Payroll impact of Vietnam’s 2018 changes to Statutory Social Insurance

Several payroll changes are expected in Vietnam in 2018 due to new social insurance regulations that will take effect from 1 January.

Now is the time for companies in Vietnam to prepare their budgets for the new-year payroll changes. As the changes will affect employee income (net take home) it’s prudent to inform staff in plenty of time.

What is changing?

From 1 January 2018:

  1. The social insurance (SI) contribution will be applicable to foreigners hired in Vietnam, or under a work permit
  2. The General Minimum Wage (GMW) will increase from VND 1.3m to VND 1.39m which increases the cap for social insurance contributions
  3. Extra payments such as the responsible allowance or regional allowance will be included in the SHUI (Social - Health - Unemployment - Insurance) Base Salary.

Points one and three are being implemented as part of Vietnam’s 2014 Social Insurance (SI) roadmap, while point two relates to the Vietnam government’s budget for the public service sector.

Social insurance contribution for foreign employees

All foreign/expatriate workers will be eligible for SI contributions from 1 January 2018, as regulated by the 2014 Social Insurance Law. As recently regulated in Decree 44/2017/ND-CP and Decision 595/QD-BHXH on 14 April 2017, SI contributions are applicable to foreigners hired in Vietnam, or under a work permit.

While at the time of publishing, there is still debate as to how to implement the SI benefit claim process (further guidance from the SI authority is needed), Compensation and Benefits (C&B) Managers should prepare for the changes now. They should allow for extra budget for foreign headcount, and communicate promptly about the employee’s contribution (obligation and benefits), as how this will affect their net take-home pay.

Increase to the general minimum wage

As legislated by Congress on 13 November 2017 the general minimum wage increase from VND 1.3m to VND 1.39m from 1 July 2018. This will affect company payroll budgets due to the subsequent SI contribution cap increase.

The below table shows how much will be contributed to SI and HI for foreigners from January 2018:

 Vietnam SI and HI contributions for foreigners in 2018

Base / insurance salary

In order to optimise their budgets, companies in Vietnam may build a low basic salary (gross salary) in their total income structure to make the SHUI contribution lower. This practice is beneficial for both employer and employee. However, it will be impacted from 1 January (as per official letter 595/QD-BHXH, Circular 47/2015/TT-BLĐTBXH, and 59/2015/TT-BLĐTBXH, Decree No. 05/2015/ND-CP) as ‘extra payments’ will be included in the SHUI base salary. Companies should review these extra payments in their salary structures and take action soon for the sake of both themselves and employees who may feel unhappy about the lower net take-home result.

Below is a summary of inclusive / exclusives that may help Vietnam HR and payroll departments in their budget planning and C&B Strategy.

 A summary of inclusive / exclusives that may help Vietnam HR and payroll departments in their 2018 budget planning and C&B Strategy.

Talk to us

TMF Vietnam’s HR and payroll professionals can provide support with regard to the social insurance regulation changes, and impact to payroll calculations in 2018.

Need more information? Get in touch with us today.

Find out how our HR and payroll services can help drive efficiency in your business.

Hung  Nguyen Duc
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