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THREE KEY POINTS ON SALARY AND COMPULSORY INSURANCE FROM JAN 2018

THREE KEY POINTS ON SALARY AND COMPULSORY INSURANCE FROM JAN 2018

VIVA BUSINESS CONSULTING là công ty tư vấn doanh nghiệp được tín nhiệm bởi hằng ngàn khách hàng danh tiếng từ năm 2006. VIVA cung cấp nền tảng quản lý toàn diện và nguồn lực thực thi theo cách kết hợp đồng thời của: Luật pháp và thủ tục hành chính trong kinh doanh – Quản lý thuế và kế toán – Quản trị quan hệ lao động – Quản trị tài chính doanh nghiệp – Quản trị và kiểm soát nội bộ. Năng lực của chúng tôi giúp khách hàng lường trước các rủi ro, tối ưu chi phí, kiến tạo lợi thế kinh doanh.

VIVA is a business consulting company, specializes in business compliance procedures according to local business laws and regulations since 2006. VIVA has been continuously trusted by thousands of well-known clients since 2006. We are creating added value for clients by offering one-stop business platform with exclusive and tailored-made services related to market entry and mandatory business compliances. We keep our client’s good standing in lawful and optimal manners whenever they are working and doing business in Vietnam.

Three key point on Social Insurance and salary (update 2020)

Expansion of the definition of salary will lead to increased social insurance premiums, which would increase labor costs. Insurance premiums are, in fact, a great pressure, directly affecting the business costs of enterprises, reducing the employees’ net income; and the pressure is double for the labor-intensive enterprises…

Pursuant to the Law on Social Insurance 2014, Law on Employment 2013Decree 105/2014/ND-CP and Decree 44/2017/ND-CP:

# Note 1, premiums of compulsory social insurance (SI) and salary deductions include:

  1. Pension and death fund (PF).
  2. Labor accident and occupational disease fund (LF).
  3. Sickness and maternity fund (SF).
  4. Unemployment Insurance Fund (UI).
  5. Health insurance fund (HI).

Applicable from 01/01/2018 according to the table below:

social insurance 2018

# Note 2, in addition to Premiums, the basis for calculating the payable amounts will also be changed; the Law on Social Insurance passed by the National Assembly on November 20, 2014, extends the definition of salaries as a basis for social insurance contributions which will include: 

  1. Salary. (No less than the regional minimum salary)
  2. Allowances.
  3. And other additional amounts. (new regulation)

At the same time, since January 1, 2018, the regional minimum salary continues to increase:

  • Region I: 3,980,000 dong/month (an increase of 230,000 dong compared to 2017).
  • Region II: 3,530,000 dong/month (an increase of 210,000 dong).
  • Region III: 3,090,000 dong/month (an increase of 190,000 dong).
  • Region IV: 2,760,000 dong/month (an increase of 180,000 dong).

“And other additional amounts” may be referred to as “real salary” or actual incomes. Expansion of the definition of salary will lead to increased social insurance premiums, which would increase labor costs. Insurance premiums are, in fact, a great pressure, directly affecting the business costs of enterprises, reducing the employees’ net income; and the pressure is double for the labor-intensive enterprises, newly employees with low income who are facing the daily necessary needs instead of deducting a part of their salary to deposit the insurance company and wait … over 20 years to care for their old age!

According to Euro Cham, reasonable labor costs can help companies compete. Compared with other ASEAN countries, Vietnam has the highest rate of social security contributions with 32.5%. In Malaysia, the rate is 13%, 10% in the Philippines, 5% in Indonesia and 8% in Thailand.

Vu Tien Loc, chairman of the Chamber of Commerce and Industry of Vietnam, said that the competitiveness of enterprises will be eroded, so the law needs to be amended for social insurance. However, the Ministry of Labor – Invalids and Social Affairs (MOLISA) said that the basis for compulsory social insurance contribution is much lower than that of other countries, so the figure is absolutely not high.

“Other additional amounts” means the amounts other than the salary allowances and related to the performance of work or titles in labor contracts. Other additional amounts do not include: Bonuses as stipulated in Article 103 of the Labor Code; Mid-shift meal amount; allowances for laborers whose close relatives die or get married, for laborers’ birthdays, for laborers who face hard times in case of labor accidents or occupational diseases and other allowances not related to the work performance or titles in the labor contracts. The lowest monthly salary for paying compulsory social insurance is equal to the regional minimum salary; The highest salary is 20 times higher than the base salary. (From 01/07/2018, increase the base salary from 1,300,000 VND to 1,390,000 VND; the increase of base salary makes the maximum salary when joining Social Insurance, Health Insurance be 27,800,000VND).

