I. Vietnam's official guidance on compulsory social insurance for foreigners: contribution starts from 1 December 2018
The long-awaited Decree No. 143/2018/ND-CP providing detailed guidance on compulsory social insurance applicable to foreign employees working in Vietnam ("Decree No. 143") was finally issued on 15 October 2018 and will take effect on 1 December 2018. Contribution and entitlement of each benefit regime will come into effect on different dates as summarized below.
Scope of application
Foreign employees who satisfy both following conditions the will be subject to compulsory social insurance:
- working in Vietnam under indefinite-term labor contracts, or definite-term labor contracts with a term of at least one full year with employers based in Vietnam; and
- having been granted with either (i) a work permit ("giy php lao ng" in Vietnamese), (ii) practicing certificate ("chng ch hnh ngh" in Vietnamese), or (iii) practicing license ("giy php hnh ngh" in Vietnamese).
Notwithstanding the above, the following foreign employees are not subject to compulsory social insurance:
- intra-corporate transferees in accordance with Article 3.1 of Decree No. 11/2016/ND-CP detailing regulations of Labor Code for foreign employees working in Vietnam.; and
- employees who have reached the statutory retirement age, as prescribed under Article 187.1 of the Labor Code, which is 60 years old for males and 55 years old for females.
Applicable benefit regimes
Decree No. 143 stipulates that foreign employees will be covered for all five compulsory social insurance regimes, which are currently applicable to Vietnamese employees. These include benefit regimes for: (i) illness, (ii) maternity, (iii) labor accidents and occupational diseases, (iv) retirement, and (v) survivorship. However, the application of the five regimes to foreign employees will be phased differently as follows:
- The short-term benefit regimes for (i) illness, (ii) maternity, and (iii) labor accidents and occupational diseases will apply from 1 December 2018; and
- The long-term benefit regimes for (iv) retirement and (v) survivorship will apply from 1 January 2022.
The contribution rates imposed on both employers and foreign employees will be the same as those applicable to Vietnamese employees, i.e., 8% from employees and 17.5% from employers, based on the salary used to contribute compulsory social insurance which is capped at 20 times the applicable general minimum salary as provided by the Government.
The contribution is implemented as below:
- From 1 December 2018 to 31 December 2021:
- Employer: 3.5%, including 3% for the fund of illness and maternity; and 0.5% for the fund of labor accidents and occupational diseases;
- Employee: Not applicable;
- From 1 January 2022 onwards:
- Employer: 17,5%, including 3% for the fund of illness and maternity, 0.5% for the fund of labor accidents and occupational diseases and 14% for the fund of retirement and survivorship;
- Employee: 8% for the fund of retirement and survivorship;
Other relevant regulations
- With respect to foreign employees who have multiple labor contracts with many employers and are subject to compulsory social insurance, contribution is only applied for the first labor contract, except that the contribution for labor accidents and occupational diseases benefits must be made by each employer in each labor contract.
- Lump-sum pay-out of retirement benefit: From 1 January 2022 onwards, foreign employees are entitled to claim a lump-sum pay-out of retirement benefit if satisfying one of the following requirements:
- reaching retirement age but having not contributed to social insurance for 20 years in full;
- having terminal illnesses as prescribed by law;
- being eligible to receive monthly retirement allowances but no longer residing in Vietnam;
- having labor contracts terminated or having expired practice licenses and work permits without extension.
II. Amendments to the Regulations Related to Work Permit/Certificate of Work Permit Exemption for Foreigners Working In Vietnam.
On 8 October 2018, Vietnamese Government issued Decree No. 140/2018/ND-CP amending decrees related to investment and business conditions and administrative procedures within the scope of management of the Ministry of Labor, Invalids and Social Affairs ("Decree No. 140") which takes effect on the same date. Among the amendments, Decree No. 140 has revised some of the current provisions applicable to work permit/certificate of work permit exemption for foreigners working in Vietnam. Below are some notable changes:
- With respect to the foreign labor usage plan:
- The written request for approval of foreign labor usage plan must be submitted to the provincial-level People's Committee, instead of the President of provincial-level People's Committee as previously prescribed by Decree No. 11/2016/ND-CP ("Decree No. 11");
- If the foreign employee is (i) chief representative of a representative office or head of a project office of an international organization or a non-governmental organization; or (ii) relative of members of foreign diplomatic missions in Vietnam who are permitted to work according to international treaties to which the Socialist Republic of Vietnam is a signatory, then the employer is not required to request for the approval of a foreign labor usage plan.
- With respect to certificate of work permit exemption:
- A foreign individual in charge of establishing a commercial presence in Vietnam will be exempted from obtaining a work permit, but will still be required to apply for a certificate of work permit exemption;
- Relative(s) of members of foreign diplomatic missions in Vietnam, who are permitted to work according to international treaties to which the Socialist Republic of Vietnam is a signatory, is not required to apply for a certificate of work permit exemption;
- With respect to work permit application:
- The copy of the employee's passport or a substitute for passport or other valid licenses for international travel is no longer required to be notarized;
- A work permit will be granted within the duration of five working days since the receipt of the full application, instead of seven working days as previously stipulated in Decree No. 11; and
- The employer having the head office in a province / city but having representative offices or branches at another province /city is entitled to file the application at the Ministry of Labor, War Invalids and Social Affairs.