The Vietnamese Government released Decree 143/2018/ND-CP (“Decree 143”) on 15 October 2018, providing the long awaited guidance for the implementation of Social Insurance obligations for foreign employees working in Vietnam.
Although the Social Insurance laws in Vietnam had stated that foreign employees have been subject to Vietnamese Social Insurance requirements effective 1 January 2018, until the release of Decree 143 there was no implementation guidance for employers.
Who is covered by Decree 143?
Decree 143 states that all foreign individuals with Work Permits or Practicing Certificates, (except for employees sent to Vietnam from their parent company within certain parameters), and who have entered into Labour Contracts for at least a 1 year term, will be subject to Social Insurance Obligations. There is no specific reference in the Decree to those holding Work Permit Exemption Certificates, so we await further guidance regarding application for these categories.
What insurance rates and when do they apply?
The Decree takes a phased-in approach to Social Insurance, with initial implementation commencing from 1 December 2018, and a full implementation from 1 January 2022.
- Employers are required to contribute 3% of employee salaries (subject to standard contribution caps) for maternity and sick leave regimes from 1 December 2018.
- Employers are required to contribute 0.5% of employee salaries (subject to standard contribution caps) for occupational health and safety from 1 December 2018.
- Employers are required to contribute 14% of employee salaries (subject to standard contribution caps) for retirement fund contribution from 1 January 2022.
- Foreign Individuals (employees) are required to contribute 8% of their salaries (subject to standard contribution caps) for retirement fund contribution from 1 January 2022.
Please note that contribution requirements cease where individuals reach the stated Vietnamese retirement age.
How do foreign employees claim against their contributions?
The Decree essentially treats foreign individuals the same as Vietnamese nationals in respect to their contributions, the benefits and processes for claims.
There are provisions in the Decree that allow foreign individuals to claim lump-sum retirement payments under the laws where they choose to no longer reside in Vietnam. How this works in practice will obviously arise after the full implementation from 2022.
What should employers do where they have been withholding social insurance for the full 2018 year?
Where employers have been calculating and withholding amounts from foreign employee salaries from 1 January 2018, in anticipation of the full implementation of the laws, they should review and recalculate salaries for 2018 based upon this new guidance. Any difference should be paid and returned to their employees.
How does the decree interact with foreign country employee pension obligations/benefits, and Vietnam’s international agreements?
The Decree states that where there are differences with the Decree and any International Agreement that Vietnam has signed, then the International Agreement will apply. We will have to wait and see how this is implemented in practice with regards to the countries where Vietnam has bilateral agreements that cover pension/retirement matters.