(Source: Viet Nam Social Security)

Legal foundation on monthly wage as basis for social insurance payment

Regulations on the basis for social insurance payment are detailed in the Labour Code 2012, the Social Insurance Law 2014 and a system of guiding documents.

From January 1, 2018, the monthly wage as foundation for social insurance payment will be defined as salary, allowances and other supplemental incomes. The new feature of the regulations from 2018 is the addition of supplemental incomes stated in the labour contract to the total sum for insurance payment.

Salary is defined as the payment stated in the salary scale applied by employers in line with the Labour Code’s Article 93. Meanwhile, allowance is the payment for special working conditions and supplemental income performance related pay.

At the same time, Provision 3, Article 30 of Circular 59/2015/TT-BLDTBXH guiding the implementation of some articles of the Social Insurance Law 2014 specifies that total wage for counting compulsory social insurance payment excludes other benefits, including bonus, bonus for helpful ideas, meals and travel allowances and other support. Wage for paying social insurance is not the whole income of labourers, as per recent comments of some enterprises.

Better ensuring interests of labourers

The new regulations on wage used for social insurance payment is one of the new contents of the Social Insurance Law 2014, which was designed based on requirements withdrawn during the implementation of relevant policies from 2007 to 2015.

Earlier, inspectors found that many businesses pay social insurance premiums for employees based on a very low wage equal to the minimum wage and much below employees’ real wage. The firms aimed to reduce costs for social insurance fees and to avoid their responsibilities, seriously affecting the interests of labourers.

Tricks like this are common in the private sector and among foreign-invested companies. In reality, many companies used two payrolls for employees, one for the real payment, and the other to submit to social insurance agencies.

In some cases, the real wage of employees was six times higher that what their employers declared to social insurance agencies. In other cases, labourers working in extremely hard and dangerous working conditions also contributed only small social insurance premium.

According to an inspection over labour, wage and social insurance launched by the Ministry of Labour, War Invalids and Social Affiars in 2011, employees’ wage as a foundation for social insurance payment was equal to only 59 percent of the real amount they were paid.

This resulted in many employees who fell ill or took maternity leave or retired only enjoying modest social insurance payments. The detailed regulations on wage for calculating social insurance payment are predicted to have great influence on society, especially the business community. The implementation of the law will be divided into two periods with specific roadmaps from 2016-2017 and 2017-2018, which is expected to ensure long-term and sustainable social welfare.

International Cooperation Department