Vietnamese law provides detailed regulation on the social security system to better safeguard the rights and interests of both Vietnamese and foreign employees. In Vietnam there are three main insurances that make up the social security system for employees in the country: social insurance, health insurance and unemployment insurance. In the following article we will provide an overview of such insurances with a special focus on the implications for foreign employees.
Social Insurance (SI)
Both Vietnamese and foreign employees must contribute to compulsory social insurance (SI), which includes sickness, maternity, occupational accidents, disease, retirement, and death insurance benefits.
According to the Decree 143/2018/ND-CP, all foreign workers are subject to the compulsory SI program if they meet all of the following requirements:
- Have obtained a work permit, a practising certificate or a practicing license issued in Vietnam.
- Employed under an indefinite-term employment contract or an employment contract valid for at least one year with employers in Vietnam.
However, employees are exempt from joining the SI scheme when:
- They are an intra-company transferee, as reviewed in clause 1 Article 3 of the Government's Decree 11/2016/ND-CP dated February 3rd, 2016.
- They have reached the retirement age which is 60 years 3 months for men and 55 years 4 months for women as stated in the Vietnamese Labor Code 45/2019/QH14
For foreign employees, the total contribution rate to be paid for the SI is 25.5%, which is divided between both the employee and the employer as follows:
- The employee must make a SI contribution accounting for 8% of his/her monthly pay to the retirement and death benefit fund.
- The employer must contribute in proportion to the employee’s payroll in the SI payment monthly accounting for 17.5%, which covers the sickness and parental insurance benefit fund, the occupational accident and disease benefit fund, and the retirement and death insurance benefit fund.
Foreign workers are eligible to request a one-off payment on the contributed amount from the social insurance agency under the following conditions:
- He/She achieves the required retirement age but has not yet incurred 20 years of SI contributions.
- He/She is currently afflicted with a deadly disease, such as cancer, polio, cirrhosis with ascites, severe TB, HIV infection moved to the phase of AIDS disease, or any other condition regulated by the Ministry of Health.
- His/Her employment contract is terminated, or his/her labor permit, practicing certificate, or practicing license has not been permitted for renewal.
As stated in Decree 143/2018/ND-CP, the one-off payment of the SI allowance can be requested within 10 days counting to the date of termination of the labor contract or the work permit/practice certificate/practice license. In addition, the employee must submit a dossier made under the regulations of the Vietnam Social Security, a Government-attached agency. Within 5 working days after receiving a complete dossier as prescribed, the Vietnam Social Security shall pay the SI allowance to the employee.
Health Insurance (HI)
Health insurance is mandatory in the case of employees who work with permanent employment contracts or with fixed-term employment contracts lasting longer than 3 months, as well as business executives, non-state public service providers, executives or directors of cooperatives who are entitled to wages or salaries, and public officials. The compulsory HI rate is 4.5% of the monthly salary, split between the employee and the employer at 1.5% and 3% respectively. This rate applies to both Vietnamese and foreign employees. Even if it is not required, it is highly advised to enrol in a voluntary health insurance plan to reduce the impact of unforeseen medical costs in case of illness or accident.
Unemployment Insurance (UI)
The unemployment insurance scheme aims to offset part of a worker's income when they become unemployed, receive vocational training, retain employment, or seek employment, on contributions to the unemployment fund. For Vietnamese employees, the cost of the insurance is contributed by both the employer and the employee. The amount they must pay is determined as follows:
- The employee pays an amount equal to 1% of the monthly salary each month
- The employer pays an amount equal to 1% of the monthly salary of employees participating in the unemployment insurance system monthly.
The monthly unemployment benefit is equal to 60% of the average monthly salary paid by UI in the 6 consecutive months before unemployment (but must not exceed 5 times the base salary or regional minimum wage).
According to the Decree 28/2015/ND-CP, there are 4 main steps that the employee must take in order to enjoy the UI insurance:
1. Directly submit an application for unemployment insurance benefits to the employment service center in the locality where he/she wants to receive the UI benefits within 3 months of the date the labor contract was terminated.
2. Visit the employment service center on the day noted on the appointment card to receive the decision on unemployment benefits.
3. Vietnam Social Security shall pay the employee's first month's unemployment benefit within 5 working days from the date of receipt of the decision on unemployment allowance.
4. Visit the employment service center each month to submit a legally required job search announcement.
Finally, it should be noticed that both foreign and Vietnamese companies are not required to cover the cost of foreign employee’s unemployment insurance.
To recap, the contribution rates of the social insurances are summed up in the following table:
In conclusion, as a foreign company in Vietnam, it’s very important to stay tuned to the latest and most updated news by the Government on the Social Security System and other labor-related matters under the advice and support of professionals with a presence in the country, to ensure one’s compliance with the local regulation and safeguard the rights of one’s employees in the most efficient and time-saving way.