As you may already be aware of, there are several important changes in the ways the compulsory insurances are applied and calculated as from 2018. Although they are not really new regulations, mostly based on the Social Insurance Law in 2014, this coming year of 2018 shall be a key milestone where new rules take into effect. We would like to highlight major points as follows:

Social Insurance applicable for foreign employees

It has been provided under the Social Insurance Law 2014 that foreign employees can participate in the Vietnam’s Social Insurance from 2018. It has, however, been unclear whether this is compulsory or voluntary until the recent Official Letter No. 1734/BHXH-QLT issued by Ho Chi Minh Social Insurance Department dated 16 August 2017, according to which it is now guided that the contribution to Social Insurance in Vietnam for foreign employees shall be compulsory. An official Decree on Social Insurance contribution of foreign employees is expected to be released soon (the most recent draft is in mid-July) to confirm this point.

According to the draft Decree, the contribution rates would be 8% by the employee and 17.5% by the employer (on the salary as capped); by participating in Social Insurance contribution, the foreign employees should be entitled to same benefits as a Vietnamese, e.g. sickness allowance, maternity allowance, labour accident and occupational disease allowance, survivorship allowance, pension (considered the conditions are met); one-time claim for pension shall be available for foreign employees in case of leaving Vietnam.

As a side note: this Social Insurance contribution for foreign employees should be implied that the employer shall be required to pay trade union fee for foreign employees as well (employer’s contribution equaling to 2% of Social Insurance salary funds).

Type of labour contracts to be contributed Social Insurance

Employees who have labour contracts from 01 month (except for probation contract as confirmed by Official Letter 1734) shall be required to participate in Social Insurance as from 01 January 2018. The threshold for Health Insurance and Unemployment Insurance contribution remains unchanged (i.e. employees with labour contracts from 03 months).

Base to calculate Social Insurance, Health Insurance and Unemployment Insurance (“SHUI”)

From 01 January 2018, the salary for contribution of SHUI shall also include other extra payments (apart from base salary and allowances which have already been a base to calculate SHUI). Such extra payments are broadly defined as payments to compensate for working process, working result of the employee (even if the amount of payment is not stated in labour contract, and may be paid regularly or irregularly). Of note, the welfare and benefits such as bonus paid in line with the Labour Code, innovative incentive, mid-shift meal allowance, and support for petrol, telephone, transportation, and housing for the employees etc. shall be stated separately in the labour contract and accordingly not included as basis to calculate SHUI contribution. We expect to have further guidance on this in the future by the Social Insurance Department.

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Mazars Vietnam - Tax Alert (VIE) - Social Insurance Law from 2018
Mazars Vietnam - Tax Alert (VIE) - Social Insurance Law from 2018
Mazars Vietnam - Tax Alert (ENG) - Social Insurance Law from 2018
Mazars Vietnam - Tax Alert (ENG) - Social Insurance Law from 2018