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Probation is a process that most employees who go to work at a new business have to go through. However, do probationary employees need to pay social insurance in Vietnam? ASL LAW Firm will detail the regulations on social insurance payment for probationary employees in Vietnam in the following article.
According to the provisions of the Law on Social Insurance 2014, employees working under labor contracts from a full 1 month to less than 3 months in Vietnam will be on the list of subjects that must participate in the Social Insurance regime.
Accordingly, for labor contracts with a term of 1 month or more, employees will have to participate in the social insurance system in Vietnam and employers will be obliged to pay social insurance contributions for them.
However, the above applies only to employment contracts that include a probationary period. In the case of a separate probationary contract, this benefit will not be given to the employee, because the employee working under the probationary contract is not one of the subjects who must pay social insurance contributions in Vietnam.
Therefore, most enterprises when applying the probationary regime for employees, establish a separate probationary contract for the purpose of not having to pay social insurance for employees.
Most of the employees agree with this because, with the probationary salary of only 85% of the official position, few will want to voluntarily contribute an additional 10.5% of the official salary to the social insurance system.
Must pay social insurance for probationary employees in Vietnam
For labor contracts that include a probationary period of 1 month or more, the employer will be required to pay social insurance contributions for the employee. At the same time, employees must also pay 10.5% of their salary according to their official labor contract, similar to a full-time employee.
According to Official Letter No. 2447/LDTBXH-BHXH dated July 26, 2011, for employees whose probationary period is stated in the labor contract and that contract is subject to participation in compulsory social insurance, both the employer and employee must pay compulsory social insurance contributions for the whole probationary period.
The salary and wages used as the basis for paying social insurance contributions during the probationary period are the wages and salaries stated in the labor contract, not the probationary salary.
However, although the regulations are issued to ensure the interests of employees, in reality, few employees want to participate in the social insurance scheme while on probation. Therefore, even if the labor contract includes a probationary period or a separate probationary contract, it is rare that the employee negotiates with the employer on the payment of social insurance and vice versa.
Not only social insurance, but in fact, employees who are on probation are also subject to the PIT rate of 10% of their salary if they have a salary of over 2 million (labor contract under 3 months). Although this PIT amount will be refunded to employees whose income is not up to the level to pay PIT at the end of the tax year, collecting this amount will cause many difficulties for employees at present.
If only counting the payable amount included in the social insurance and personal income tax, the probationary employee will only receive a salary of 64.5% of the official salary in 1 month.
That’s why most businesses currently do not apply PIT and pay social insurance to employees so that they can enjoy 85% of the probationary salary.
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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