In the first six months of the year, employment in Vietnam has rapidly decreased. According to a report by the Population and Labor Statistics Department under the General Statistics Office of Vietnam, as of June, 30.8 million people aged over 15 have been laid off, lost their jobs completely or received lower wages because of COVID-19. Thousands of enterprises have been affected, among them are the textile, footwear, and travel industries. Many businesses have had to cut staff and reduce salaries and benefits just to survive. This news, of course, applies around the world.
Since social isolation measures were lifted in April, the Vietnamese government has tried to help both employees and employers. It issued Resolution no.42/NQ-CP and Resolution 954/2020/UBTVQH14 (“Resolutions”). They consist of financial packages and reduced tax obligations to help both employers and employees affected by COVID-19.
Incentives for Employees
- An employee whose employment is temporarily suspended or who has had to take unpaid leave for a period of at least one consecutive month from April 1, 2020 until June 30, 2020 is entitled to financial assistance of VND 1.8 million (US$77) per month. This assistance can be applied for a maximum period of three months commencing from April 1, 2020. The employer needs to submit the application to local authorities in order to obtain these benefits for its employees.
- An employee whose employment is terminated, but who is not entitled to unemployment insurance, or who works in a household business (in the fields of food and beverage, accommodations, tourism, health care) and works without an employment contract is entitled to financial assistance of VND 1 million (U$$43) per month. The employee will directly submit his/her application to the local authority.
Personal income tax (“PIT”) is decreased. From July 1, 2020, a resident taxpayer will be allowed to deduct VND 11 million (US$475) from his/her taxable income before tax rates are applied, as compared to the previous amount of VND 9 million (US$387). The new policy is retroactive and will apply from January 1, 2020 when taxpayers finalize their PIT reports for 2020. According to the new policy, the tax deduction for each dependent has been raised from VND 3.6 million (US$157) to VND 4.4 million (US$192) per month.
Incentives for Employers
An employer who meets the three following conditions will be entitled to borrow a loan from the Vietnam Bank for Social Policies at zero percent interest for a maximum term of 12 months:
- has either suspended 20% of its employees or 30 employees or more are participating in compulsory social insurance; and has already paid 50% of the salary of these qualifying employees for the period April 1 to June 30, 2020;
- is experiencing financial difficulties and is unable to pay salary;
- has a good record in connection with loans from credit institutions or branches of foreign banks as of December 31, 2019.
The maximum loan is 50 % of the regional minimum salary per employee for a maximum of three months. If an employee is suspended from work due to the pandemic, the employee must still be paid the amount agreed upon by both parties, but that amount cannot be lower than the regional minimum wage.
An employer affected by COVID-19 can apply for a suspension of the contribution to the retirement and survivorship funds of the social insurance program for a maximum of 12 months. An employer is also entitled to a reduction of 30% of its corporate income tax in 2020 if its revenues are less than VND 200 billion (US$ 8.7million).
COVID19 has had a significant impact on each individual life and on the economy. These supportive policies are intended to help individuals and companies that are stressed and also to reactivate the economy.