Foreign workers may be forced to pay social insurance in Vietnam

Under the draft decree on compulsory social insurance for foreigners, the basic package would cover sickness, maternity, occupational diseases and accidents, retirement and death, which is similar to that for Vietnamese workers. If approved, the decree will come into force from January 1, 2018.

According to the draft, employees would pay a monthly insurance premium of 8 percent of their income, which would go to the retirement and death fund.

Employers would contribute 18 percent of an employee's monthly salary, including 3 percent to the sickness and maternity fund, 14 percent to the retirement and death fund, and 1% to the occupational diseases and accidents fund.

Income subject to social insurance payment includes wages, allowances and supplements in accordance with Vietnamese law.

A foreign employee whose contract has expired and not renewed, or who is eligible for pensions or monthly allowances but no longer resides in Vietnam, could still receive a one-off payment from the social insurance fund if requested.

At present, Vietnamese workers are required to pay social insurance based on the wages and allowances stipulated in their labor contracts, while from 2018, payments will also be based on any supplements mentioned in their contracts.

Early retirement and lump-sum pension payouts have been eating into Vietnam's pension fund, while employers paying workers in increments has led to losses to the social insurance fund, officials have said.

Compulsory social insurance for foreign workers would put Vietnam on a par with Thailand and the Philippines, while Singapore only requires citizens and permanent residents to pay social security, leaving temporary residents exempt from the tax.