Vietnam has revised its minimum wage caps and social security contributions, the majority of which took effect from January 2018. These changes will have an impact on payroll and the net take-home salaries of employees.
They consist of minimum wage changes, salary caps for unemployment insurance and social insurance contributions for foreign workers:
- Minimum wages
Being aware of Vietnam’s minimum wage rates is important for payroll compliance. There are currently two kinds of minimum wages:
Common Minimum Wage
The common minimum wage is used to calculate salaries for employees in state-owned organisations. It will increase by 90,000 VND (US$4) per month from 1,300,000 VND (US$57) to 1,390,000 VND a month (US$61) from 1 July 2018.
Regional minimum salary
Regional minimum salaries apply to employees in all non-state enterprises and to regions as defined by the government. The National Wages Council finalised the regional minimum salary rates for 2018 and they came into force from 1 January, as follows:
- Region I: VND 3,980,000 (US$174) per month;
- Region II: VND 3,530,000 (US$154) per month;
- Region III: VND 3,090,000 (US$135) per month;
- Region IV: VND 2,760,000 (US$121) per month.
- Social security
There are three types of mandatory social security in Vietnam:
- Social insurance (SI);
- Health insurance (HI);
- Unemployment insurance (UI).
SI and UI contributions apply to Vietnamese citizens only, while both Vietnamese and foreigners are expected to pay HI contributions.
Changes to social security contributions
Vietnamese employers mostly offer a low gross salary to ensure that SI/HI/UI contributions remain low, a situation that has been of benefit to both the companies themselves and their employees. But from 1 January 2018, extra payments such as responsibility, seniority, and regional allowances must be included when calculating SI/HI/UI gross salary. This situation will lead to a reduction in employees’ net take-home pay.
The renumeration used to calculate social security contributions will include basic salary, allowances and other payments as referred to in an individual’s employment contract. These could include:
- Location allowances;
- Responsibility allowances;
- Hardship, hazardous and toxic allowances;
- Area allowances;
- Mobility allowances;
- Attraction allowances;
- Other similar allowances.
Not included in such calculations are certain bonuses, incentives, meal allowances, petrol, telephone expenses, transportation and childcare.
Changes in contribution caps
From 1 July 2018, the minimum salary cap for SI/HI contributions will rise to VND 27,800,000 (US$1,220) per month from the present VND 26,000,000 (US$1,140) per month. This situation will increase the compulsory insurance contributions made by both employers and employees.
- Social insurance for foreign workers
From 1 January 2018, all foreign/expat workers will be required to make SI contributions. The fund will pay out for sickness, maternity leave, occupational diseases and accidents, retirement and death. If a foreign employee leaves Vietnam, they will be able to make a one-off pension claim.
Foreign employees will be liable to pay 8% of their salary on SI contributions, while employers will pay 17.5%.
Health insurance
Foreign workers will need to pay 1.5% of their salary out in HI contributions, while their employer will pay 3%.
Unemployment insurance
From 1 January 2018, the minimum regional salary cap for UI contributions will range from VND 55,200,000 (US$2,412) to VND 79,600,000 (US$3,479) per month depending on region.
- Region I: VND 79,600,000 per month;
- Region II: VND 70,600,000 (US$3,085) per month;
- Region III: VND 61,800,000 (US$2,700) per month;
- Region IV: VND 55,200,000 per month.
This article was first published on Vietnam Briefing.
By Koushan Das, editor, Dezan Shira & Associates.
Since its establishment in 1992, Dezan Shira & Associates has been guiding foreign clients through Asia’s complex regulatory environment and assisting them with all aspects of legal, accounting, tax, internal control, HR, payroll and audit matters. As a full-service consultancy with operational offices across China, Hong Kong, India and ASEAN, we are your reliable partner for business expansion in this region and beyond. For inquiries, please email us at info@dezshira.com. Further information about our firm can be found at: www.dezshira.com.
