Vietnam has adopted a new comprehensive Law on Social Insurance (Law No. 41/2024/QH15). It will come into effect on July 1, 2025 (“LOSI 2024”). It is the first major change in the law that governs social insurance since 2014. Significant changes will impact both employers and employees. We focus on key provisions.
1. Expanded Coverage for Mandatory Social Insurance
LOSI 2024 greatly expands the pool of persons subject to mandatory social insurance. Notably, social insurance will include persons with contracts that are not traditional labor contracts but involve a paid salary with management and supervision by one party. This means that contracts deemed as “expert contracts”, “service contracts”, “consulting contracts” or “cooperation contracts” may be subject to mandatory social insurance participation by both employers and employees if the work is compensated with wages/salaries and involves management, direction, and supervision by one party. This expansion is intended to align with the definition of a labor contract under the Labor Code (which took effect on January 1, 2021).
Foreign employees working in Vietnam are subject to mandatory social insurance if they are working under a definite-term labor contract with a term of at least 12 months with an employer that is in Vietnam. There are exceptions for (i) internal company transfers, (ii) persons who have reached retirement age, and (iii) cases covered by international agreements. This regulation has remained unchanged since Decree 143/2018 dated October 15, 2018–which decree mandates social insurance for foreign employees.
2. Shortened period of social insurance participation for pension entitlements
Under LOSI 2024, an employee is eligible to receive pension entitlements if she has participated in social insurance for 15 years, instead of 20 years as at present. This new regulation will, of course, increase the number of employees who will be entitled to pensions.
3. Introduction of the new concept of “social retirement benefit”
A Vietnamese citizen who reaches 75 years or more, but is not yet eligible to receive pension entitlements, may nevertheless apply for social retirement benefit. This means the new regulations provide financial support for elderly workers who have not qualified for pension entitlements.
4. Limiting circumstances to receive lump sum insurance benefits
Under LOSI 2024, an employee who will start to participate in social insurance from July 1, 2025 will no longer be entitled to a lump-sum insurance benefit at retirement. There are some exceptions, for example, if the employees’ labor capacity is reduced by 81% or more, if the employee will leave Vietnam to stay in another country, etc.
5. Clarifying the salary used for social insurance contributions
The LOSI 2024 provides that the salary used to calculate social insurance contributions will include monthly salary according to the job or position, allowances, and other additional payments agreed upon and paid regularly in each salary payment period (instead of “all other additional amounts” as permitted under the LOSI 2014). This effectively, narrows the definition of salary.
6. Rights of Employers
The LOSI 2024 grants certain rights to employers, including:
- The right temporarily to suspend mandatory social insurance contributions under specific conditions.
- The right to have their rights and interests protected by employer representative organizations (established by employers to protect their legitimate rights and interests in accordance with the Labor Code 2019)–for example, the Association of small and medium enterprises.
7. Responsibilities of Employers
Employers have new obligations under the LOSI 2024, including:
- Registering employees for mandatory social insurance within 30 days of their eligibility.
- Preparing necessary documentation for employees to receive social insurance benefits.
- Coordinating with social insurance agencies (such as, district or provincial level Social Insurance Authority) to verify contribution periods and to disburse benefits.
- Compensating employees if the employer fails to fulfill social insurance obligations, causing harm to employees’ rights.
8. Temporary Suspension of Contributions
Employers facing difficulties that necessitate a temporary halt in operations can suspend contributions to the pension and survivorship allowance fund for up to 12 months. Contributions must resume and be made up after the suspension period.
9. Penalties for Late Contributions and Evasion
Late payment and evasion of mandatory social insurance and unemployment insurance are subject to penalties. Employers must pay the full amount of overdue contributions plus a fine of 0.03% per day. Administrative fines and non-monetary penalties are also possible.
By Nguyen Thi Thuy – Dao Thi Ai
