance, which covers allowances for (i) illness, (ii) maternity, (iii) labor accidents and occupational diseases, (iv) retirement, and (v) survivorship, foreign employees could be entitled to same benefits as a Vietnamese employee;
The contribution rates imposed on both employers and foreign employees will be the same as those applicable to Vietnamese employees (i.e. currently 8% by employees and 17.5% by employers), based on foreign employees’ actual monthly salaries capped at 20 times the applicable general minimum wage (mức lương cơ sở) (approximately USD 1,200);
Under Decree 143/2018, foreign employees would be entitled to a lump-sum Social Insurance allowance upon request if they do not continue working in Vietnam; and
Decree 143/2018 will take effect on 1 December 2018. However, foreign employees will only pay for their Social Insurance contribution from 1 January 2022. Whereas Vietnam-based employers would enjoy a contribution rate of 3.5%, their contribution rate will increase to 17.5% from 1 January 2022.
In practice, many foreign employees in Vietnam may already participate in separate pension scheme and are unlikely to bother to claim benefits from the Vietnamese social insurance system. Therefore, paying Vietnamese compulsory insurance for foreign employees could increase the costs for their employers and employees.
This post is contributed by Nguyen Hoang Duong, a trainee at Venture North Law.