Three Key Points On Salary And Compulsory Insurance From Jan 2018

social insurance

Three Key Points On Salary And Compulsory Insurance From Jan 2018

Expansion of the definition of salary will lead to increased social insurance premiums, which would increase labor costs. Insurance premiums are, in fact, a great pressure, directly affecting the business costs of enterprises, reducing the employees’ net income; and the pressure is double for the labor intensive enterprises…

social insurancePursuant to the Law on Social Insurance 2014Law on Employment 2013Decree 105/2014/ND-CP and Decree 44/2017/ND-CP:

# Note 1, premiums of compulsory social insurance (SI) and salary deductions include:

  1. Pension and death fund (PF).
  2. Labor accident and occupational disease fund (LF).
  3. Sickness and maternity fund (SF).
  4. Unemployment Insurance Fund (UI).
  5. Health insurance fund (HI).

Applicable from 01/01/2018 according to the table below:

social insurance 2018

# Note 2, in addition to Premiums, the basis for calculating the payable amounts will also be changed; the Law on Social Insurance passed by the National Assembly on November 20, 2014 extends the definition of salaries as a basis for social insurance contributions which will includes: 

  1. Salary. (No less than the regional minimum salary)
  2. Allowances.
  3. And other additional amounts. (new regulation)

At the same time, since January 1, 2018, the regional minimum salary continues to increase:

  • Region I: 3,980,000 dong/month (an increase of 230,000 dong compared to 2017).
  • Region II: 3,530,000 dong/month (an increase of 210,000 dong).
  • Region III: 3,090,000 dong/month (an increase of 190,000 dong).
  • Region IV: 2,760,000 dong/month (an increase of 180,000 dong).

And other additional amounts” may be referred to as “real salary” or actual incomes. Expansion of the definition of salary will lead to increased social insurance premiums, which would increase labor costs. Insurance premiums are, in fact, a great pressure, directly affecting the business costs of enterprises, reducing the employees’ net income; and the pressure is double for the labor intensive enterprises, newly employees with low income who are facing the daily necessary needs instead of deducting a part of their salary to deposit the insurance company and wait … over 20 years to care for their old age!

According to EuroCham, the reasonable labor costs can help companies compete. Compared with other ASEAN countries, Vietnam has the highest rate of social security contributions with 32.5%. In Malaysia, the rate is 13%, 10% in the Philippines, 5% in Indonesia and 8% in Thailand.

Vu Tien Loc, chairman of the Chamber of Commerce and Industry of Vietnam, said that the competitiveness of enterprises will be eroded, so the law needs to be amended for social insurance. However, the Ministry of Labor – Invalids and Social Affairs (MOLISA) said that the basis for compulsory social insurance contribution is much lower than that of other countries, so the figure is absolutely not high.

“Other additional amounts” means the amounts other than the salary allowances and related to the performance of work or titles in labor contracts. Other additional amounts do not include: Bonuses as stipulated in Article 103 of the Labor Code; Mid-shift meal amount; allowances for laborers whose close relatives die or get married, for laborers’ birthdays, for laborers who face hard times in case of labor accidents or occupational diseases and other allowances not related to the work performance or titles in the labor contracts. The lowest monthly salary for paying compulsory social insurance is equal to the regional minimum salary; The highest salary is 20 times higher than the base salary. (From 01/07/2018, increase the base salary from 1,300,000 VND to 1,390,000 VND; the increase of base salary makes the maximum salary when joining Social Insurance, Health Insurance be 27,800,000VND).

Special important point to note is that notwithstanding stated herein, it does not mean that 100% of the employee’s income/additional amounts will be required to pay insurance premiums; simply, only fixed amounts, monthly, are subject to deduction of insurance.

# Note 3in addition to premiums and the basis to calculate the amounts payable, the subjects joining the insurance are also changed:

  1. Laborers working under the definite-term labor contracts of no less than 3 months.
  2. Laborers working under the definite-term labor contracts of one month to less than three months (only for social insurance, labor accident and occupational disease insurance).
  3. Foreign laborers having: work permits; practicing certificate; license.

There are currently no detailed guidelines for the subjects mentioned in Points 2 and 3 above, however, this is a mandatory trend and enterprises should prepare for the applying, planning budget and personnel costs appropriately and timely. The new regulation raises a lot of questions about the detailed guidelines for cases such as foreign workers who do not directly sign labor contracts with a legal entity in Vietnam or are assigned to work in Viet Nam according to the appointment from the parent company; benefits and calculations in case the foreigners terminate their employment and return to their homeland.

In fact, some foreigners who come to work in Vietnam still keep social insurance in their countries or participate in voluntary health care. In such cases, in accordance with the new regulations on social insurance and health insurance, it will lead to the double payment of the insurance for workers and employers. It would, therefore, be necessary to have a transparent legal and policy framework on the right to social insurance when the assignees return to their home countries after their duties are completed in Vietnam.


In any case, the businesses must comply with the State regulations in business. The enterprises must not only comply with but also exactly comply with and optimize the regulations, thus taking the compliance into an advantage in business. To manage and control the monthly salary deductions such as social insurance, health insurance, unemployment insurance, labor incidents and occupational disease, union fund, etc. the enterprises must:

  1. Manage the employees’ records clearly and fully.
  2. Register the appropriate salary scale.
  3. Set up the policy salaries, collective labor agreements and register as prescribed.
  4. Draft sets of coherent labor contracts.
  5. Prepare and manage the payroll, salary paid slips, salary deductions.
  6. Manage data and reports in the line with relevant state agencies’s requirement.
  7. Regularly update new regulations from the competence state agencies.

VIVA’s skilled professionals can advise, implement part or all of the work involved, help you prevent, manage the risks and get rid of time-consuming events.

In addition to the compliance procedure management, we also offer additional value and services:

  1. Re-evaluate the organization chart, operational procedures.
  2. Re-evaluate the regulation on operating organization.
  3. Re-evaluate the job description system.
  4. Re-evaluate the system of salary policies, including rules and regulations on labor discipline, bonus and welfare policies, policies of recruitment , training, development and exploitation of human resources. Update, anticipate and control the costs incurred related to salary labor.
  5. Salary budget, manage salary costs and salary deductions.
  6. Optimal compliance of labor relations according to current rules and regulations.
  7. Policy on information confidentiality, anti-conflict of interests, codes of conduct , etc.
  8. Corporate culture.

Serving method:

  1. Directly consult via telephone, mobile phone and email.
  2. Supply one stop services; organize skillful teams personnel to implement directly in the customer’s office.
  3. The scope of the services is designed according to the actual case and expectation.

With more than 10 years of delivering business consultation for more than 1000 foreign representative offices in Viet Nam, Viva Business Consulting is capable to consult and implement any query you have in the most practical way. We prevent your business from any potential risks in advance so you can manage foreign employees in the most simple and cost effective way.

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