Vietnam has revised its minimum wage caps and social security contributions, the majority of which took effect from January 2018. These changes will have an impact on payroll and the net take-home salaries of employees.
They consist of minimum wage changes, salary caps for unemployment insurance and social insurance contributions for foreign workers:
- Minimum wages
Being aware of Vietnam’s minimum wage rates is important for payroll compliance. There are currently two kinds of minimum wages:
Common Minimum Wage
The common minimum wage is used to calculate salaries for employees in state-owned organisations. It will increase by 90,000 VND (US$4) per month from 1,300,000 VND (US$57) to 1,390,000 VND a month (US$61) from 1 July 2018.
Regional minimum salary
Regional minimum salaries apply to employees in all non-state enterprises and to regions as defined by the government. The National Wages Council finalised the regional minimum salary rates for 2018 and they came into force from 1 January, as follows:
- Region I: VND 3,980,000 (US$174) per month;
- Region II: VND 3,530,000 (US$154) per month;
- Region III: VND 3,090,000 (US$135) per month;
- Region IV: VND 2,760,000 (US$121) per month.
- Social security
There are three types of mandatory social security in Vietnam:
- Social insurance (SI);
- Health insurance (HI);
- Unemployment insurance (UI).
SI and UI contributions apply to Vietnamese citizens only, while both Vietnamese and foreigners are expected to pay HI contributions.
Changes to social security contributions
Vietnamese employers mostly offer a low gross salary to ensure that SI/HI/UI contributions remain low, a situation that has been of benefit to both the companies themselves and their employees. But from 1 January 2018, extra payments such as responsibility, seniority, and regional allowances must be included when calculating SI/HI/UI gross salary. This situation will lead to a reduction in employees’ net take-home pay.
The renumeration used to calculate social security contributions will include basic salary, allowances and other payments as referred to in an individual’s employment contract. These could include:
- Location allowances;
- Responsibility allowances;
- Hardship, hazardous and toxic allowances;
- Area allowances;
- Mobility allowances;
- Attraction allowances;
- Other similar allowances.
Not included in such calculations are certain bonuses, incentives, meal allowances, petrol, telephone expenses, transportation and childcare.
Changes in contribution caps
From 1 July 2018, the minimum salary cap for SI/HI contributions will rise to VND 27,800,000 (US$1,220) per month from the present VND 26,000,000 (US$1,140) per month. This situation will increase the compulsory insurance contributions made by both employers and employees.
- Social insurance for foreign workers
From 1 January 2018, all foreign/expat workers will be required to make SI contributions. The fund will pay out for sickness, maternity leave, occupational diseases and accidents, retirement and death. If a foreign employee leaves Vietnam, they will be able to make a one-off pension claim.
Foreign employees will be liable to pay 8% of their salary on SI contributions, while employers will pay 17.5%.
Health insurance
Foreign workers will need to pay 1.5% of their salary out in HI contributions, while their employer will pay 3%.
Unemployment insurance
From 1 January 2018, the minimum regional salary cap for UI contributions will range from VND 55,200,000 (US$2,412) to VND 79,600,000 (US$3,479) per month depending on region.
- Region I: VND 79,600,000 per month;
- Region II: VND 70,600,000 (US$3,085) per month;
- Region III: VND 61,800,000 (US$2,700) per month;
- Region IV: VND 55,200,000 per month.
This article was first published on Vietnam Briefing.
By Koushan Das, editor, Dezan Shira & Associates.
Since its establishment in 1992, Dezan Shira & Associates has been guiding foreign clients through Asia’s complex regulatory environment and assisting them with all aspects of legal, accounting, tax, internal control, HR, payroll and audit matters. As a full-service consultancy with operational offices across China, Hong Kong, India and ASEAN, we are your reliable partner for business expansion in this region and beyond. For inquiries, please email us at info@dezshira.com. Further information about our firm can be found at: www.dezshira.com.
