Social Security In Vietnam: An Overview
Vietnam’s social security system is a comprehensive set of programs that provide benefits to its citizens in times of need. These benefits include pensions, healthcare, unemployment assistance, and other social assistance programs.
While the system includes a variety of insurances, social insurance is the most important and significant, as it covers most of the benefits provided by the system. Therefore, the Vietnam social security system is often called the “Vietnam social insurance” policy.
The Subjects of the Vietnam Social Security Program
Social insurance is mandatory for all employees in Vietnam. The law on social insurance, which was passed in 2014, provides the legal framework for the program and sets out the contributions that are required from employers and employees, regardless of whether they work for the government or a private company. The program is funded through monthly contributions from both parties.
Self-employed people and those who are not employed by any entity can enroll in a voluntary private insurance program. However, they will not be covered by all of the benefits included in the mandatory social insurance program, such as maternity leave income, unemployment insurance, or labor accident insurance. They will only be covered by the most important benefits, such as social insurance and health insurance.
Types of Social Insurance in Vietnam
Understanding the different insurance types and their calculation formulas will help you understand the hiring cost in Vietnam from the perspective of the employer’s expenses for social security contributions. The employer is responsible for paying a portion of the contributions for each insurance type. The total amount of the contributions will depend on the employee’s salary and the number of insurance types they are covered by. The following insurances are included in the Vietnam social security system:
Vietnam Social Insurance
Vietnam social insurance is the backbone of the Vietnam social security system. It provides benefits to employees in the event of unpaid leave, maternity leave, or retirement. This insurance can help to protect employees’ financial security in times of need.
Under an employment contract in Vietnam, both the employer and employee are required to contribute to the social insurance fund. The employer’s contribution is 17%-17.5% of the employee’s gross fixed monthly income, while the employee’s contribution is 8%. The maximum amount of income that is subject to social insurance contributions is 20 times the national minimum wage.
Note that contributions to Vietnam’s national social security system are tax-deductible business expenses. This means that businesses can deduct the amount of their contributions from their taxable income. This can help to reduce enterprise tax liability.
Work Accident Insurance
In Vietnam, companies are required to contribute 0.5% of their employees’ fixed gross monthly income (or a maximum of 20 times the national minimum wage) to the Work accident insurance fund. This contribution is used to provide benefits to employees who are injured or become ill as a result of their work.
However, due to the impact of the COVID-19 pandemic, the government of Vietnam exempted companies from this contribution from July 2020 to July 2021. This exemption was intended to help businesses during a difficult time.
The exemption has now expired, and companies are once again required to contribute to the Work Accident Insurance Fund. This is an important safety net for employees, and it is important for businesses to comply with the law.
Vietnam Health Insurance
Vietnam health insurance is a government-run program that provides basic health insurance coverage to all citizens and legal residents of Vietnam. The program is funded by contributions from employers and employees.
The employer contributes 3% of the employee’s monthly fixed gross income, up to a maximum of 20 times the national minimum wage. The employee contributes 1.5% of their monthly fixed gross income.
Following successful registration, a Vietnam health insurance card will be issued (done by the company). This card can be used to access medical services at any participating hospital or clinic in Vietnam.
The coverage provided by health insurance is often deemed insufficient because it is far too small in comparison to the actual treatment costs in private hospitals. This is because health insurance is a basic plan that only covers a limited range of services.
As a result, employers usually provide additional health insurance (via a private insurance company) as an additional benefit to their employees. This additional health insurance can help to cover the costs of more expensive treatments and procedures that are not covered by health insurance.
Vietnam Unemployment Insurance
Employers and employees in Vietnam are required to contribute 1% of their gross fixed income (up to a maximum of 20 times the regional minimum wage) to the unemployment insurance fund. This insurance provides benefits to employees who are unemployed through no fault of their own.
The benefits include a monthly allowance, job search assistance, and training. The amount of the allowance depends on the employee’s salary and the number of years they have contributed to the fund.
By purchasing unemployment insurance, employers can avoid having to pay severance pay or an allowance to employees who are terminated from their jobs. Employees who have paid for unemployment insurance can claim benefits from the government if they become unemployed.
