Tiếng Việt
中文 (中国)
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The recent complicated situation of the Covid-19 epidemic, combined with the general difficulties of the world such as the Ukraine-Russia conflict, has pushed Vietnamese employees into extreme difficulties. Consequently, many employees could not bear the pressure and decided to choose the lump sum withdrawals of their social insurance to cover the immediate difficulties. This situation happens more and more often and creates a lot of pressure on society as well as the future of withdrawers. Accordingly, the Government needs to quickly amend regulations on lump-sum social insurance in Vietnam to help the people make the right decisions.
Currently, the regulation of paying social insurance premiums for at least 20 years before receiving a pension puts many employees in a difficult situation because this period is too long.
For employees who have reached retirement age and are only a few years short of contribution, this problem is easy to solve. However, for employees who are under the retirement age and have many years left, they have no choice but to continue to work in the business to pay the social insurance contributions.
Another option is to pay voluntary social insurance, but for the majority of employees, this method is too expensive because employees have to pay almost all of the employer’s percentage.
The above reason plus the fact that the unorthodox information on social networks has caused employees to gradually lose faith in Vietnam’s social insurance system, thinking that the Government and the State created this system to bully and abuse the people.
Thereby, this situation led to the consequence that in the first 3 months of this year, the whole country had more than 208,900 people enjoying lump-sum social insurance (up 1% over the same period last year). In the 2016-2021 period, more than 4.59 million people receive lump-sum social insurance benefits.
On average, 1 out of every 2 people participating in social insurance has 1 withdrawal and the next year is always higher than the previous year. In the group receiving lump-sum social insurance, there is a strange situation that it is, in fact, the women who make up the majority while it is women who will benefit from the social insurance system much more than men.
The lump-sum withdrawal of social insurance not only makes it difficult for employees to get by in old age but also creates pressure on the Vietnamese government and state.
Because contrary to unorthodox rumors online, the State of Vietnam will not stand by and watch citizens without pensions survive on their own. Instead, the Government will have a separate budget to take care of the welfare and pension system for the elderly without pensions.
With more and more employees falling into the group of elderly people without pensions plus the rapidly aging population (it is expected that by 2030, 20% of the population will be over 60 years old), the Government of Vietnam will be under great pressure to maintain a harmonious and peaceful society.
Status of receiving lump-sum social insurance in Vietnam
Currently, for employees who come to withdraw lump-sum social insurance, employees working at the Social Insurance Agency have been thoroughly understood that they have the responsibility to clearly explain to employees the benefits, losses, and damages when withdrawing lump-sum social insurance.
Furthermore, the employees at the Social Insurance Agency will advise the withdrawers to reserve, and continue to participate in the social insurance regime in order to have a pension later in life.
However, if the withdrawers decide to continue, the social insurance agency still has to complete the procedure according to regulations.
In terms of procedures, it is difficult to change, but in terms of regulations, creating or changing conditions to make employees feel like they will lose a lot of money when withdrawing lump-sum social insurance is something that the authorities can execute.
Currently, according to the assessment of the Ministry of Labour, Invalids and Social Affairs, the lump-sum withdrawal of social insurance mainly occurs in the group of employees with low income and no accumulation. That’s why when they lose their job, the employees face many economic pressures, typically pressure to pay bills for electricity, water, food, housing, clothes, school fees, medical bills, etc. Consequently, the employees will have a tendency to choose a short-term solution rather than the long-term future.
This happens especially more for female employees because the pressures on women regarding child-rearing, family care, and employment are much more unpredictable than male employees.
Thereby, when faced with the choice of having to take a loan at a high-interest rate, with interest on top of interest to take care of life and receive lump-sum social insurance without risk in the short term, employees often choose the latter option.
There are even cases when the employees have less than 1 year of working after quitting, they choose the method of “mortgage social insurance books” to receive immediately an amount equal to only 50-60% of the amount they should have been entitled to.
The above situation shows how desperate the employees are, and at the same time raises a new problem that needs to be solved in addition to the lump-sum social insurance system, which is how to solve the root cause of the difficulty to make the employee happy and please that they do not need to think about withdrawing lump-sum social insurance to cover difficulties.
According to experts, in addition to the objective cause of the outbreak of the Covid-19 pandemic, which makes businesses have no choice but to cut positions, there is another reality in Vietnamese society that makes it difficult for employees to work is that at present, businesses will often cut or fire elderly employees (usually over 40), causing employees to lose their jobs before reaching retirement age.
Obviously, when they are old, businesses don’t want to keep the employees let alone considering to hire elderly employees to a brand new position and paying social insurance for them.
Changing regulations on lump-sum social insurance in Vietnam
The situation from the business perspective is very difficult to solve. However, for the regulation of lump-sum social insurance, there should be no such rigidity.
Accordingly, in order to reduce the number of employees who choose to withdraw lump-sum social insurance, the Ministry of Labor, War Invalids and Social Affairs has proposed to amend the regulations in the direction of reducing the number of years of social insurance payment, currently a minimum of 20 years of payment.
Therefore, according to the proposal, the employees can receive pensions from 10 years to 15 years or 20 years and more. The choice will largely base on the situation of the employee.
Obviously, with a reduced number of years of payment, the benefit level will also decrease accordingly, but even if a pension is less than 2 million, 1 million, or even a few hundred thousand dongs, it is better than having no income at all, creating a burden for the family, children, and society.
In addition, according to the proposal of the Ministry of Labor, War Invalids, and Social Affairs, our country also needs to supplement the child-rearing allowance system and increase policies to support businesses to maintain jobs with middle-aged employees to avoid the dismissal of employees who have reduced working capacity but have not yet reached the retirement age as prescribed by law.
Not only that but the proposal also includes amending the lump-sum social insurance withdrawal regulation in the direction of only allowing the withdrawal of the employee’s contribution. Accordingly, if employees decide to withdraw, they can only withdraw within 10.5% (actually, only the 8% which is paid into the pension fund, 1% is for unemployment insurance, and 1.5% for health insurance), and the 20 – 21.5% rate of the employer will not be entitled.
Although this regulation is harsh, it will certainly significantly reduce the number of people participating in lump-sum social insurance because if they want to enjoy the entire amount contributed to the Fund, including the employer’s contribution, the employees are forced to continue to follow the social insurance system and enjoy welfare regimes such as pensions, sick care in old age, etc.
Another improvement is that the Ministry of Labor proposes to supplement the regulation that for the employees who have exceeded the time to pay social insurance contributions but are not eligible for the pension, if they do not receive lump-sum social insurance, they will be entitled to social retirement benefits sooner with a higher monthly allowance than others.
Labor expert – Mr. Pham Minh Huan (former Deputy Minister of Labor, War Invalids and Social Affairs) said: “There are many reasons for withdrawing lump-sum social insurance, so it is necessary to quickly adjust relevant policies, especially to amend the Law on Social Insurance, including reducing the number of years of payment to receive the pension. People who have paid social insurance contributions for more than 10 years are often middle-aged, they easily lose their jobs and often found it difficult to find new jobs to continue paying, so in order to keep them in the system, they need easier conditions for pension enjoyment, and other policies to support them.”
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