Social Insurance and Wage Compliance for FDI Enterprises in Vietnam

The new legal framework: the Law on Social Insurance 2024

The Law on Social Insurance No. 41/2024/QH15 took effect on 01/07/2025, replacing the Law on Social Insurance 2014. FDI enterprises need to review their entire HR process — labor contracts, salary scales and tables, payroll regulations, insurance declaration procedures — against the new legal framework instead of continuing to operate out of old habits.

Compulsory social insurance is a legal obligation, not a matter of agreement: any commitment between an enterprise and an employee about “not participating” or “paying extra cash instead of insurance contributions” is void. See also wage policy in the enterprise on designing salary scales as the foundation for calculating insurance contributions.

Expanded subjects of compulsory social insurance

Article 2 of the Law on Social Insurance 2024 expands compulsory coverage. In addition to employees working under indefinite-term labor contracts and definite-term contracts of 01 month or more, the law adds cases where the parties agree under a different name but the content shows paid work, wages, and the management, administration, and supervision by one party — targeting “service contracts” and “collaborator contracts” used to evade insurance obligations while the substance is an employment relationship.

The law also adds enterprise managers, controllers, and capital representatives who do not receive wages. For FDI enterprises, management positions seconded by foreign investors — even where they receive no salary from the Vietnamese company — need to be reviewed to determine participation obligations.

Wages as the social insurance contribution base

Article 31 provides that the contribution salary base for the enterprise sector includes the salary by job or title, salary allowances, and other additional amounts paid regularly and stably in each pay period. Amounts paid evenly every month in connection with performing work must be included; ad hoc, unstable amounts may be excluded — but classifying each specific amount requires careful comparison with the regulations and actual payment practice.

The contribution salary base is capped at 20 times the reference amount — enterprises paying high salaries to senior managers must apply this correctly to avoid over- or under-contribution subject to retroactive collection. Conversely, the contribution salary base must not be lower than the regional minimum wage.

Current social insurance contribution rates

Current social insurance contribution rates: Clause 1, Article 32 of the Law on Social Insurance No. 41/2024/QH15 provides that monthly the employer contributes 3% of the contribution salary base to the sickness and maternity fund and 14% to the retirement and survivorship fund; the employee contributes 8% to the retirement and survivorship fund (Clause 1, Article 33). The 22% rate to the retirement and survivorship fund in Clause 2, Article 32 applies only to non-commissioned officers, soldiers, and standing militiamen (points d and e, Clause 1, Article 2), not to employees in enterprises. In addition to social insurance, enterprises and employees must also contribute to health insurance, unemployment insurance, and occupational accident and disease insurance at rates prescribed by law (employer: 0.5% occupational accident — disease insurance, 3% health insurance, 1% unemployment insurance).

On the employee side, monthly deductions from wages under current regulations comprise 8% social insurance, 1.5% health insurance, and 1% unemployment insurance; the remainder is paid by the employer and accounted as deductible expenses when calculating corporate income tax if documentary conditions are met.

Enterprises must clearly distinguish the portion deducted from employees’ wages from the portion paid by the employer. Any late or deficient contribution gives rise to late-payment interest and may be subject to administrative sanctions. A fixed monthly withholding and remittance schedule should be set, with figures reconciled between HR, accounting, and notices from the social insurance authority to detect discrepancies promptly.

Social insurance for foreign employees

Foreign employees are subject to compulsory social insurance when they meet the conditions in Clause 2, Article 2 of the Law on Social Insurance No. 41/2024/QH15: working under a definite-term labor contract of 12 months or more with an employer in Vietnam and holding a work permit or practice certificate or practicing license issued by a competent Vietnamese authority; except for intra-corporate transferees, persons who have reached retirement age at the time of contracting, or where an international treaty provides otherwise. From 01/07/2025, eligible foreign employees apply the same contribution rates as Vietnamese employees: the employer contributes 3% to the sickness and maternity fund and 14% to the retirement and survivorship fund; the employee contributes 8% to the retirement and survivorship fund — there is no longer a separate “roadmap” as under Decree 143/2018/ND-CP.

Declaring, withholding, remitting, and finalizing social insurance

Enterprises must register covered employees within the prescribed time limit from when the employment relationship arises, declare the correct contribution salary base, and withhold and remit fully and on time each month. Declaration dossiers are now mainly processed electronically; enterprises need to assign someone to track dossier processing results so supplements can be made promptly when dossiers are returned.

When there are personnel changes — new hires, departures, adjustments to the contribution salary level, maternity leave, long sick leave — enterprises must declare promptly in the month the change arises. Late declaration leads to incorrect or deficient contributions and late-payment interest. Internal procedures should link insurance change declarations with the processes for signing contracts, salary increase decisions, and contract termination decisions so nothing is missed.

Finalizing the social insurance book upon termination of the labor contract

Upon termination of a labor contract, the employer must complete the procedure for confirming the social insurance contribution period (“finalizing the book”) and return the social insurance book to the employee — the obligation FDI enterprises most often delay, especially during mass terminations — see also workforce reduction in corporate restructuring.

Late finalization prevents employees from completing procedures for unemployment insurance, lump-sum social insurance, or transferring their contribution record to a new employer — and employees have the right to complain or sue to compel the enterprise to perform. Book finalization should be a mandatory checklist item in the offboarding process, with clear deadlines and responsible persons.

Payroll compliance: payslips, deductions, and personal income tax

Beyond social insurance, monthly “wage compliance” in operations includes: preparing payslips clearly showing each income component and each deduction; withholding and paying personal income tax as prescribed; and keeping payroll records for finalization and inspection.

The key point is consistency across three sets of figures: the internal payroll, personal income tax returns, and social insurance contribution dossiers. Unexplained discrepancies between declared taxable wages and insured wages are the first sign prompting authorities to expand their inspection — so reconcile these three data sources quarterly.

Common social insurance mistakes at FDI enterprises

Four common mistakes when reviewing compliance for FDI enterprises. First, signing contracts under different names (services, collaborators) for positions that are substantively employment relationships to evade insurance contributions — the Law on Social Insurance 2024 has closed this loophole. Second, contributing based on the regional minimum wage while actual take-home pay is much higher — subject to retroactive collection of the difference upon inspection.

Third, failing to declare changes promptly when salaries increase, so the recorded contribution period is lower than reality and affects benefit entitlements. Fourth, late book finalization when employees leave, leading to prolonged complaints. The common thread is that enterprises know the regulations but lack internal procedures to implement them consistently.

Inspection, retroactive collection, and sanctions

The social insurance authority has the power to inspect and examine enterprises’ contributions. When evasion or deficient contribution is detected, the enterprise is subject to retroactive collection of the amounts due plus late-payment interest and administrative sanctions; cases of evasion by deceitful tricks meeting the constitutive elements may also face criminal prosecution.

For FDI enterprises, the consequences go beyond fines: they affect the parent group’s compliance assessment, the enterprise may be put on the publicly disclosed list of social insurance debtors, and difficulties arise in labor-related administrative procedures.

Frequently asked questions