Compulsory Social Insurance For Foreign Employees In Vietnam

Foreign employees in Vietnam will soon be subject to Social Insurance - employers need to prepare for the changes…

From 1 December 2018, new rules will take effect extending compulsory Social Insurance contributions to foreign employees in Vietnam. The government officially extended the Law on Social Insurance 2014 (clause 2, article 2) to foreign employees on 1 January 2018, but thanks to the complexity of the new regulation, and a lack of official guidance, its implementation was delayed.

Growing Foreign Worker Population

Vice chairman of the National Assembly’s Social Affairs Committee, Bùi Sỹ Lợi, has stated that the new rules for compulsory Social Insurance will help ensure fairness between native Vietnamese workers and foreign workers - who are entering the country in increasing numbers. Statistics from the Ministry of Labour, Invalids and Social Affairs (MoLISA) revealed that the number of foreign employees in Vietnam reached 83,046 in 2018 - up from 63,557 in 2011.

Clarification of New Regulations

On the 15 October 2018, the Vietnamese government issued Decree 143/2018/NC-CP, which provided clarity on how the Law on Social Insurance (and the Law on Occupational Safety) should be applied to foreign employees.

The key points of the decree are as follows:

Who does the law apply to?

The extension of SI contributions will apply to foreign employees working under the following criteria:

  • Foreign employees who have obtained work permits, practicing certificates, or practicing licenses issued in Vietnam.
  • Foreign employees who have indefinite-term employment contracts - or employment contracts with Vietnamese employers which are valid for at least one year.
  • Foreign employees who are working under intra-company transfer, or who have reached retirement age under the Labor Code.

What are SI rates for foreign employees?

All employers must participate in compulsory Social Insurance if they hire employees from 1 December 2018. SI contributions are made at the following rates:

SI Fund

Employer Contribution

Employee Contribution

Sickness and parental

3%

0

Occupational accident and disease benefit

0.5%

0

Retirement and death insurance benefit (from 1 January 2022)

14%

8%

Employers are not required to contribute to SI for employees who do not work or receive wages for more than 14 days each month.

What does Social Insurance entitle foreign employees to?

Foreign employees who contribute to the compulsory scheme will be entitled to SI for:

  • Sickness
  • Maternity
  • Workplace accidents
  • Occupational diseases
  • Retirement
  • Survivor benefits

Are foreign employees entitled to a one-off SI benefit?

Under certain circumstances, foreign employees are eligible to receive a one-time SI benefit payout. Those circumstances apply to foreign employees who:

  • Have satisfied their retirement pension funding requirements but who no longer live in Vietnam
  • Have reached retirement age with a premium payment period of under 20 years
  • Have practice licences and work permits which are expired and not extended
  • Have terminal illnesses

When beneficiaries of SI payments die, relatives who do not live in Vietnam may be eligible for a one-off death benefit. Similarly, beneficiaries may authorise another person to receive their SI payments, or one-off payment. 

Mutual Benefits for Vietnamese Expats

With foreign employee populations now entitled to social insurance benefits, Vietnam’s government hope that Vietnamese workers in other countries will also find their opportunities to access social insurance schemes expanded. Those benefits will be welcomed by Vietnam’s mobile and expat employee populations which, according to MoLISA statistics, reached 479,600 between 2011-2015.

For more information on the Vietnamese tax and social insurance system, explore activpayroll’s Global Insight Guide to Vietnam.