Nguyen Thanh Tram, Le Tuan Anh, Nguyen Thi Thanh Xuan Vision & Associates[1]
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| Senior citizens in Bach Dang ward, Hai Ba Trung district, Hanoi, receive pensions and social insurance allowances via the Vietnam Post system__Photo: VNA |
The 2024 Law on Social Insurance (the Law) will take effect on July 1 next year and will supersede the 2014 Law on Social Insurance (the 2014 Law), which had a number of articles amended under Law 84/2015/QH13, Law 35/2018/QH14, Labor Code 45/2019/QH14, and the National Assembly’s Resolution 93/2015/QH13 of June 22, 2015, on implementation of the policy on one-off payment of social insurance benefits to employees. The Law aims to address the shortcomings of the 2014 Law so as to make it consistent with the 2019 Labor Code and concretize the goals set forth in the Party Central Committee’s Resolution 28-NQ/TW of May 23 2018, on reform of social insurance policies (Resolution 28), such as expanding the coverage of compulsory social insurance; further promoting modernization of social insurance management; and ensuring convenience and transparency for social insurance participants and beneficiaries.
This article introduces novel and amended provisions of the Law as compared to the 2014 Law, particularly those on enterprises and employees paying social insurance premiums based on the salary regime decided by employers.
Coverage and beneficiaries of social insurance
The Law amends the provisions on employees being Vietnamese citizens who are required to participate in compulsory social insurance. Accordingly, compulsory social insurance will apply to those who work under indefinite-term labor contracts or labor contracts with a term of full one month or longer, even when the employee and employer agree on another name of their contract (instead of labor contract under the 2014 Law) but such contract has the contents showing paid jobs, salary, and management, administration and supervision by one contracting party.
It also expands the coverage of compulsory social insurance to Vietnamese citizens, including also corporate managers, supervisors, representatives of state capital, and representatives of enterprises’ capital; members of the Board of Directors, Chief Executive Officers, members of the Board of Supervisors or supervisors who are not salaried, and part-timers whose monthly salary is equal to or higher than the lowest salary level used as a basis for payment of compulsory social insurance premiums.
Worthy of note, the Law states that in the first month of work or work resumption, if an employee takes a sickness leave for 14 working days or more, he still has to pay social insurance premiums for that month.
Meanwhile, the Law adds types of employees who are not required to pay compulsory social insurance premiums. They include: (i) foreign citizens working in Vietnam who are not subject to compulsory social insurance and sign labor contracts with a term of full 12 months or longer with employers in Vietnam, unless otherwise provided by a treaty of which Vietnam is a member; and (ii) corporate managers, supervisors, representatives of state capital, and representatives of enterprises’ capital who are not salaried and have reached the retirement age, unless such a person’s social insurance premium payment period is at most six months shorter than the law-specified period; in this case, these employees must continue to pay insurance premiums like compulsory social insurance participants in order to receive pension under regulations.
Social insurance premium payment
The Law clarifies that the monthly salary will be used as a basis for payment of compulsory social insurance premiums for employees receiving salaries decided by employers. The monthly salary includes: salary paid for an employee based on his job/title; salary-based allowances; and only other additional amounts agreed to be paid regularly and stably in each period of salary payment (instead of all other additional amounts as stated in the 2014 Law).
The Law extends the deadline for employers to pay compulsory social insurance premiums. Accordingly, in case of making monthly premium payment, employers may pay compulsory social insurance premiums (the amounts under their obligation) no later than the last day of the subsequent month (instead of the last day of the current month as stipulated in the 2014 Law).
With respect to management of the payment of social insurance premiums, the Law adds provisions on management of the collection and payment of social insurance premiums, defining responsibilities of related agencies in the identification and management of entities liable to participate in social insurance.
To secure the enforcement of social insurance policies, the Law provides certain measures, such as forcing those making late payment or evading payment of compulsory social insurance and unemployment insurance premiums to fully pay the late-paid amounts and concurrently pay an amount equal to 0.03 percent per diem (similar to cases of late payment of taxes) on the late-paid amounts and the number of days of late payment to the social insurance fund and unemployment insurance fund. Other measures include imposing administrative sanctions for acts of making late payment of compulsory social insurance and unemployment insurance premiums. For acts of shirking premium payment, the Law requires administrative sanctioning or examination for penal liability.
The above measures aim to minimize late payment or evasion of payment of social insurance premiums, particularly late payment or payment evasion for a long time, making the payable premiums irrecoverable. This is also expected to help guarantee the rights of employees to participate in and benefit from social insurance.
