EMPLOYER ACTION CODE: ACT
Long-standing government plans to require foreign workers to fully participate in the social security system have been put into effect by Decree 143/2018/ND/CP (Decree 143), although the largest cost component, employer and employee contributions for retirement and death benefits, won’t take effect until 2022.
Effective December 1, 2018, foreign workers employed or expected to be employed for one year or more who work at least 15 days per month must be enrolled in the system, excluding intra-company transferees and individuals above normal retirement age. Initially, foreign workers will be covered only by the sickness, maternity, health insurance and workers compensation benefits programs, requiring a total employer contribution of 3.5% of covered pay (equal to 20 times the monthly minimum wage for the state sector). Coverage for retirement and death benefits will apply from January 1, 2022, subject to a further employer contribution rate of 14% and an employee contribution rate of 8% of covered pay.
It’s been anticipated for some time that foreign workers would be required to participate in the social security system. The participation of foreign workers in social security will increase employment costs for employers. Companies should review the employment status of all foreign workers and identify those who now qualify for social security enrollment. Vietnam does not currently have bilateral social security agreements with other countries that would preclude participation. Payroll systems will need to be adjusted and employees will need to be informed of the changes.