A special important point to note is that notwithstanding stated herein, it does not mean that 100% of the employee’s income/additional amounts will be required to pay insurance premiums; simply, only fixed amounts, monthly, are subject to deduction of insurance.

# Note 3, in addition to premiums and the basis to calculate the amounts payable, the subjects joining the insurance are also changed:

  1. Laborers working under the definite-term labor contracts of no less than 3 months.
  2. Laborers working under the definite-term labor contracts of one month to less than three months (only for social insurance, labor accident and occupational disease insurance).
  3. Foreign laborers having: work permits; practicing certificate; license.

There are currently no detailed guidelines for the subjects mentioned in Points 2 and 3 above, however, this is a mandatory trend and enterprises should prepare for the applying, planning budget and personnel costs appropriately and timely. The new regulation raises a lot of questions about the detailed guidelines for cases such as foreign workers who do not directly sign labor contracts with a legal entity in Vietnam or are assigned to work in Vietnam according to the appointment from the parent company; benefits and calculations in case the foreigners terminate their employment and return to their homeland.

In fact, some foreigners who come to work in Vietnam still keep social insurance in their countries or participate in voluntary health care. In such cases, in accordance with the new regulations on social insurance and health insurance, it will lead to the double payment of insurance for workers and employers. It would, therefore, be necessary to have a transparent legal and policy framework on the right to social insurance when the assignees return to their home countries after their duties are completed in Vietnam.

However,

In any case, the businesses must comply with the State regulations in business. The enterprises must not only comply with but also exactly comply with and optimize the regulations, thus taking the compliance into an advantage in business. To manage and control the monthly salary deductions such as social insurance, health insurance, unemployment insurance, labor incidents and occupational disease, union fund, etc. the enterprises must:

  1. Manage the employees’ records clearly and fully.
  2. Register the appropriate salary scale.
  3. Set up the policy salaries, collective labor agreements, and register as prescribed.
  4. Draft sets of coherent labor contracts.
  5. Prepare and manage the payroll, salary paid slips, salary deductions.
  6. Manage data and reports in line with relevant state agencies’ requirement.
  7. Regularly update new regulations from the competence state agencies.

VIVA’s skilled professionals can advise, implement part or all of the work involved, help you prevent, manage the risks and get rid of time-consuming events.

In addition to the compliance procedure management, we also offer additional value and services:

  1. Re-evaluate the organization chart, operational procedures.
  2. Re-evaluate the regulation on an operating organization.
  3. Re-evaluate the job description system.
  4. Re-evaluate the system of salary policies, including rules and regulations on labor discipline, bonus and welfare policies, policies of recruitment, training, development, and exploitation of manage employment relations. Update, anticipate and control the costs incurred related to salary labor.
  5. Salary budget, manage salary costs and salary deductions.
  6. Optimal compliance of labor relations according to current rules and regulations.
  7. Policy on information confidentiality, anti-conflict of interests, codes of conduct, etc.
  8. Corporate culture.

Serving method:

  1. Directly consult via telephone, mobile phone, and email.
  2. Supply one-stop services; organize skillful teams personnel to implement directly in the customer’s office.
  3. The scope of the services is designed according to the actual case and expectation.

ABOUT VIVA BUSINESS CONSULTING

VIVA is the local expertise for local business compliance procedures, has been trusted by thousands of foreign investors, multinational companies from Europe, Japan, Singapore, India, Korea, USA… for the required business compliance procedures by local laws and regulations since 2006.

Thanks for consistent of practice expertise in Business laws - Employment relations – Tax and accounting – Corporate finance – Corporate services,  VIVA has been successfully providing service for thousands of leading companies in such industries: Garment, energy, pharma, advertising, agricultural…

VIVA keeps its signature by offering one-stop business platform with regard to market entry and the mandatory business compliances. We ensure for our client’s good standing, in lawful and optimal manners whenever they are working and doing business in Vietnam.

 

VIVA not only manage business required procedures by laws but firstly places client’s compliance and good standing, in the optimal methods when offering any solution, and integrated with our intensive resources that allow us to prevent most of the risks in advance, create more benefits, advantages and business inspiration for entrepreneurs.

The insights and consistent backgrounds in Business Laws – Accounting and Corporate Finance – Tax Management – Labor Relations and Payroll – Serectarial and consistent with our exclusive standard operation processes, consisting of consultation – implementation – pratice operation help us fully protect client interests as one-stop solution.

YOU WILL RECEIVE

“If you ask any successful businessperson, they will always have had a great mentor at some point along the road.”

 

 

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