Overview of Vietnamese Social Insurance and Its Impact on Companies and Expatriates Due to Legal Reforms
2024/09/07
- Certified Public Accountant in the United States
- Yuzuki Watari
Workers earning salaries in Vietnam, including Japanese expatriates, are required to enroll in compulsory insurance.Compulsory insurance consists of three types: social insurance, health insurance, and unemployment insurance. For foreigners, only social insurance and health insurance apply. Due to the amended Social Insurance Law promulgated on June 29, 2024, and the increase in the basic wage for public servants effective July 1, 2024, there have been changes to social insurance premiums.
This paper explains the outline of social insurance in the first half and discusses the impact of legal revisions and the increase in basic wages for public servants on insurance premiums in the second half.
1. Basics of Social Insurance and Changes Due to Legal Amendments
1.1 Overview of Compulsory Insurance in Vietnam and Method for Calculating Social Insurance Premiums
The compulsory insurance in Vietnam is as follows.
| Coverage | Eligible Persons | Contribution Rate | |
| Social Insurance | Sickness benefits, maternity benefits, workers’ compensation and occupational disease benefits, retirement pension (including one-time social insurance), survivor’s pension | Vietnamese and foreign workers (excluding internal transfers*1） | Company contribution rate: 17.5% |
| Individual Contribution Rate: 8% | |||
| Health Insurance | 80% coverage of medical expenses (only for hospitals where health insurance is applicable) | Workers with an indefinite employment contract or an employment contract of three months or longer (excluding internal transfers *1） | Company contribution rate: 3% |
| Individual contribution rate: 1.5% | |||
| Unemployment Insurance | Benefits amounting to 60% of the average salary for the period corresponding to the enrollment duration | Vietnamese people with employment contracts of three months or longer | Company contribution rate: 1% |
| Individual contribution rate: 1% |
Employees transferred within the company who are excluded from social insurance must have “intra-company transfer” explicitly stated on their work permit.
Please be aware that even if a transfer within the company is believed to apply inside the company, cases without this notation on the work permit may be pointed out during tax audits or insurance investigations.
*1: Generally, “intra-company transferees” are also exempt from health insurance along with social insurance. On the other hand, since the exemption from health insurance is not explicitly stated in the law, it is recommended to confirm the eligibility for exemption with the social insurance agency.
When calculating social insurance premiums, the lower amount among the following is treated as the individual’s salary.
・The total income (including executive allowances and qualification allowances) minus certain allowances such as performance bonuses, incentives, meal expenses, and workers’ compensation benefits.
・The basic salary of government employees (monthly amount: 2,340,000 VND) multiplied by 20 (approximately 280,000 yen).
It should be noted that the calculation standards will be changed from July 1, 2025, due to this legal revision. (Details are described in 1.2 III)
There is no dependent deduction in Vietnam’s social insurance, unlike Japan’s social insurance.
The basic salary for Vietnamese public servants has been on an upward trend as follows, and it is expected to continue rising in line with Vietnam’s economic growth.
Since changes in the basic salary affect individual social insurance premiums each time, it is necessary to establish a system to keep up-to-date information.
| 2019 | 2022 | 2024 | |
| Base salary of public servants (monthly) | 1,490,000 | 1,800,000 | 2,340,000 |
(Unit: VND)
1.2 Revisions to the Social Insurance Law
The revised Social Insurance Law, promulgated on June 29, 2024, and officially effective from July 1, 2025, highlights three key points that companies should be aware of.
I. Expansion of Social Insurance Coverage
Addition of Vietnamese workers, as specified below, as eligible members for enrollment.
・ompany executives who do not receive a salary (examples below)
a) Chief Executive Officer (CEO)
b) Members of the Board of Directors
c) Members of the Board of Auditors
・Part-time workers who meet the following conditions
a) Working part-time under a fixed-term employment contract of one month or longer or an indefinite-term employment contract
and
b) Have a monthly salary equal to or higher than the reference level (detailed in section III of the same item)
II. Changes to the definition of salaries subject to social insurance premium calculation
”Salaries subject to social insurance premium calculation” consist of the following three points.
a) Basic salary
b) Position and duty allowances
c) Other additional payments agreed to be paid regularly and stably during each salary period
*It has been newly specified that regular bonuses, etc., are also treated as target salaries for calculation under item c) above.
On the other hand, allowances such as incentive payments based on sales performance and one-time payments given considering the worker’s situation are excluded from the calculation target salary.
