impact from the proposal to reduce the minimum number of years of social insurance payment in Vietnam, reduce the minimum number of years of social insurance payment in Vietnam, reduce the minimum number of years of social insurance payment from 20 years to 15 years to enjoy pension in Vietnam, reduce the minimum number of years of social insurance payment in Vietnam,

Impact from the proposal to reduce the minimum number of years of social insurance payment from 20 years to 15 years to enjoy pension in Vietnam

One of the main points in the draft amendments to the Law on Social Insurance by the Ministry of Labor, War Invalids and Social Affairs of Vietnam is the proposal to reduce the minimum number of years of paying social insurance premiums from 20 years to 15 years in order to allow employees to enjoy pensions earlier in Vietnam.

This proposal to reduce the minimum number of years of contribution is expected to provide employees with more benefits, most notably the flexibility to make their own decisions about whether to continue working to enjoy the higher pension benefits or not depending on the health conditions of them, life plan,…

Thereby, if employees are currently required to work for at least 20 years to be eligible to receive pensions, if the proposal is approved, they will only need to work for at least 15 years to enjoy pensions, provided that they meet the retirement age requirement.

For employees who are not healthy enough to work because they have reached retirement age (about 60 years old), it will be difficult for them to continue working for many more years to receive their pension. For them, the one-time payment (lump sum social insurance) including the employer’s share for the remaining years to reach the minimum number of 20 years of payment is too difficult economically.

Therefore, with this proposal, employees will have more space to adjust their retirement plans, in balance with the number of years of contribution.

To be fair, when taking pension before the 20 years mark of paying social insurance premiums, employees will have their benefits reduced by % corresponding to the number of years they quit before the mark. Accordingly, they will not receive the 45% of the premium salary but only about 33.75% to 42.75%.

Specifically, male employees participating in social insurance from 15 to under 19 years, the pension for each year of payment is calculated as 2.25% of the average monthly salary on which social insurance is paid. Male employees who have paid social insurance premiums for 20 years or more will enjoy a pension of 45%, plus 2% for each year of payment thereafter. To enjoy maximum rate of 75%, employees must pay full 35 years.

Female employees who pay 15 years of social insurance premiums receive a minimum pension of 45%, then add 2% for each year of participation. To enjoy the maximum rate of 75%, female employees must pay social insurance contributions for 30 years.

For each year of retirement before fully paying 20 years of current common social insurance, female employees will be deducted 2% of the benefit rate and male employees will be deducted 2.25% of the benefit rate for up to 5 years. If leaving early before the required retirement age, 2% of the annual benefit rate will be deducted, applicable to both men and women.

Conversely, male employees who have paid social insurance contributions for more than 35 years and female employees who have paid social insurance contributions for more than 30 years, in addition to the maximum pension, will receive a lump-sum allowance for the number of excess years.

Impact on business

In addition to creating more conditions and options for employees, we also need to look at the overall picture of the economy, including the employer’s perspective on the proposal to change the number of years of minimum contribution to receive the above pension.

Because at present, usually 1 year before being eligible for retirement (ie the 19th year of payment), most employees will take a full year off to enjoy unemployment benefits for the time they participate in the social insurance fund (Up to 12 months equivalent to 12 years of paying unemployment insurance) or if they do not intend to receive a pension, they can choose the lump sum withdrawal of social insurance, which also requires a precondition of no insurance participation within 1 year.

With this proposal, employees may be able to leave simultaneously if they are in the 14th year of payment because they have decided to leave when they have paid the full 15 years or take other options.

Giving employees more options will also affect the psychology of a large group of employees, even creating a Domino effect where employees discuss to leave early, or even withdraw completely from the insurance system.

Therefore, considering the current situation of the economy as well as the beliefs and action trends of Vietnamese employees, the Ministry of Labour, Invalids and Social Affairs of Vietnam should consider this proposal more closely regarding its impacts on the economy. It is necessary to ensure the rights of employees as well as the stable development of the economy through the pillar which is the Vietnamese enterprises.

The draft Law on Social Insurance has been consulted until April 2023, is expected to be submitted to the Government in June, submitted to the National Assembly for discussion at the October 2023 National Assembly session, and approved in May 2024 and come into effect from January 1, 2025.

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.


    Your infomation

    ***Other service of ASL LAW – full service Vietnam law firm ***  
    Retainer service to enterprises International trademark registration
    Oversea investment consultancy for Vietnamese enterprises Patent in Vietnam
    PCT Patent in Vietnam PCT Patent Vietnam Entry
    Intellectual property services (Vietnam IP Firm) Vietnam Patent Agent
    Trademark in Vietnam Vietnam Patent Firm
    Vietnam Trademark Agent Patent translation in Vietnam
    How to register trademark in Vietnam Vietnam Patent Translation Agent
    Copyright in Vietnam Vietnam IP Firm
    Vietnam Trademark Vietnam IP Agent
    Notes to company formation in Vietnam M&A
    How to open company in Vietnam Banking & financial services
    Open representative office in Vietnam Contract consultancy
    Establish company in Vietnam Employment and labor
    Corporate services in Vietnam Litigation and dispute resolution
    Vietnam Law Firm Franchise in Vietnam
    Vietnam Antidumping Law Firm Vietnam Franchise registration
    Vietnam countervailing law firm Vietnam Business Law Firm
    Vietnam Real estate law firm Vietnam construction law firm
    Law firm in Hanoi Law Firm in Ho Chi Minh
    Debt collection in Vietnam Debt recovery law firm in Vietnam
    Debt collection law firm in Vietnam Vietnam Debt Collection law firm
    IP agent in ASEAN Establish R.O in Vietnam
    Setting up a foreign-invested company Setup foreign company in Vietnam
    Technology Transfer in Vietnam Technology Transfer services
    Labour law in Vietnam Employment law in vietnam
    Vietnam franchise law firm International trademark registration
    Contact Me on Zalo
    WhatsApp chat