Social insurance is a welfare policy that is no longer unfamiliar to employees and employers. Previously, the social insurance policy only applied to Vietnamese employees (Vietnamese citizens), but from December 1, 2018, social insurance also applies to those who are foreign citizens working in Vietnam (Foreign employees). So, how shall these employees pay social insurance?
I. Concepts and Classifications
Under the provisions clause 1, Article 3 of Law on Social Insurance 2014 “Social insurance means the guarantee to fully or partially offset an employee’s income that is reduced or lost due to his/her sickness, maternity, labor accident, occupational disease, retirement or death, based on his/her contributions to the social insurance fund”.
Social insurance fund is a financial fund that is independent from the state budget and set up by contributions from employees and employers and with the State’s support.
Social insurance includes 2 types: Compulsory social insurance and voluntary social insurance.
- Compulsory social insurance: Sickness, Maternity, Labor accident and occupational disease, Retirement and Survivorship allowance.
- Voluntary social insurance: Retirement and survivorship allowance.
Period of social insurance payment: counted from the time an employee starts paying social insurance to the time he/she stops such payment. In case an employee pays social insurance in interrupted periods, his/her period of social insurance payment is the total of such periods.
II. Social Insurance Regime for Foreign Employees
Employers and foreign employees will comply with the social insurance regime specified in Decree No. 143/2018 / ND-CP as follows:
1. The foreign employees are eligible to participate in social insurance, including:
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.
However, the foreign employees shall be excluded from participation in the compulsory social insurance as if: (i) they are intra-company transferees as stipulated (under clause 1 Article 3 of the Decree No. 11/2016/ND-CP dated 03 February 2016) or (ii) they reach retirement age according to the provisions of Vietnamese law.
2. Compulsory social insurance regime for foreign employees
Under the provisions Article 5 of the Decree No. 143/2018 / ND-CP regulations on compulsory social insurance:
The foreign workers shall be entitled to the following compulsory social insurance benefits: sickness, maternity, occupational accident, disease, retirement and death insurance benefits (Particularly, the retirement and survivorship allowance will only be applied from January 1, 2022).
3. The rate and method of payment
The social insurance payment is based on the percentage calculated on the monthly salary fund of the foreign employees. The monthly salary paid for social insurance is specified in Article 14 of Decree No. 143/2018 / ND-CP.
In which, the rate of insurance contribution of the employers and the foreign employees is made as follows:
From December 1, 2018, employers contribute 3.5% (including 3% to the sickness and maternity fund, and 0.5% to the insurance fund for occupational accidents and diseases). The foreign employees are not required to pay the premium during this period;
From January 1, 2022, the retirement and survivorship allowance regime for foreign employees will be applied. At that time, the employer has to pay 17.5% (including 3% to the sickness and maternity fund, and 14% to the retirement and death fund). Foreign workers will contribute 8% to the retirement and death
From the effective date of Decree No. 58/2020/ ND-CP, employers are not required to contribute 0.5% to the insurance fund for occupational accidents and diseases.
The employees who neither works nor receives salaries or wages for a period of at least 14 working days in each month shall not be bound to pay the social insurance contribution that month. This month shall not be taken into account to determine entitlement to social insurance benefits, except for parental leaves.
If the insured employee who is currently entitled to monthly retirement pensions and social insurance benefits is not residing in Vietnam, he/she may authorize another person to receive these amounts. The one-off benefit payment in his/her wish shall be approved.
In addition to social insurance, foreign employees are also allowed to apply other welfare policies such as health insurance (because these workers are still considered employees in the enterprise), support policies, job assistance, … to ensure the rights of foreigners living and working in Vietnam. For unemployment insurance, foreign employees are not entitled because this is a special policy for Vietnamese employees.
III. Legal basic
– Law on Social Insurance 2014 No. 58/2014/QH13 dated November 20, 2014;
– Decree No. 143/2018 / ND-CP dated October 15, 2018, 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;
– 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;
– Decree No. 58/2020/ ND-CP dated May 27, 2020, regulating rates of compulsory insurance contributions to the occupational accident and disease benefit fund.