The purpose of this revision is not to change the handling of various allowances but to suppress violations through clarification of the rules.
If social insurance premiums have been calculated including service allowance etc. before the amendment, there is no problem, but if not, they must now be calculated including these going forward.
III. Change in the criteria used to calculate the base salary which is the upper limit for social insurance premiums
Until now, “base wage for public servants” has been used to calculate the base salary, but due to the recent legal amendment, the “reference level” becomes the new criterion.
The reference level is determined by the government based on a multifaceted consideration of factors such as the rise in the Consumer Price Index, economic growth, the national budget, and the condition of social insurance funds. As of September 1, 2024, the monetary amount of the reference level has not been announced, so it is necessary to closely monitor announcements from the government.
2. Impact on Japanese Companies and Response Measures
2.1 Increase in Social Insurance Premiums Paid by Companies
The increase in insurance premiums due to this legal revision will result in increased burdens on both companies and individuals.
In the case of large companies, it is common for the company to bear the full amount of social insurance premiums for expatriates, including the portion that would normally be paid by the individual; in such cases, this results in an increased burden for the company.
Since the salary used to calculate social insurance premiums for many expatriates is more than 20 times the base salary of Vietnamese civil servants, the base salary multiplied by 20 is used as the standard monthly salary for social insurance calculations.
Due to the recent increase in the base salary of civil servants, the capped base salary (monthly amount) has risen as follows.
(2,340,000 VND – 1,800,000 VND) x 20 = 10,800,000 VND
If expatriates are subject to social insurance, the company is required to pay 25.5% of the above salary (total of company and individual contribution rates).
The following is the increase in social insurance premiums due to this increase in the basic wage.
10,800,000 VND x 25.5% x 12 = 33,048,000 VND (approximately 200,000 yen per year)
If there are, for example, five expatriates, the annual cost related to social insurance will increase by about 1,000,000 yen, which is not insignificant.
Also, when a local entity or a representative office employs part-time Vietnamese workers, from July 1, 2025, it will be required to pay the company’s share of social insurance contributions for these workers.
It is also important to note that this amendment will increase the costs associated with employing part-time workers.
2.2 Measures to Prevent Unnecessary Increases in Insurance Premiums
One measure to reduce the burden of social insurance contributions is to exclude expatriates from social insurance coverage.
If an expatriate falls under “internal transfer,” it is possible to categorize them as excluded from social insurance and health insurance.
The definition of an internal transferee is specified in Article 2.1 of Government Decree 152/2020/ND-CP, requiring fulfillment of the following two conditions.
I. The transfer of a foreign parent company’s representative director, manager, expert, or technical worker to its local subsidiary or expatriate office in Vietnam (where the parent company must have a direct capital relationship with the subsidiary to which the transfer is made).
II. Worked at the parent company for at least 12 months or more
When considering the above conditions, it is necessary to be aware of the following cases.
・If transferring from a group company other than the parent company to a local base in Vietnam, it does not qualify as an internal transfer.
・If the regional headquarters are located in Singapore or Hong Kong, and the Vietnamese corporation is linked as a subsidiary of that headquarters (i.e., the grandchild company of the Japanese parent company), the regional headquarters becomes the parent company of the Vietnamese corporation, making it difficult to consider a transfer from the Japanese company to the Vietnamese corporation as an internal transfer.
As mentioned above, due to recent revisions to social insurance laws and the increase in base wages for public servants, the social insurance premium burden for companies and their expatriates has been increasing.
If insurance premiums are paid according to the method before the legal amendments, it may be discovered during a tax or social insurance audit, potentially leading to unexpectedly large expenses including penalties.
Taking this legal change as an opportunity, it is recommended to verify the proper payment status of social insurance premiums, seeking expert assistance if necessary.
【Contact Information】 I-GLOCAL CO., LTD.
Person in charge：Yuzuki Watari yuzuki.watari@i-glocal.com
Ho Chi Minh Office +84-28-3827-8096 Hanoi Office +84-24-2220-0334
Related reports are here
We introduce reports related to this theme below.
Please be sure to take a look at them together.
・2024年社会保険法の主要な変更点（前編）
・2024年社会保険法の主要な変更点 （後編）
・Points Foreign Workers Should Note Regarding the Revised Health Insurance Effective July 1, 2025
This article was translated using Yarakuzen.
