The 2014 Law on Social Insurance adds three more groups of subjects to be covered by compulsory social insurance. These are people working under labour contracts of a definite term between one full month and under three months; part-time communal cadres; and foreigners working in Vietnam and possessing work permits, practice certificates, or licenses issued by competent Vietnamese authorities.
From 2018, foreigners working in Vietnam are required to participate in compulsory social insurance, and pay insurance premiums based on their wage, allowances and other additional amounts stated in their labour contract.
Specifically, the foreign employee will have to pay 8% of his/her monthly wage while his/her employer will have to pay 18% of the employee’s full pensionable wage, making a total contribution of 26% to the social insurance fund.
In accordance with the Law on Social Insurance, which went into force early last year but will not cover foreign nationals working in Vietnam until early 2018, foreign workers in Vietnam with a work permit, or a practice certificate or license will have to contribute insurance.
In practice, a certain number of foreign nationals who come to Vietnam for an assignment still maintain social security in their home countries or enter a voluntary healthcare program. For such cases, statutory social and health insurance will result in additional costs for employees and their employers.
The enforcement of health insurance and social insurance for foreign nationals without signing Totalization agreements with any countries would lead to double taxation of income with respect to social security taxes. Totalization agreements are meant to protect the benefit rights of those working between two or more countries, and do away with situations where workers pay social security taxes to two countries on the same income.
The Law on Social Insurance, which the National Assembly passed on November 20, 2014, broadens the definition of the salary used as the basis for social insurance contribution (*). Many FDI in Viet Nam have expressed concerns about changes in legislation.
Wages and allowances are used as the basis for social insurance in the period from January 1, 2016 to December 31, 2017. However, from early next year onwards, the basis for social insurance contribution will be broadened to include salaries, allowances and other supplementary amounts, making the burden of labor cost heavier (*).
(*) In order to update, manage and optimize the labor cost, many FDI companies have been using outsourcing service for payrolls and other procedures related to expats from consultant firms. The consultant can support to verify situation – design solutions and optimal tools in tailored manner…
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