Changes to compulsory insurance contributions in Vietnam

From 1 July 2017, Vietnam’s common based minimum salary will increase from VND 1,210,000 to VND 1,300,000 per month, write TMF Group experts.

Common based minimum salary

As a result of this salary increase, the maximum salary for contribution of compulsory social and medical insurance will increase to VND 26,000,000 per month from the previous VND 24,200,000.

Unemployment insurance

In order to reduce the burden on employers and to promote business, the Government has submitted a proposal to the National Assembly to reduce the unemployment insurance contribution for employers from 1% to 0.5%. The new rate will be applied from the date of the National Assembly’s Resolution, until 31 December 2019.

Social insurance

From 1 June 2017, Decree 44/ND-CP comes into effect. It stipulates that employer contribution rates to the Labour, Accident and Occupational Diseases Fund will be 0.5% of the salary fund for compulsory social insurance contributions.

The Labour, Accident and Occupational Diseases Fund is part of the Social Insurance Fund, managed by the Social Insurance Authority. Currently the employer contribution rate is 18% but the new contribution rate will reduce this to 17.5%.

Benefits of the change

  • The minimum common base salary will increase the salary of employees working in state-owned companies and organisations. The common base salary is used to calculate the maximum salary for contribution to compulsory insurance, so this will affect employers and employees whose salaries exceed the current capped salary for contribution.
  • The reduction in contributions to unemployment insurance and social insurance will reduce the financial burden on employers as well as promote their business.
  • The social insurance contribution will reduce by 0.5% to fund the Labour, Accident and Occupational Diseases Fund following a Government review.

Potential impact

In order to be ready for the change, employers must look at their employment budget to assess how the new common based salary increase will affect them. The reduction in the unemployment and social insurance contributions for employers is a positive change, and will create benefits for foreign investors in Vietnam.

Key dates

  • The minimum common salary will increase from 1 July 2017. As a result, the maximum salary for social insurance and health insurance will increase by 1.074% (from VND 26,000,000 to VND 24,200,000).
  • Unemployment insurance will be applied for the period from the effective date of the National Assembly’s Resolution until 31 December 2019.
  • The new rate for social insurance will be applied from 1 June 2017.

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Hang  Hoang
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