Full Social Insurance Contributions for foreign employees working in Vietnam effective from 1 January 2022.

From 1 January 2022, foreign individuals working in Vietnam and their employers are required to fully participate in Vietnam’s compulsory Social Insurance program, resulting in an increase in the social insurance contributions for both employers and employees. Enterprises employing foreign individuals in Vietnam should review the latest updates from the authorities and carefully plan their 2022 budgeting and salary calculations, in order to account for the increased Social Insurance contributions arising.

In this article, we delve into the details on how the social insurance contributions apply for foreign individuals working in Vietnam and the organisations employing them, with insights on insurance rates, salary thresholds and specific benefits.

According to clause 1, 2, Article 2 of Decree No 143/2018/NĐ-CP, foreign individuals working in Vietnam are required to participate in the compulsory Social Insurance program if they obtain work 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, but excluding:

1. Employees who are intra-company transferees as stipulated in clause 1 Article 3 of the Government’s Decree No. 11/2016/ND-CP dated February 3^rd, 2016, providing details of the implementation of certain articles of the Labour Code regarding foreign employees working in Vietnam.

2. Employees having attained retirement age under clause 1 Article 187 of the Labour Code:

• • For male the retirement age is 60 years and 3 months if they retire in 2021
  • For females the retirement age is 55 years and 4 months if they retire in 2021

Social Insurance premiums for foreign individuals working in Vietnam and their employers

Social Insurance contributions are based on the employee’s gross salary, including any allowances and other additional amounts as prescribed by law. The rates and calculations for foreign employees and their employers applicable from January 1^st 2022 are detailed below, however readers should note that these rates are subject to maximum payment caps as outlined later in this release:

• From January 1^st, 2022, foreign employees are required to make the Social Insurance contribution equal to 8% of the monthly salary, which is paid into the retirement and death benefit fund.

• From January 1^st, 2022, employers are required to make the Social Insurance contribution equal to 14% of the monthly salary, which is paid into the retirement and death insurance benefit fund.*Enterprises are entitled to apply the 0% contribution rate to the labour accident and occupational disease fund from July 1^st, 2021 to June 30^th, 2022, reducing contributions by 0.5% during this period.

Salary thresholds for calculating Social Insurance premiums for foreign individuals

The salary for paying Social Insurance premiums for foreign workers is limited to specific caps, and below we refer to the lowest and the highest thresholds used for calculation the insurance contributions:

• The minimum monthly salary on which compulsory Social Insurance premiums are based is equal to the Regional Minimum Monthly Wage at the time of payment. In particular, the current regional minimum wage is regulated as follows:

• The maximum monthly salary on which Social Insurance premiums are based is equal to 20 x Base Salary, which is 29,800,000 VND. Currently, the Base Salary applied in 2021 is 1,490,000 VND/month and there is no prescribed change released by the authorities for 2022.

What are the benefits for foreigner individuals participating in Social Insurance?

Clause 1, Article 5 of Decree 143/2018/ND-CP covers the regime of compulsory Social Insurance applicable to foreign employees as follows.

• Employees specified in Clause 1, Article 2 of this Decree are entitled to benefit from the following compulsory Social Insurance regimes: sickness, maternity, occupational accident and occupational disease insurance, retirement and death.
• Clause 6, Article 9 of Decree No 143/2018/NĐ-CP stipulates that from January 1^st, 2022, foreign employees working in Vietnam and participating in compulsory Social Insurance can withdraw the one-off amount of Social Insurance allowance if they wish to do so.

Foreign individuals are able to withdraw the Social Insurance allowance if:

• They reach the pension age and have paid Social Insurance premiums for at least 20 years, or do not continue to reside in Vietnam;
• They suffer from a life-threatening disease as prescribed by the Ministry of Health; and
• They terminate the labour contract and/or the practicing certificate, or the practicing license expires without being permitted for renewal.

How is the One-Time Social Insurance Payment for foreign workers calculated?

Clause 7 Article 9 of Decree 143/2018/ND-CP provides guidance on the rate of the one-time Social Insurance benefits and accordingly, the one-time Social Insurance payment of foreign employees is determined based on the following formula:

One-time Social Insurance payment = 2 x Average monthly salary on which Social Insurance premiums are based x Number of years of payment of Social Insurance contributions.

The yearly period of Social Insurance premiums payment is rounded as follows:

• Where there are odd months from 1 – 6 months: the period is rounded up to ½ year.
• Where there are odd months from 7 – 11 months, 1 year is counted.

Application process for One-Time Social Insurance Payment: 

Within 10 days from the date of contract termination, or work permit, practicing certificate, practicing license expiry, foreign employees who will not continue their contract or renewing the license, are able to submit a dossier to apply for the One-Time Social Insurance Payment.

In maximum 5 working days after receiving the dossier requirements, the Social Insurance Department will settle the procedures and employees will receive settlement results, including:

• Relevant documents (directly at the Social Insurance department or through the public postal service or via electronic transactions)
• Subsidy paid directly at the social insurance agency, through the public postal service or through a personal bank account.

*In case the foreign employee authorises another person to receive the payment on their behalf, they are required to comply with the procedure for “authorization to receive social insurance and unemployment benefits” and provide the original authorization contract as prescribed by law.

If you need any assistance with these or any other matters relevant for international investors in Vietnam, our experts are ready to work with your company to ensure you understand how the above will apply to your specific situation in Vietnam.

Contact our teams for expert support and further information on managing labour and HR compliance in Vietnam.

Huynh Thi Bao Tran– Head of Payroll and HR Consulting – tran.huynh@acclime.com

Matthew Lourey – Managing Partner – m.lourey@acclime.com