Guidance on compulsory social insurance for foreign employees working in Vietnam

07
November
2018

Under Vietnam’s Law on Social Insurance dated 20 November 2014, from 1 January 2018, foreign employees working in Vietnam with either (i) work permit, (ii) practicing license or (iii) practicing permit issued by Vietnamese authorities will be required to contribute to Vietnam’s compulsory social insurance scheme. However, due to the lack of further guiding legislation, this policy has yet to be implemented.

On 15 October 2018, the Government of Vietnam issued Decree No. 143/2018/ND-CP guiding compulsory social insurance contribution for foreign employees working in Vietnam (“Decree 143”). Decree 143 will come into effect on 1 December 2018.

Below are key highlights of Decree 143:

  1. Covered foreign employees

Under Decree 143, all foreign employees meeting both conditions below are required to participate in Vietnam’s compulsory social insurance scheme:

  • The foreign employee has either (i) work permit, (ii) practicing license or (iii) practicing permit issued by Vietnamese authorities; and
  • The foreign employee has a labour contract with indefinite term or definite term of one year or more.

Decree 143 excludes the following foreign employees from social insurance participation:

  • Employees who are (i) managers, executive directors, experts and technical workers already employed for at least 12 months by a foreign enterprise which has established a commercial presence in Vietnam and (ii) temporarily transferred internally to the commercial presence in Vietnam; and
  • Employees reaching retirement age under Vietnamese laws.
  1. Coverage and contribution rates

The compulsory social insurance scheme applicable for foreign employees will cover:

  1. Sickness;
  2. Maternity;
  3. Occupational accidents and disease;
  4. Pension (effective from 1 January 2022); and
  5. Death (effective from 1 January 2022).

The contribution rates to social insurance funds of the employers and the foreign employees from the employee’s monthly salary are as follows:

Sickness and maternity insurance fund
Occupational accidents, and disease insurance fund
Pension and death insurance fund (applicable from 1 January 2022)
Employer of foreign employee
3%
0.5%
14%
Foreign employee
N/A
N/A
8%
  1. One-off insurance payment

Under Decree 143, within 10 days before (a) the termination of labour contract or (b) the time when the work permit, practicing license, practicing permit expires (whichever is earlier), if the foreign employee does not continue to work under the labour contract or is denied extension of his/her permit, the employee may submit an application to receive a one-off insurance payment to the social insurance authority. The statutory timeline for the social insurance authority to assess the application and conduct payment to the employee is 5 business days from receipt of valid application documents.

Generally, pursuant to Decree 143, the foreign employees are subject to the same compulsory social insurance scheme applicable for Vietnamese employees.

With the issuance of Decree 143, companies will officially be required to contribute to social insurance funds for their foreign employees as well besides their Vietnamese employees. As this increases an employer’s spending on foreign employees, there is concern that this Decree could decrease Vietnam’s appeal with both foreign investors and expatriates who seek employment in Vietnam. Whether this is true or not remains to be proven in practice.

If you have any questions or require any additional information you may contact Phuong Nguyen, Duc Tran or the ZICO Law partner you usually deal with.


This alert is for general information only and is not a substitute for legal advice.