Pension enjoyment rates
The Law specifies conditions on the minimum number of years of social insurance premium payment for employees to receive pension. It says that participants in compulsory social insurance or voluntary social insurance may receive pension when they reach the retirement age as specified by the Labor Code and have paid social insurance premiums for full 15 years or more (instead of 20 years or more under the 2014 Law).
This amendment is aimed at increasing the number of social insurance participants, and creating opportunities for those who have reached the retirement age but yet to pay social insurance premiums for full 20 years to enjoy monthly pension. This also encourages employees to reserve the premium payment period and continue to pay social insurance premiums so as to receive monthly pension instead of receiving a lump-sum social insurance benefit.
Regarding monthly pension levels, the Law retains the levels set in the 2014 Law, specifically as follows:
For female employees, the monthly pension is equal to 45 percent of the average salary used for social insurance premium payment, corresponding to 15 years of premium payment. After that, this level will be added with 2 percent for every additional year of premium payment but the total level must not exceed 75 percent.
As for male employees, the monthly pension is equal to 45 percent of the average salary used for social insurance premium payment, corresponding to 20 years of premium payment. After that, this level will be added with 2 percent for every additional year of premium payment but the total level must not exceed 75 percent.
However, the Law revises the provisions on monthly pension for persons who receive pension due to reduced working capacity, saying that in case a person retires under six months earlier than the date he reaches the law-specified retirement age, his pension enjoyment rate will not be reduced. If he retires between full six months and under 12 months earlier than the date he reaches the retirement age, his pension will be reduced by 1 percent (meanwhile, under the 2014 Law, for one year of early retirement, the pension enjoyment rate will be reduced by 2 percent; if a person’s age upon early retirement has an odd period of up to full six months, the reduction rate is 1 percent, but no reduction will be applied if his age upon early retirement has an odd period longer than six months).
At the same time, the Law adds some provisions on monthly pension rates. Accordingly, in case a male employee has paid social insurance premiums for between full 15 years and under 20 years, his monthly pension will be equal to 40 percent of the average salary used for social insurance premium payment, corresponding to 15 years of premium payment; after that, this rate will be added with 1 percent for each year of additional premium payment.
The calculation of monthly pension of employees varies from country to country. If an employee is eligible for receiving pension under a treaty to which Vietnam is a contracting party but has paid social insurance premiums in Vietnam for less than 15 years, each year of premium payment under such treaty is regarded to be equal to 2.25 percent of the average income used as a basis for social insurance premium payment (i.e., equal to the benefit level applicable to male employees working in Vietnam and having paid premiums for 20 years as mentioned above). This provision aims to facilitate implementation of social insurance agreements with foreign countries, such as the Republic of Korea, including the agreement on calculation of the total period of social insurance premium payment under the laws of the two signatories to the agreement in order to determine the conditions for enjoyment of social insurance benefits under the law of each signatory for employees working in both countries.
One-off allowance upon retirement, one-off social insurance benefit
Like the 2014 Law, the Law allows male employees having paid social insurance premiums for more than 35 years and female employees with the premium payment period longer than 30 years upon retirement to receive, in addition to pension, a one-off allowance equal to 0.5 time the average salary used for social insurance premium payment for each year of excessive payment until the retirement age.
However, the Law adds the provisions on one-off allowance after an employee fully meets the law-specified conditions for retirement, aiming to encourage employees to continue premium payment after the retirement age. Specifically, for an employee who has fully satisfied the law-specified conditions for receiving pension and continues to pay social insurance premiums, he will be entitled to receive a one-off allowance before retirement that is equal to twice the average salary used as a basis for premium payment for each year of premium payment exceeding 35 years, for male employees, or 30 years, for female employees, in the period from the date he reaches the retirement age to the date of retirement.
The Law also adds several cases concerning payment of one-off social insurance benefits, permitting those who have terminated social insurance premium payment to receive one-off social insurance benefits if they make reasonable requests. It states that an employee who meets the condition on retirement age but whose premium payment period is shorter than 15 years may choose to receive monthly allowance instead of enjoying one-off social insurance benefit.
One-off social insurance benefits will also be granted to: (i) those suffering a working capacity reduction of 81 percent or more; people with extremely severe disabilities; (ii) employees who, by the effective date of the Law, have the period of social insurance premium payment shorter than 20 years and, after this period, are neither subject to compulsory social insurance nor participate in voluntary social insurance; (iii) employees who are eligible to receive pension under regulations but do not continue to reside in Vietnam; and (iv) employees whose labor contracts are terminated or whose work permits, practice certificates or practice licenses expire but who are not eligible to have such papers extended.-
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