Social insurance in Vietnam is a government-regulated system designed to provide financial protection and support for workers. This system ensures that individuals and their families can receive benefits if they face situations such as illness, work-related accidents, maternity, or retirement.
It’s a safety net that allows workers to contribute during their working years and receive assistance when they are no longer able to work due to various reasons.
In 2024, the social insurance system continues to evolve, with the government focused on expanding coverage and improving benefits. There are multiple types of social insurance available in Vietnam, each serving specific needs depending on the worker’s employment status.
The most important thing to understand is how these different benefits work, what benefits they offer, and why it is crucial for both employers and employees to contribute to the system.
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What is Social Insurance?
Social insurance (Bảo hiểm xã hội or BHXH in Vietnamese) is a type of insurance that workers and employers contribute to regularly.
These contributions are made from a portion of the worker’s salary, and employers are responsible for paying a larger share of the contribution. The goal of this insurance is to provide financial aid in situations where the worker is no longer able to earn an income or requires support due to health or life circumstances.
In Vietnam, the social insurance system is mandatory for employees working under employment contracts that last at least one month.
In addition to these mandatory contributions, there is also a voluntary social insurance system for individuals who are not required to participate in the compulsory system, such as freelancers, farmers, or those who want to ensure they have coverage in retirement.
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Types of Social Insurance in Vietnam
Social insurance in Vietnam is divided into two main categories: compulsory social insurance and voluntary social insurance. Each of these systems has its own set of rules, benefits, and coverage.
Compulsory Social Insurance
Compulsory social insurance is the most common form of social insurance in Vietnam, and it is mandatory for employees who have signed labor contracts.
According to Article 2 of the Law on Social Insurance (Law No. 58/2014/QH13), “employees who have labor contracts of a term of 1 month or more, employers, and individuals engaging in other forms of employment are subject to participation in compulsory social insurance.”
Employers are required to enroll their employees in this system and make contributions on their behalf. Employees also contribute a percentage of their salary, making it a joint effort to ensure future benefits.
Voluntary Social Insurance
Under Article 4 of the Law on Social Insurance (Law No. 58/2014/QH13), “voluntary social insurance is a social security benefit where individuals may choose to participate and make contributions to the social insurance fund based on their financial capacity. Participants in voluntary social insurance are entitled to pensions and survivorship benefits.”
The voluntary social insurance system is designed for individuals who are not covered by the compulsory system. This includes workers who are self-employed, freelancers, farmers, or anyone without an employment contract.
Unlike the compulsory system, participation in voluntary social insurance is optional, but it provides similar benefits, especially focusing on retirement. However, it is important to note that, unlike the compulsory system, voluntary social insurance does not offer benefits like sickness or maternity leave.
The primary focus is on ensuring individuals can receive a pension upon retirement and that their families are supported in the event of their death.
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Social Insurance Benefits in Vietnam
Vietnam’s social insurance system operates under several benefits, each targeting specific situations that workers might encounter during their employment. These benefits ensure that workers and their families are financially supported when they are most vulnerable.
The five main benefits under the social insurance system are:
- Sickness
- Maternity
- Accident and Occupational Disease
- Retirement
- Survivor
Let’s break these down in detail.
Benefits Under Compulsory Social Insurance
Employees participating in the compulsory social insurance scheme are entitled to five main benefits, corresponding to the following benefits:
1. Sickness Benefit
Under the sickness benefit, employees who fall ill or are injured (outside of work-related causes) are entitled to sick leave.
During this time, the employee receives a portion of their salary, usually calculated as 75% of their average monthly salary. The duration of the sick leave depends on how long the employee has worked and the nature of the illness.
For regular illnesses, employees can take up to 30 days off if they have worked less than 15 years, or 40 days if they have worked between 15 and 30 years. For serious illnesses, the sick leave can extend up to 180 days.
The sick leave provides a critical lifeline for employees who need time to recover without losing financial stability.
2. Maternity Benefit
The maternity benefit is one of the most supportive features of the social insurance system in Vietnam. It ensures that female employees are financially covered during pregnancy and childbirth, helping to alleviate the stress of balancing work and family.
