basis for paying social insurance premiums depending on the actual salary and salary allowances of Vietnamese employees, basis for paying social insurance premiums depends on actual salary in Vietnam, actual salary as basis for paying social insurance premiums in Vietnam,

Proposal on changing the basis for paying social insurance premiums depending on the actual salary and salary allowances of Vietnamese employees in the draft revised Law on Social Insurance

Recently, the Ministry of Labor, War Invalids and Social Affairs of Vietnam has proposed to change the basis for paying social insurance premiums in the draft revised Law on Social Insurance which is open for public comment. Accordingly, employers and employees may pay social insurance based on the actual fluctuation of salary each month, instead of the salary stated in the labor contract which is currently applied at moment.

Proposal to change the basis for paying social insurance premiums in Vietnam

In the draft revised Law on Social Insurance, the Ministry of Labor, War Invalids and Social Affairs proposes two salary options as the basis for calculating monthly social insurance contributions. It is known that this proposal will apply mainly to the group of employees who are paid the regional minimum wage by the enterprise in the region or economic area where the enterprise is located.

Maintain current regulations

The first option proposed by the Ministry of Labour, Invalids and Social Affairs to keep current regulations. Accordingly, the salary used as the basis for payment of social insurance includes the salary, wage allowance and other additional amounts determined by the specific amount stated in the labor contract.

Thereby, employees will only pay a fixed rate of social insurance premium each month based on the salary stated in the labor contract, including pre-determined allowances (if any) that do not change over time.

If employees want to pay a higher social insurance premium, they will have to negotiate with their employer to amend the contract according to the actual monthly salary and salary allowances and supplements.

However, as nature, if there is a fluctuation, it will create a difficult situation for the accounting department of each company to summarize the change and submit it to the Department of Social Insurance every month, creating inconvenience and difficulty.

In fact, with a huge number of businesses and employees in Vietnam, if a large number of businesses apply this method, the Department of Social Insurance itself will not be able to summarize and confirm the payment level of the employees in a timely manner, thereby leading to the situation that it may take many months or even years for employees to be able to update their status on VSS.

This is because Vietnam’s social insurance system is still in the development stage, each officer of the Department has on average to process the records of too many employees and enterprises respectively, resulting in the difficulty when handling cases. The management was overloaded, unable to follow up, causing the debt situation, late payment of social insurance to increase sharply as well as being unable to update and check the actual salary situation of each employee.

Thereby, in order to partially solve the current situation of social insurance, many experts have proposed to increase the number of employees handling the social insurance payment at the Department of Social Insurance, reaching an average rate of one specialist account for 3000 – 4000 employees corresponding to the international rate which have had high efficiency ratio confirmed.

In addition, another option that the employer can consider applying to ensure the interests of the employees is to set the social insurance premium payment rate slightly higher than the employee’s actual salary, in terms of the maximum salary received by the employee in the preceding year.

At that time, if the employee’s salary received in that month is lower than the maximum salary received in the preceding year, the employee will have to return the difference to the employee, but the social insurance premium payment rate will still be marked with a fixed milestone each month, changing only once each year according to the translational trend.

However, although this payment method ensures the rights of employees, legally, and reduces the burden of detailed calculation for both the business and the Social Insurance Department, it makes the employer pay with a larger amount of money. Consequently, almost no businesses will use this option, but only fixed the monthly salary paid for social insurance as the regional minimum wage.

Social insurance premiums are based on actual wages, with monthly fluctuations

The second option proposed by the Ministry of Labour, Invalids and Social Affairs is the basis for paying social insurance premiums based on the actual salary, which fluctuates every month.

Considering the fact that the group of employees is mainly employees who only pay social insurance based on the regional minimum wage, while the monthly salary is doubled or even tripled, this proposal will help ensure the rights of employees than before.

Employers and employees will find it difficult to use measures such as salary allowances, bonuses, KPIs, additional payments, etc. to avoid the obligation to pay social insurance incorrectly.

Specifically, this proposal of the Ministry of Labor will be based on a predetermined amount (usually the regional minimum wage) and changes in the working process of employees. The fluctuations can be in the form of salary allowances, car allowances, travel expenses, etc.

Basically, the second option proposed by the Ministry will still be the current goal, even mandatory provisions by the Labor Code and the Department of Social Insurance. However, because the efficiency is not high, this time, the Ministry of Labor proposed to have stricter and more detailed regulations in ensuring the rights of employees, forcing enterprises to pay correctly and sufficiently in accordance with the wages received by employees.

However, the effectiveness of this option still needs to be examined because it is difficult to force employers to give up their interests and protect the rights of employees. They will still be able to find ways to make sure they don’t pay what employees actually get.

Difficulties in applying the actual insurance payment base plan

According to the provisions of the Labor Code and related documents, the benefits that are not counted as one of the payment of social insurance include: Bonus for initiative, meal in between shifts, support for petrol, phone, travel, money housing, child care, child rearing, support when employees have relatives getting married or died, birthday support, allowances for difficulties in case of occupational accidents.

Thereby, in order not to pay high social insurance premiums, the employer will transfer part of the employee’s actual salary into the above allowances to avoid paying high social insurance payments, such as support for petrol, car, phone, travel, housing for work, etc.

In some case, the employer might transfer the salary to the meal allowance in the middle of shifts if necessary. For example, a worker needs 25,000 VND for lunch, 22 labor days a month will be 550,000 VND. Employers may use tricks to increase this amount to around 1 million VND/month.

This meal rate is still within an acceptable level and thereby, will not cause the Social Insurance Department and other employees’ rights protection agencies too much attention to investigate. Only when employees themselves feel that the injustice is too great in the quality of the meal (the price of the meal is 30,000 to 35,000 but the quality is only under 20,000), leading to a strike, speaking to the press, etc., will the matter be revealed.

Not only meal allowance but other allowances will also be difficult to strictly control due to the fact that there are legitimate cases where such allowance is needed while in most cases it is unnecessary, just a trick to reduce the amount payable to the social insurance fund.

Currently, the hard regulation of allowances for calculation of social insurance premiums can only be applied to state-owned enterprises with a salary scale showing fixed amounts, although in reality, it is only calculated by three types of allowances, including position, seniority and seniority beyond the frame (if any).

With businesses that pay the minimum wage for employees, it will be difficult to hard regulate allowances for calculating social insurance premiums because each business builds a different salary scale, allowances, and money levels except for fixed levels according to standards such as plus 5-7% allowance for heavy and hazardous work, or plus 7% for trained employees. The allowances cannot be specified, so as long as it is within a reasonable range, it will be difficult to find out the details of the violations of each enterprise.


After a period of time, only when employees voice their own claim for benefits, will the Social Insurance Department receive information and deal with a few prominent cases of warning, while the rest of enterprises are unbothered, untouched.

It will be difficult to ensure the rights of employees while Vietnam’s economic situation is still in the developing stage, many places are still facing difficulties and the reality is that the current awareness of employers is only trying to get the highest profit possible, ignoring the interests of employees.

Addressing this situation will require a concerted effort by both business and government agencies through more effective, deeper, and real-world impact deterrence measures rather than ‘pilots’ penalty. In addition, although there are quite positive changes in the direction of this proposal to support employees on the surface, but in fact, it will not solve the root of the problem.

The employees themselves subjected for this proposal are also divided into two equal streams of opinion, for and against, because if they follow this proposal, they will have to lose a larger amount of money per month while the majority of Vietnamese people today do not have too much confidence in the Vietnamese social insurance system, considering that recent changes are made to their disadvantage, even if it is this proposal ‘looks good’ on the outside.

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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