I. Expansion of Compulsory Social Insurance Participants

The new law broadens the categories of individuals who are required to participate in Vietnam’s compulsory social insurance (SI) system. Some of the key groups now included are:

1. Business household owners: Individuals managing small household businesses must now contribute to compulsory SI.
2. Unpaid management positions in cooperatives: Members of boards of directors, general directors, or directors who do not receive a salary are now covered.
3. Part-time employees: Workers earning at least the minimum salary must participate.
4. Permanent militia and non-professional workers at the local level are also now subject to mandatory contributions.

This expansion is aimed at ensuring greater protection for more segments of Vietnam’s workforce, promoting inclusivity, and providing a broader safety net for workers. Vietnam’s Social Insurance Law.

II. New Categories Exempt from Compulsory Social Insurance

While many new participants have been included, there are also clear exemptions. Individuals in the following categories will not be required to participate in the compulsory SI scheme:

1. Individuals already receiving pensions, social insurance benefits, or statutory allowances.
2. Domestic workers, who are often employed in private households, remain exempt.
3. Individuals reaching retirement age with fewer than six months remaining for mandatory SI contributions.

This distinction ensures that vulnerable individuals, such as retirees and those already receiving social security benefits, are not overburdened with additional contributions. Vietnam’s Social Insurance Law.

III. Voluntary Social Insurance for Specific Groups

The new law provides an option for voluntary social insurance for individuals who temporarily suspend their labor or employment contracts but wish to continue contributing to SI. This flexibility allows workers in situations such as career breaks or temporary unemployment to maintain their social insurance contributions. Vietnam’s Social Insurance Law.

IV. Transition from “Basic Salary” to “Reference Level”

One of the most significant updates in the new law is the replacement of the term “basic salary” with a “reference level.” This change will serve as the basis for calculating social insurance contributions and benefits. Vietnam’s Social Insurance Law.

1. Reference Level: The reference level is now determined by the government and will be adjusted based on factors such as inflation, economic growth, and the state budget.
2. Impact on Businesses: This transition allows for more flexibility in setting contribution rates, ensuring that they are adjusted in line with economic conditions, and helping businesses manage costs while maintaining fair benefits for workers.

V. Introduction of a Social Pension Scheme

A notable addition to the law is the introduction of a Social Pension Scheme. This scheme is designed to provide financial support to older Vietnamese citizens who do not qualify for pensions or social insurance benefits. Vietnam’s Social Insurance Law.

Eligibility:

• Citizens aged 75 and above.
• Citizens aged 70-75 who belong to poor or near-poor households.

Benefits:

• A monthly social pension, the rate of which will be reviewed every three years.
• Full health insurance coverage is sponsored by the state.
• Funeral expenses will be provided to beneficiaries’ families upon their death.

This scheme enhances social welfare by ensuring that vulnerable elderly individuals receive basic financial support. Vietnam’s Social Insurance Law.

VI. Support for Employees Without Full Pension Contributions

For individuals who reach retirement age but do not meet the full contribution period required for a pension, the law offers a new solution:

• Monthly Allowance: Individuals can request a monthly allowance, which will be calculated based on the number of years they contributed to social insurance. The minimum monthly allowance will match the social pension.
• Health Insurance: Beneficiaries will also be entitled to state-sponsored health insurance.
• Death Benefits: In case of death, beneficiaries’ families will receive a lump-sum payment for unpaid allowance months, along with funeral cost support.

This provision prevents individuals who have contributed to social insurance for a shorter period from being left without financial support upon reaching retirement age. Vietnam’s Social Insurance Law.

VII. Expanded One-Time Social Insurance Allowance Options

The new law also clarifies the circumstances under which a one-time social insurance allowance can be claimed, particularly for employees who joined before 30th June 2025. To claim a one-time payment, employees must meet the following conditions:

1. They have not contributed to social insurance for at least 12 months.
2. They have less than 20 years of total contributions.

For those contributing after 1st July 2025, a one-time withdrawal will only be available in special cases such as:

• Reaching retirement age with fewer than 15 years of contributions.
• Serious illness or severe disability (cancer, AIDS, severe tuberculosis).
• Termination of employment with no renewal option for work permits or licenses.

VIII. Pension Flexibility and New Regulations

A key update in the pension system is the reduction of the minimum number of contribution years required for pension eligibility, from 20 years to 15 years. For male employees, the pension rate will be 40% of the average monthly salary after 15 years of contribution, with an additional 1% added for each year thereafter.

Additionally, for employees who continue contributing beyond the mandatory retirement age, the law introduces a one-time pension allowance, where workers receive an additional 0.5 times their average salary for each year they contribute beyond the required threshold. Vietnam’s Social Insurance Law.

Preparing for 2025

The updates in Law No. 41/2024/QH15 represent a major shift in Vietnam’s social insurance landscape, aiming to provide broader coverage, greater flexibility, and enhanced financial support for both employees and employers. Companies and workers should prepare for these changes now to ensure smooth compliance when the law comes into effect in July 2025.

NIC Global stands ready to assist businesses in understanding and implementing these changes. Contact our team of experts for a consultation on how these updates will impact your operations and workforce management. Vietnam’s Social Insurance Law.

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Details of Vietnam’s Social Insurance Law 2024: Download