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The lump-sum social insurance mechanism has always been the most controversial mechanism in the Vietnamese social insurance system. Newspapers of both the private and public sectors have always encouraged employees not to withdraw lump-sum social insurance, but instead, to wait until full retirement age to receive pensions. In the following article, ASL LAW will point out some disadvantages when withdrawing lump-sum social insurance in Vietnam.
If the employee enjoys the lump-sum social insurance regime, the employee will officially withdraw from the social insurance system. According to current regulations, this withdrawal is a complete withdrawal, employees will no longer have any milestones in the social insurance system to be able to count on if they change their minds and come back to the system.
Currently, this regulation is being proposed by many representatives to amend. Accordingly, the proposal is that employees can only withdraw their contribution to the fund, while the part paid by the employer will be preserved in the fund as a milestone so that if employees change their minds, they will be able to return to the social insurance system and have their years of contribution reserved.
According to the current provisions of the Law on Social Insurance and the Labor Law, if an employee has withdrawn social insurance once and wants to return, he or she will have to restart, calculating the number of years of payment from the beginning.
Support for employees themselves
If they are no longer in the social insurance system, when employees reach the retirement age of 60 for women and 62 for men in the coming years, they will not be entitled to pensions or financial support for old age retirement.
Until then, if they need to support themselves, not depending on or relying on their children, they will have to continue to work and apply for jobs at small agencies, which is very difficult for employees of that age.
Usually, based on practical experience, most employees at retirement age can only do spontaneous jobs such as selling food on the street, carrying street vendors, etc., or working as security guards with very low wages, here and there.
Meanwhile, if at their young age, they do not withdraw from social insurance, they will be able to enjoy a monthly pension from 45% to 75% of the average social insurance contribution during their working life.
In addition, when employees get old, illness is inevitable. If not in social insurance or health insurance, employees will certainly have to lose a large amount of money for each medical examination and treatment.
The lowest health insurance support level is currently 80% for employees of working age, 95% for retirees, and 100% for people over 80 years old who are receiving social benefits.
If employees do not participate in health insurance, they will have to pay 100% of the cost of medical examination and treatment, regardless of age.
If the employee is not in the social insurance system but still wants to enjoy the health insurance regime, the employee can choose to buy voluntary health insurance like the voluntary social insurance scheme, but the contribution rate will be very high and the benefit level is still lower than that of individuals participating in the social insurance regime.
Support for employees’ relatives
If the employee dies while participating in the social insurance regime, the employee’s relatives will receive a funeral allowance to take care of the funeral services for the employee, as well as to support the employee’s family.
This amount will be paid once by the social insurance agency to the employee’s next of kin. The current funeral allowance is 10 times the base monthly salary. The current base salary is 1.49 million VND per month. In 2023, the base salary will increase to 1.8 million VND. Thereby, since the policy of changing the base salary takes effect, the relatives of the deceased employee will receive 18 million VND.
According to the provisions of Point a, Clause 1, Article 66 of the Law on Social Insurance 58/2014/QH13, when an employee who is paying social insurance premiums dies, the person in charge of the funeral and their relatives will be entitled to a funeral allowance. Thereby, if the employee has only paid social insurance for one month but unfortunately dies, their relatives will also receive the above allowance.
This level of allowance also applies to people who are enjoying pensions, and those who have died due to work accidents or occupational diseases.
This means that when they reach retirement age and enjoy pensions, employees and their relatives will certainly receive at least 18 million VND, not to mention other support regimes from the social insurance fund such as the monthly survivorship allowance for the bereaved relatives.
However, all of these benefits will not be provided if the employee withdraws from the social insurance system.
ASL LAW is the top-tier Vietnam law firm for Employment and Labor Law. If you need any advice, please contact us for further information or collaboration.
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