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Supporting trade union fees for Vietnamese enterprises with union fee reduced by half

Given the challenging economic situation in Vietnam, where major producers of Vietnam’s key goods face declining orders and union fee reductions, the government has proposed that the Vietnam General Confederation of Labor (VGCL) consider reducing union fees by 50%. This would mean a reduction from 2% to 1% of the mandatory fee, with an extended payment period throughout 2023.

As a result, starting from the present time until the end of 2023, Vietnamese enterprises identified as facing difficulties, with a labor force reduced at least by half when participating in the compulsory social insurance system, will have their union fees deferred.

It is worth noting that the determination of the number of reduced workers will be calculated from February 2023 until the policy takes effect. Workers identified as having reduced employment include those who have quit their jobs, had their contracts temporarily suspended, or are on unpaid leave.

The deadline for labor unions in provinces and cities, as well as sectoral labor unions, to review and identify eligible local businesses for this comprehensive support policy is before January 31, 2024.

Regulations on Trade Unions and Trade Union Fees in Vietnam

In Vietnam, the payment of trade union fees is part of the national trade union system and is governed by the Labor Code.

All workers who are members of a trade union organization are responsible for paying trade union fees. Trade union members include workers in enterprises, government agencies, organizations, and self-employed individuals.

The rate of trade union fees is calculated based on the income of the worker. According to the provisions of the Labor Code, the maximum trade union fee rate must not exceed 2% of the taxable income of the worker. Therefore, workers are required to contribute 2% of their social insurance-covered income to the trade union funds.

When this fee is collected, half of it is remitted to the higher-level trade union, while the other half remains for trade union activities at the enterprise level.

According to Vietnamese legal regulations, not all enterprises are required to have trade unions. The specific number of workers that triggers the requirement to establish a trade union is specified in the Labor Code and relevant implementing documents.

Specifically, enterprises with 10 or more workers are required to establish a trade union. In cases where an enterprise does not have a trade union, they must take alternative measures to ensure the rights and benefits of workers.

Supporting Trade Union Fees for Vietnamese Enterprises

The year 2023 is a challenging economic year for the majority of Vietnamese enterprises, as indicated by the decrease in new business establishments and an increase in business closures compared to the same period last year.

At its peak in the second quarter of 2023, Vietnam experienced a severe downturn, with prolonged deflation. The issue of unemployment continued to affect many major producers of key export items, particularly to strong markets such as the United States.

Therefore, the policy of reducing trade union fees can help support businesses by providing them with greater financial flexibility to rehire workers or restructure their business operations.

Given Vietnam’s difficult circumstances, the Private Economic Development Research Board (Board IV) previously recommended not remitting trade union fees to higher levels (reducing by half) until the end of 2024, while retaining these funds at the local level to support workers.

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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