New regulations on Social Insurance contribution for foreign employees in Vietnam

published on October 23, 2018 / reading time approx. 1 minutes

Foreign Employees in Vietnam will have to contribute to the Social Insurance scheme as of 1 December 2018 (employers contribution) or 2022 (employees contribution) respectively. This is a new regulation implemented as of 1 December 2018.

Changes

Until 31 December 2017 foreigner were exempted from SI contribution in Vietnam. A regulation came into force on 1 January 2018 where there was a requirement for Foreigner to contribute to the SI scheme. Due to a lack of guidance, this contribution was put on hold until now.

The SI scheme contains three values being the “Sick and Accident Insurance” and the “Pension Fund”. The former is paid by the employer on behalf of the employee at currently 3,5 per cent and the latter is paid by the employee at 8 per cent and the employer at 14 per cent. The newly issued guidance now states

From 1 December 2018 the employer will contribute 3,5 per cent to the SI scheme for “Sick and Accident Insurance”.

From 1 January 2022 both the employer and employee will contribute in full at a total of 8 per cent for the employee and 17,5 per cent for the employer.

The calculation base for contribution is currently capped at 20 times of the common minimum salary which currently equals 27,400,000 VND (approximately 1,000 Euro).

This step aligns the approach in Vietnam with other countries in the region such as Thailand. Singapore now remains the only country in the region where foreigner that are not permanent residents are not required to contribute to a SI scheme.

Conclusion

This change has caused major discussions between foreign chamber and the government of Vietnam. Foreign chambers believe that this increase in contribution will make it less attractive for foreigner to come to Vietnam. Whether or not the relatively low maximum contribution of 80 Euro for an individual will make Vietnam less attractive to work in, remains to be seen. The benefits of SI contribution for a foreign individual are very limited in “Sick and Accident Insurance” but will need to be reviewed again in relation to the pension portion.