The Importance of Vietnam Social Security for Vietnamese Employees
Vietnamese employees place a high value on social insurance and unemployment insurance, two important benefits of the Vietnam social security system. These benefits can provide financial security during times of need, such as maternity leave or unemployment.
Social insurance provides benefits to employees during maternity leave and retirement. Maternity leave benefits are particularly important to Vietnamese women, who are entitled to a six-month leave by law. This insurance can provide significant financial assistance during this time, as the company will not be paying the employee’s salary during this period.
To be eligible for social insurance benefits, such as maternity leave income assistance, mothers must have a minimum of 6 months of social insurance contribution history prior to the labor date. This encourages women to enroll in the insurance program well in advance of their expected due date.
Unemployment insurance provides benefits to employees who are unemployed through no fault of their own. To be eligible for unemployment benefits, employees must have collected at least 12 months of insurance contributions. This means that it is important for employees to enroll in the insurance program as soon as possible. The longer they are a member of the insurance program, the higher the allowance they will receive.
Overall, social insurance and unemployment insurance are important benefits that can help to protect Vietnamese employees’ financial security. By planning ahead and enrolling in these programs, employees can ensure that they will have the financial resources they need when they need them most.
How Companies Can Attract and Retain Top Talent by Providing Social Security Benefits
Under the Vietnam Social Insurance Law 2014, labor contracts impose the full Vietnam social security program. This means that only those with legal employment in Vietnam are subject to the comprehensive program and entitled to all of its social insurance benefits.
When a person enrolls in the state social security program, they are assigned a social insurance number and a social insurance book. The social insurance number is a unique identifier that is used to track the person’s contributions to the program. The social insurance book is a physical document that records the person’s contributions and benefits.
Each company that the person works for will contribute to Vietnam’s social security funds on their behalf. These contributions will be recorded in the social insurance book. The person can use the social insurance book to claim benefits from the program, such as maternity leave, disability benefits, or retirement benefits.
All registration, recording, and benefit claims must be handled by the employer. This means that an individual cannot participate in the program on their own. The employer must register the employee with the social security agency and make the necessary contributions. The employer must also keep records of the employee’s contributions and benefits.
When a business begins hiring in Vietnam, it is required to participate in the country’s social security and social insurance programs. Failure to pay contributions to these funds on time or in full can result in penalties and interest charges. In addition, businesses that do not strictly adhere to Vietnam’s social security and social insurance laws may face legal consequences.
How To Provide Insurance To Vietnamese Employees Without A Vietnamese Entity
Insurance has become increasingly important to Vietnamese employees in recent years. This is due to a number of factors, including the rising cost of healthcare, the increasing number of people working in informal sectors, and the lack of government-provided social safety nets.
As a result, many multinational corporations with remote teams in Vietnam are looking for ways to enroll their employees in the state social security program. This can be a challenge, as the program is designed for employees who are working in Vietnam and who are registered with the Vietnamese government.
However, there are a number of ways to enroll employees in the state social security program, even if they are not physically located in Vietnam. One option is to use a third-party administrator (TPA). A TPA is a company that specializes in helping businesses comply with social security laws in different countries. That firm is known as EOR (Employer Of Record) service.
How An EOR Company Can Help You
An Employer of Record (EOR) is a service that allows businesses to outsource the employment responsibilities of their foreign employees to a local entity. This means that the EOR will act as the legal employer of the employees, which includes tasks such as hiring, firing, and paying them, as well as enrolling them in social security and other benefits programs.
EOR services can be a valuable option for businesses that do not have a legal entity in Vietnam. This is because it can help businesses comply with local employment laws and ensure that their employees are properly taken care of.
In recent years, Employer of Record (EOR) services have become increasingly popular in Vietnam. This is due to a number of factors, including the growing number of foreign companies operating in Vietnam, the increasing complexity of Vietnamese employment laws, and the desire of businesses to outsource HR responsibilities.
To get know more about the EOR service by Iris International, contact us by email, phone, or by filling out this form below.
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