Vietnam: Substantial Changes Made to Social Insurance Law

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By Lien Hoang

July 8—An overhaul of Vietnam's social insurance law will require contributions by foreign workers, introduce paternity leave, extend the contribution period and let employees tap their pensions early, a state official said June 26. The last change represents a rare concession by communist leaders following a strike in March that shut down factories supplying Nike and Adidas.

In a surprising reversal, the National Assembly changed regulations on June 22 to let workers collect their pension contributions in a lump sum within a year of leaving their jobs, according to the government website. The 2014 Social Insurance Law, which will be phased in starting Jan. 1, 2016, otherwise would have required people to wait until retirement and withdraw benefits monthly. Tens of thousands of shoe factory workers went on strike to demand the right to immediate payouts.

Tran Thi Thuy Nga of the Ministry of Labor, War Invalids and Society said beneficiaries would collect as much as four times more in retirement funds if they wait rather than take the lump sum.

“The National Assembly is trying to think about how to encourage workers to save up and make contributions to social insurance,” Nga, who is director of the ministry's social insurance department, said at a seminar June 26 to explain the new insurance law.

Huynh Minh Quan, director of NVM Group, told Bloomberg BNA the parliamentary action was unprecedented and saw it as a harbinger of more workers' rights in the long term.

“It could mean more big changes in the future,” said Quan, whose management company hosted the seminar. “Right now it's a small change.”

New Rules for Foreigners and Fathers

Foreigners who have work permits in Vietnam currently do not pay into social security, but this will change under the new law, which in 2018 will make insurance mandatory for foreign nationals, as well as for workers with contracts of at least one month rather than the current two.

“There are a lot of Vietnamese who go to foreign countries to work, and there are a lot of foreigners who come to Vietnam to work,” Nga said. Including this larger workforce, she said, will help the country “expand the groups who are targeted to participate in social insurance.”

Also new for Vietnam is the idea of paternity leave. The insurance law will let men take at least five days off work for the birth of a child, up to 14 days for those expecting their wives to have twins or go into surgery.

“Parental leave is not just for women,” Nga said. “A lot of you might think it is.”

The law also makes benefits more accessible to pregnant women, who previously had to pay into social insurance for six of the 12 months before giving birth to qualify for paid time off. Starting next year, they'll have to pay for just three months.

Voluntary Contributions

Nga said Vietnam offers one of the most generous pension plans in the world, sending retirees monthly payments worth as much as 75 percent of their base salaries, compared to as little as 60 percent in other countries.

Vietnamese must generally pay into the pension fund for two decades before they can claim benefits, contributing 10.5 percent of their pay each month, while their employers must contribute an additional 22 percent.

Those who reach retirement age but haven't paid insurance for the full 20 years can still collect a pension under the social insurance law if they make a single payment to cover the missing years, Nga said.

The new law will also allow Vietnamese to qualify for higher payouts by continuing to put money into the pension system beyond the necessary 20 years up to a maximum total of 30 years' contributions.

To contact the reporter on this story: Lien Hoang in Ho Chi Minh City at lhoang@bnaglobal.com

To contact the editor responsible for this story: Rick Vollmar at rvollmar@bna.com

For more information on Vietnamese HR law and regulation, see the Vietnam primer.