Compulsory social insurance regime for expatriate workers in Vietnam
The regulations on compulsory social insurance for expatriate workers in Vietnam are still quite new as they are first regulated in the 2014 Law on Social Insurance, which takes effect from 01/01/2018. These new regulations were passed to attract workers from abroad to work in Vietnam and ensure fair treatment of expatriate workers in the context of Vietnam's deep participation in international agreements nowadays. What are the specific regulations, who shall participate in the compulsory social insurance and how much to pay for the compulsory social insurance? In the following article, DTD will answer these questions based on the current regulations.
1. Subjects participating in compulsory social insurance regime
Under previous Vietnamese law, a foreigner was not a subject of compulsory social insurance. Specifically, Clause 1, Article 2 of the 2006 Law on Social Insurance, which has expired, stipulates:
“Article 2. Subjects of application
1. Laborers entitled to participate in compulsory social insurance are Vietnamese citizens…”
However, the scope of subjects participating in compulsory social insurance has been expanded in the 2014 Law on Social Insurance. Accordingly, not only Vietnamese workers but also expatriate workers are subject to compulsory social insurance.
Clause 2, Article 2 of the 2014 Law on Social Insurance stipulates for the subjects applying this law as follows:
“Article 2. Subjects of application
2. Employees who are foreign citizens working in Vietnam with work permits or practice certificates or practice licences granted by competent Vietnamese agencies shall be covered by compulsory social insurance under the Government’s regulations.”
This clause is made clear in Clauses 1 and 2, Article 2 of Decree No. 143/2018/ND-CP Elaborating on Law on Social Insurance and Law on Occupational Safety and Hygiene regarding Compulsory Social Insurance for employees who are foreign nationals working in Vietnam. Specifically, according to Clause 1, Article 2 of Decree 143/2018/ND-CP, subjects participating in compulsory social insurance include:
“1. Employees who are foreign nationals working in Vietnam shall be required to participate in the compulsory social insurance program if they obtain work permits, practicing certificates, practicing licenses issued in Vietnam, indefinite-term employment contracts or employment contracts valid for at least one year with employers in Vietnam.”
In addition, Clause 2, Article 2 of this Decree also provides:
“2. Employees referred to in clause 1 of this Article shall be excluded from participation in the compulsory social insurance as provided herein if:
a) they are intra-company transferees as stipulated in clause 1 Article 3 of the Government’s Decree No. 11/2016/ND-CP dated February 3, 2016, providing details of the implementation of certain articles of the Labor Code regarding foreign employees working in Vietnam (Foreign workers internally reassigned in the company are the managers, chief executive officers, experts and technicians of a foreign enterprise which has established a commercial presence in Vietnam, are temporarily reassigned within the same enterprise to its commercial presence in Vietnam and have been employed by the foreign enterprise for at least 12 months);
b) they reach retirement age under clause 1 Article 187 of the Labor Code (reaching full 60 years of age, for males, and full 55 years of age, for females).”
Therefore, an expatriate worker working in Vietnam is the subject of compulsory social insurance when meeting 2 factors:
(i) Having work permits or practice certificates or practice licences granted by competent Vietnamese agencies, and
(ii) Signing indefinite-term employment contracts or employment contracts valid for at least one year with employers in Vietnam.
However, expatriate workers, even though meeting the above two conditions, but falling into one of the following two cases, are not required to participate in compulsory social insurance:
(i) Being the managers, chief executive officers, experts and technicians of a foreign enterprise which has established a commercial presence in Vietnam, who are temporarily reassigned within the same enterprise to its commercial presence in Vietnam and have been employed by the foreign enterprise for at least 12 months;
(ii) Workers reaching retirement age.
2. Compulsory social insurance premium for expatriate workers in Vietnam
Compulsory social insurance is an obligation for both expatriate workers and their employers. This provision is stipulated in Clause 2, Article 3 of the Law on Social Insurance 2014:
“Article 3. Interpretation of terms
2. Compulsory social insurance means a form of social insurance organized by the State in which employees and employers are required to participate.”
This obligation is clarified to each subject of compulsory social insurance as follows:
* Compulsory social insurance contributions of employees:
Clause 1, Article 12 of Decree No.143/2018/ND-CP stipulates the compulsory social insurance payment rate of expatriate workers in Vietnam:
“Article 12. Social insurance contribution rates and methods at the employee side
1. From January 1, 2022, the employee prescribed in clause 1 Article 2 hereof shall, on a monthly basis, make a social insurance contribution accounting for 8% of his/her monthly pay to the retirement and death benefit fund.”
Accordingly, until January 1, 2022, expatriate workers are not required to pay compulsory social insurance. However, from January 1, 2022, they have to pay the monthly retirement and survivorship fund equal to 8% of the monthly salary.
* Compulsory social insurance contributions of employers:
Clause 1, Article 13 of Decree 143/2018/ND-CP stipulates the compulsory social insurance payment rate of employers signing labor contract with expatriate workers in Vietnam:
“Article 13. Social insurance contribution rates and methods at the employer side
1. The employer specified in clause 3 Article 2 hereof shall, on a monthly basis, make a social insurance contribution in proportion to the employee’s payroll in the social insurance payment month as follows:
a) 3% of the abovementioned payroll paid into the sickness and parental insurance benefit fund;
b) 0.5% of the abovementioned payroll paid into the occupational accident and disease benefit fund;
c) 14% of the abovementioned payroll paid into the retirement and death insurance benefit fund, in effect from January 1, 2022.”
Therefore, from December 1, 2018 (the effective date of Decree 143/2018/ND-CP) to January 1, 2022, the employer only contributes 3% to the sickness fund and maternity leave, 0.5% to the labor accident and occupational disease insurance fund. From January 1, 2022, the employer, in addition to the two funds mentioned above, have to pay an additional 14% of the monthly salary to the retirement and survivorship fund.
Accordingly, following current regulations, there is a significant difference between the compulsory social insurance contributions for employees and employers in the case of foreign employees and that of Vietnamese employees (8% for employees, 17.5% for employers in the case of Vietnamese workers, while this figure is 0% and 3.5% in the case of expatriate workers, respectively). The reason for this difference is that compulsory social insurance regime for expatriate workers is still quite new, then businesses and workers need time to adjust and adapt to the regulations. This payment will be extended until the end of 2021. From January 1, 2022, the compulsory social insurance contribution rate for expatriate workers will be similar to that for Vietnamese employees (8% for employees, 17.5% for employers) with a view to treating fairly to domestic and expatriate workers.
Above are some basic regulations related to the compulsory social insurance regime for expatriate workers in Vietnam. Expatriate workers need to acknowledge these regulations in order to obey and protect their own interests.
