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Legal Update

New Social Insurance Law

12 February 2007
Mayer Brown JSM Legal Update

Summary

On 29 June 2006 the National Assembly of the Socialist Republic of Vietnam issued the new Social Insurance Law which replaces 1995 Regulations on Social Insurance and came into effect on 1 January 2007. 

Below are some significant changes that employers should take note.

Full Update

The new Law on Social Insurance contains the following significant changes:

1.  The total maximum number of sick leave days each year in respect of employee(s) working in normal conditions are:

  • 30 days if they have contributed to social insurance under 15 years;
  • 45 days if they have contributed to social insurance from 15 years to less than 30 years;
  • 60 days if they have contributed to social insurance from 30 years and more (50 days under the old law).

Employee(s) may receive sick leave allowance equivalent to 75% of salary rate paid for by the social insurance fund.

2.  In the event a child of an employee is ill, the employee shall be entitled to the leave to care for the child each year as follows:

  • a maximum of 20 working days if the child is under 3 years of age;
  • a maximum of 15 working days if the child is from 3 to less than 7 years of age.

If this period expires and the child remains ill, his/her mother or father may continue to receive the above allowance.  This is new which was not stipulated in the old law.

3.  In respect of maternity allowance

Under the old law, maternity leave is as follows:

  • 5 months of the employee's salaries which are paid for by social insurance;

Under the new law, this is changed as below:

  • 1 month's salary based on general minimum wage rate;
  • 4 months' salaries paid for by social insurance.

In the event the mother dies after giving birth, the father shall be entitled to the above until the child is 4 months' old.

Thus, maternity allowance is lower than before.

4.  Level and mode of social insurance payment of employee(s)

Employee(s) must contribute 5% of their wages to a retirement and death fund each month.  The new law provides that from 2010 this rate shall be increased by another 1% for every two years up to a maximum rate of 8%.

5.  Level and mode of social insurance payment of employer(s)

Employer(s) must pay for the following funds:

  • 3% for a sickness and maternity fund;
  • 1% for a labour accidents and occupational diseases fund;
  • 11% for retirement and death allowance.  From 2010, this rate shall be increased by 1% every two years up to a maximum of 14%.

The above shall be paid based on the social insurance payment wage of employee(s) as discussed below.

6.  Social insurance payment wage of employee(s) shall be determined as follows:

Employee(s) shall contribute to social insurance according to the wage agreed in a labor contract. 

In the event the salary which is stipulated in the labor a contract is higher than 20 months' based on the general minimum wage rate (currently VND 450,000), social insurance payment wage upon which contributions are to be made shall be only 20 months based on the general minimum wage rate.


Author: Dao Nguyen, Ly Le

For further information, please contact:

Name: Dao Nguyen
Phone: +84 8 822 8860
Fax: +84 8 822 8864

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