New regulations on social and health insurance effective in 2007

The new Law on Social Insurance (LSI) issued on June 29 th 2006 and has come into effect on January 1 st 2007. The Employment Insurance Provisions (EIP) will come into effect on January 1 st 2009.

Generally, the new Law will have significant impact on employees, more than employers.

Effects on employers' SI contribution:

SI contribution rates are fixed and regulated by the Law on Social Insurance and the rates will be gradually increased. However, the employer will not be affected immediately by the increase. The contribution schedule are as follows:

Employer Employee

From January 2007 to December 2009

15% 5%

From January 2010 to 2014

≥18% ≥8%

Since 2015

18% 8%

Effects on employees' SI benefits:

Under old regulations, the contribution salary isn't limited and base on the employees' contracted salary. Under the LSI, if the employee's contracted salary exceeds the maximum contribution salary, the benefits have some changes.

For example:

Employee A is an Accountant. A's net contracted salary is VND 12,000,000. According to the current regulation minimum salary is VND 450,000, maximum salary equals to 20 x minimum salary or VND9,000,000.

Calculation her maternity benefits

  • Under old law : Total benefits is VND60,000,000 (including salary for 4 months maternity leave and 1 month salary of one-off maternity allowance)
  • Under the LSI : Total benefit is VND36,900,000 (including salary for 4 months maternity leave and 2 months of minimum wage of one-off maternity allowance)

Calculation her pension benefits upon retirement

  • Under old regulation:
  • Monthly pension salary (paid until death): VND9,000,000
  • One-off pension allowance: VND18,000,000
  • Under the LSI:
  • Monthly pension salary (paid until death): VND 6,750,000
  • One-off pension allowance: VND13,500,000

Unemployment insurance

This is the first time, the LSI has introduced unemployment insurance. It will apply to the employers who employ more than 10 employees. The contribution rate is small, which reflects the limited benefits of the program: the employer, employees, and the State will each contribute 1% of the salary on which contribution is based and which does not exceed the maximum salary.

New obligation of the employer to pay sick and maternity SI benefits

According to the LSI, the Employer will pay the employees their SI benefit in case of sickness and maternity leave. The LSI also fixes the minimum year to contribute SI is 20 years instead of 30 years for man and 25 years for woman before.

Obviously, the LSI will have a significant impact on both employers and employees, especially employees who has high salary. The employers need to recheck provision in its internal labor regulations that relate to SI.