Vietnam social insurance foreign employees: who must pay

Vietnam social insurance foreign worker rules begin on 1 January 2018, and the law now reaches expatriates who hold a Vietnamese work permit. The year has just started, and one question is still open. The 2014 law says foreign staff are "allowed" to join, and a guiding decree that would make it a firm duty has not been issued. Employers should plan now, but they should not treat every detail as final.

What the law says

The National Assembly passed the Law on Social Insurance, No. 58/2014/QH13, on 20 November 2014. It widened the groups that fall under the compulsory scheme. One new group is foreign employees who work in Vietnam with a work permit, a practicing certificate or a practicing licence issued by a Vietnamese authority.

The date for this group is 1 January 2018. Until then, expatriates were generally covered only by health insurance. Vietnamese staff already pay into social insurance, health insurance and unemployment insurance.

The wording is the problem. The law says these foreigners are "allowed" to take part. It does not say clearly whether that means they must. It also does not separate staff on a local labour contract from staff who are sent to Vietnam on a secondment letter.

Sources: KPMG, GMS Flash Alert 2017-188, 21 December 2017; Law No. 58/2014/QH13, 20 November 2014.

Who is likely to be covered

A draft decree gives the best hint. The Ministry of Labour, Invalids and Social Affairs released it for public comment in 2017. It says a foreign employee is covered when two things are true. The person works for an employer based in Vietnam under a labour contract, and the person holds a work permit, practicing certificate or practicing licence.

KPMG reports that the draft appears to narrow the group and points to expatriates with a local labour contract and a Vietnamese permit. If that holds, staff who stay on a home-country contract and are seconded to Vietnam may fall outside the rule. This is a reading of a draft, not final law.

Sources: Baker McKenzie, as republished by Baker McKenzie via Conventus Law, 2 June 2017; KPMG, GMS Flash Alert 2017-188, 21 December 2017.

Rates and the pay cap

The rates match those for Vietnamese staff. KPMG lists social insurance at 17.5 percent for the employer and 8 percent for the employee. Other legal notes of the period give the employer share as 18 percent, so firms should confirm the figure with their adviser or the social insurance office.

The pay base is salary, allowances and other regular payments. It has a ceiling of 20 times the government base salary. That ceiling is VND 26 million a month today and rises to VND 27.8 million from July 2018. KPMG puts the largest combined monthly payment at about VND 6.63 million, or roughly USD 290.

The draft decree would cover foreign staff under all five regimes that apply to Vietnamese staff: sickness, maternity, work accidents and occupational diseases, retirement and death benefits.

Sources: KPMG, GMS Flash Alert 2017-188, 21 December 2017; Baker McKenzie via Conventus Law, 2 June 2017.

What happens when a contract ends

The draft decree also covers people who leave. A foreign employee whose contract or work permit ends, and who will not continue to work or renew the permit, could ask for a one-time payment. The draft sets the same calculation that applies to Vietnamese staff. This matters because, KPMG notes, Vietnam is not a party to any international social security agreement.

KPMG also warns of a double cost. A worker who stays in a home-country scheme and also pays in Vietnam may pay into two systems. In some cases the Vietnamese cost is lower than the home cost, which could help employers who send staff abroad.

Sources: Baker McKenzie via Conventus Law, 2 June 2017; KPMG, GMS Flash Alert 2017-188, 21 December 2017.

What employers can do now

Start with a list. Note each foreign employee, the contract type, the permit and its expiry date. Then model the added cost using the rates and cap above, and check how payroll would change if a worker leaves a home scheme.

Next, ask the local social insurance office what it expects. KPMG notes that the national insurance body gave its views in Decision 595/QD-BHXH of 14 April 2017 and Official Letter 1734/BHXH-QLT of 16 August 2017. It also notes a common local habit: when a guiding decree arrives late, rules can apply back to the start date. Setting money aside is a prudent step.

Finally, watch for the final decree. It will settle who is in, who is out and from what date. Until then, treat this guide as a plan, not a promise.

Sources: KPMG, GMS Flash Alert 2017-188, 21 December 2017.

Sources

• Law on Social Insurance No. 58/2014/QH13, National Assembly of Vietnam, 20 November 2014.
• KPMG, "Vietnam: Expatriates May Participate in Social Insurance System", GMS Flash Alert 2017-188, 21 December 2017.
• Baker McKenzie, "Draft Decree On Compulsory Social Insurance For Foreign Employees In Vietnam", republished by Conventus Law, 2 June 2017.