Expats May Be Required to Contribute to Social Security in 2018


As VN Express reported earlier this week, Vietnamese Government officials are looking into collecting social insurance payments – starting January 2018 – from foreigners working in Vietnam.

Today, Vietnam has three components to its social security system: social insurance (SI), unemployment insurance (UI) and health insurance (HI). As the system stands, SI and UI benefits are available only for Vietnamese citizens, while HI coverage is required for Vietnamese and foreign workers employed under Vietnam labour contracts (thus, expats employed by overseas companies with no local contract between the employee and the Vietnamese government are excluded from this system).

Foreigners working in Vietnam under a work permit, practicing licence, or practicing certificate issued by a Vietnamese organization will be allowed to participate in the new social insurance plan from January 2018 onwards. Mentioned in a report by PwC Vietnam, the word choice “allow” would imply that, effective 1 January 2018, expat employees can choose to contribute to Vietnam’s SI.

Double Taxation of Social Insurance for Expats

In practice, a good number of expatriates who come to Vietnam for a work assignment still maintain social security in their home countries or choose to purchase private health insurance. In such cases, statutory social and health insurance will result in additional costs for employees and their employers.

Social insurance in Vietnam

International Social Security agreements (often called Totalization agreements) appear to be the most suitable solution for the double-taxation issue. This plan is meant to protect the benefit rights of those working between two or more countries, and do away with situations in which workers pay social security taxes to two countries with the same income.

Another major concern for employers is that, from 2018 on, the basis for social insurance contribution will be broadened to include salaries, allowances and other supplementary incomes. This will raise labour costs considerably when compared to the current state of the law, which only counts wages and allowances.

A Sharp Increase of Foreign Workers in Vietnam

The number of foreign workers keeps increasing year after year. About 84,000 foreigners are currently working in Vietnam compared to 12,600 in 2004 (a six-fold rise), registering a 1.8 percent increase last year as the Labor of Ministry reported.

a foreigner employee

Based on a HSBC’s Expat Explorer survey, 35 percent of expats agree that Vietnam is a good place to progress their careers. The top three reasons they choose to move to Vietnam are for a new challenge (46 percent), being sent by an employer (26 percent) and to improve their quality of life (24 percent).

As economic development continues to grow (outperforming many other countries in Southeast Asia), it looks like Vietnam will soon have to come a decision on how labour law applies for expatriates and which yardstick should be used to determine their contribution to Vietnam’s social welfare funds.