Pregnant employees are entitled to maternity leave of six months. In the case of twins or more, the leave period is extended by one month for each additional child.
During maternity leave, the employee receives 100% of their average monthly salary. Additionally, female workers can also receive financial aid for prenatal care, childbirth, and even miscarriage or abortion in specific cases.
In certain conditions, male employees are also entitled to take time off to support their spouse after childbirth, with a leave period ranging from 5 to 14 days depending on the birth circumstances.
3. Accident and Occupational Disease Benefit
This benefit provides compensation and support for employees who suffer accidents or illnesses that are directly related to their work.
Employees are entitled to paid leave and financial support while they recover from these injuries. The amount of compensation depends on the severity of the injury, and in some cases, employees may be entitled to a lump sum or monthly payments if they are permanently disabled.
If an employee dies due to a work-related accident or occupational disease, their family is entitled to compensation from the social insurance fund.
4. Retirement Benefit
The retirement benefit is designed to provide financial support to employees once they have reached a certain age and have made sufficient contributions to the social insurance system.
For men, the retirement age is 62, and for women, it is 60. However, early retirement is also possible for those who work in hazardous environments or suffer from health issues that prevent them from continuing to work.
The retirement pension is calculated based on the number of years an employee has contributed to the social insurance fund and their average salary during those years. The longer an employee has contributed, the higher their pension will be.
5. Survivor Benefit
The survivor benefit provides financial support to the family of an employee who has passed away. This benefit ensures that the employee’s dependents, such as their spouse, children, or parents, are cared for in the absence of their primary earner.
In the event of an employee’s death, their heirs or relatives are entitled to survivor benefits, which include:
- Funeral Allowance: A lump-sum payment to the person responsible for the funeral arrangements, equivalent to ten times the basic salary at the time of the employee’s death.
- Monthly Survivor Allowance: A monthly allowance paid to the employee’s dependents, calculated as a percentage of the employee’s pension or accident and occupational disease allowance.
- Lump-sum Survivor Allowance: A one-time allowance paid to the employee’s dependents, calculated as a percentage of the employee’s voluntary social insurance contributions.
For each of these benefits under the mandatory social insurance scheme, employees must meet the required conditions and submit the necessary documentation to the social insurance agency for processing.
The amount of support the family receives depends on the employee’s contributions and the circumstances of their death.
Benefits Under Voluntary Social Insurance
Voluntary social insurance participants are eligible for two main benefits: retirement and survivor benefits.
According to Article 4, Clause 2 of the 2014 Social Insurance Law:
1. Retirement Benefit
Participants who reach retirement age or become unable to work due to illness or disability are entitled to monthly pension payments.
To qualify, individuals must have contributed to the social insurance system (either mandatory or voluntary) for at least 20 years and meet the legal retirement age.
2. Survivor Benefit
If a voluntary social insurance participant dies, their heirs or family members are entitled to a one-time payment that covers funeral expenses and survivor payments, provided the deceased contributed to the system for at least 12 months in the 36 months prior to their death.
3. Additional Benefits
Voluntary social insurance participants also receive health insurance benefits upon retirement, the option to withdraw their contributions in a lump sum, and government financial assistance for low-income households:
- Health Insurance Card: Issued to participants receiving a pension, allowing access to medical services.
- Lump-Sum Withdrawal: Participants can withdraw a lump-sum social insurance payment under certain conditions.
- Government Support: A portion of the voluntary social insurance contributions is subsidized by the state, calculated as a percentage of the monthly contribution based on the rural poverty line:
- 30% support for participants from poor households.
- 25% support for participants from near-poor households.
- 10% support for other participants.
Participants have flexibility in choosing payment methods, ranging from monthly contributions to lump-sum payments for multiple future years or for remaining periods, with amounts adjusted to suit their income levels.
How to Receive Social Insurance Benefits?
To access social insurance benefits, participants need to follow these steps:
- Register for Social Insurance: Depending on eligibility, individuals must register for either mandatory or voluntary social insurance according to the applicable regulations.
