The Government issued Decree 143/2018/ND-CP (“Decree 143”) on 15 October 2018 on compulsory Social Insurance (SI) contributions for foreigners working in Vietnam. Decree 143 affections the Social Insurance Law 2014 and took effect from 1 December 2018. Practically, this will affect the majority of foreign employees only from 1 January 2022.
The Social Insurance contribution will be imposed on both foreign employees and their employers if the foreign employees are working in Vietnam under indefinite-term labor contracts or definite-term labor contracts with duration of one year or more with Vietnam-based employers; and have
a work permit (giấy phép lao động), or
a practicing certificate (chứng chỉ hành nghề), or
a practicing license (giấy phép hành nghề) issued by Vietnamese authorities;
Contribution to SI covers allowances for (i) illness, (ii) maternity, (iii) labor accidents and occupational diseases, (iv) retirement, and (v) survivorship, foreign employees could be entitled to same benefits as a Vietnamese employee;
Are there any differences to Contribution Rates of Locals?
The contribution rates imposed on both employers and foreign employees will be the same as those applicable to Vietnamese employees.
Currently SI is applicable at 8% for employee contributions and 17.5% for employer contributions.
Based on foreign employees’ actual monthly salaries capped at 20 times the applicable general minimum wage (mức lương cơ sở)
(approximately USD 1,200).
What are Transition Tips for Multinationals?
Decree 143/2018 will take effect on 1 December 2018. However, foreign employees will only pay for their Social Insurance contribution from 1 January 2022. Whereas Vietnam-based employers would enjoy a contribution rate of 3.5%, their contribution rate will increase to 17.5% from 1 January 2022. Please note however that foreign employees issued with a local contract will not benefit from this transition period.
Will this new SI for expatriates be a sunk cost for Multinationals?
For multinationals, the practical answer is to allow for it as a sunk cost. For expatriates however, under Decree 143/2018, foreign employees would be entitled to a lump-sum Social Insurance allowance upon request if they do not continue working in Vietnam upon meeting various documentation and proof requirements that are yet to be further clarified for administrative execution of this proposed process.
Foreign workers entitled to this claim include: those who have reached retirement age but have not contributed to social insurance for 20 years in full, have a terminal illness under the scope of Vietnam’s criteria, qualified for retirement allowances outside of Vietnam, or have a terminated labor contract, expired practice license, and limited timeframe under a work permit.
In practice, it may be administratively cumbersome and uneconomical to claim benefits from the Vietnamese social insurance system. Therefore, paying Vietnamese compulsory insurance for foreign employees could increase the costs of assignment in Vietnam as of 2022.
What are the other Social Security Measures applicable in Vietnam?
Health insurance (HI)
Compulsory HI contributions are applicable to both Vietnamese individuals and expatriates visa holders, except for assignees with home employment contracts who have not been issued with local employment contracts.
HI contribution rates are 4.5% of total salary and allowances. This is made up of 3% employer contributions and 1.5% employee contributions.
Salary/wage subject to HI contribution is capped at 20 times the minimum basic salary for HI contributions.
Unemployment insurance (UI)
Expatriates are exempt from compulsory UI contributions as these are applicable to Vietnamese individuals only.
Employer and employee contributions are 1% on total salary and allowances.
The employee contribution is capped at 20 times the minimum regional salary for UI contribution.
Should you require any assistance with employment taxes for your expatriates in Vietnam, please contact us.