- Make Timely and Complete Contributions: Ensure that contributions are paid in full and on time as specified by the contribution levels and timelines set forth by the social insurance policies.
- Manage and Update Social Insurance Records: Participants must maintain and regularly update their social insurance records. Any changes to personal information or employment status should be promptly reported to the social insurance authorities.
- Submit Claims for Benefits: In the event of circumstances that reduce or eliminate income from employment, participants must prepare and submit the necessary documentation to the social insurance authorities for review and approval of the applicable benefits.
How to Register for Social Insurance in Vietnam
Registering for social insurance is a straightforward process, especially for employees under compulsory social insurance. Employers are responsible for registering their employees with the Vietnam Social Security and ensuring that contributions are made regularly.
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For Employers and Employees
Employers are required to register their company and employees with the Vietnam Social Security within 30 days of the employee starting work. This applies to all businesses that employ staff under labor contracts, regardless of industry or company size.
Here’s the step-by-step process:
Step 1: Gather the Required Documents
Employers need to prepare:
- A social insurance declaration form (Form TK1-TS)
- The labor contract.
- A copy of the business registration certificate.
Step 2: Submit the Application
Submit the completed forms to the Vietnam Social Security (VSS) office, either in person or via the online portal provided by the VSS.
Step 3: Receive the Social Insurance Code
Once processed, the employee will be assigned a Social Insurance Code, which tracks their contributions and benefits throughout their employment.
Step 4: Make Monthly Contributions
Employers are responsible for withholding a portion of the employee’s salary for social insurance and adding their own contribution. The total is typically 32% of the employee’s salary, with 21.5% paid by the employer and 10.5% by the employee.
For Voluntary Participants
Self-employed individuals or workers not covered by compulsory social insurance can register for voluntary social insurance at their local Social Security office. The registration process involves submitting a simple application form along with identification documents.
Here’s how to do it:
Step 1: Prepare the Necessary Documents
You’ll need:
- A social insurance declaration form (Form TK1-TS)
- A copy of your ID card or passport.
Step 2: Submit the Application
Submit your documents to your local social insurance office, or register through authorized agencies such as post offices or social insurance agents.
Step 3: Choose Contribution Level and Payment Plan
As a voluntary participant, you have flexibility in choosing your contribution level based on your income.
Contributions are calculated at 22% of your declared income, with a minimum of 22% of the base salary and a maximum of 22% of 20 times the base salary. You can opt to pay monthly, quarterly, or yearly.
Current Social Insurance Contribution Rates
The contribution rates for compulsory social insurance are shared between employers and employees.
As of 2024, the contribution rates are as follows:
- Employee’s Contribution:
- Social insurance: 8% of monthly salary.
- Health insurance: 1.5% of monthly salary.
- Unemployment insurance: 1% of monthly salary (only for employees working under contracts of 3 months or more).
- Employer’s Contribution:
- Social insurance: 17.5% of monthly salary.
- Health insurance: 3% of monthly salary.
- Unemployment insurance: 1% of monthly salary.
These contributions cover the costs of all the benefits provided by the social insurance system, including sickness, maternity, accident, and retirement benefits.
For voluntary participants, the contribution rates are more flexible, allowing participants to choose their contribution level based on their financial situation. However, the benefits for voluntary social insurance are typically lower compared to compulsory insurance.
The contribution rate for voluntary social insurance is 22% of the participant’s chosen income level, which must be at least equal to the regional minimum wage.
Conclusion
Social insurance in Vietnam plays a big role in making sure you’re covered financially during tough times, like when you’re sick, on maternity leave, have a work-related accident, or when you retire. As the system continues to evolve in 2024, it’s important for both employers and employees to stay on top of the latest benefits and requirements.
As experts in Vietnamese law, Russin & Vecchi can help you navigate the social insurance system, ensuring you’re compliant and able to access the full range of benefits available. Whether you are a business owner managing employee coverage or an individual looking to secure your own, we provide tailored legal solutions to meet your specific needs.
Let Russin & Vecchi handle the complexities of the process so you can focus on securing your financial future with confidence.
Contact us today.
