In Vietnam today, the number of foreign employees coming to live and work is increasing along with the development of the economy, making it an urgent need to perfect the insurance regime for foreigners. In the past time, many foreign employees have had to terminate their labor contracts and leave Vietnam because their work permits, practice certificates, and practice permits have expired and cannot be renewed. When leaving Vietnam, are foreign employees entitled to a lump-sum social insurance scheme? What are the conditions and procedures to enjoy the lump-sum social insurance regime?
Vietnam's legal regulations on social insurance benefits for foreign employees
Pursuant to the Law on Social Insurance 2014, Decree 143/2018/ND-CP and the Law on Health Insurance 2008 (amended 2014), foreign employees in Vietnam will have to participate in i) compulsory social insurance including retirement and survivorship insurance, sickness and maternity insurance, and ii) health insurance.
Pursuant to Clause 2, Article 17 of Decree 143/2018/ND-CP, foreign employees will participate in retirement and survivorship insurance from January 1, 2022, and from then on, foreign employees are entitled to enjoy the lump-sum social insurance regime as specified in Clause 6, Article 9 of Decree 143/2018/ND-CP below:
"Article 9. Retirement regime
...6. Cases of lump-sum social insurance benefits
Employees specified in Clause 1, Article 2 of this Decree, upon request, are entitled to lump-sum social insurance benefits if they fall into one of the following cases:
a) Having reached the retirement age as prescribed in Clause 1 of this Article but have not yet paid the full 20 years of social insurance premium payment;
b) The person is suffering from one of a life-threatening disease such as cancer, polio, cirrhosis of the liver ascites, leprosy, severe tuberculosis, HIV infection that has progressed to AIDS, and other diseases as prescribed by the Ministry of Health;
c) The employee is eligible for pension as prescribed in Clause 1 of this Article but does not continue to reside in Vietnam;
d) The employee terminates the labor contract or the work permit, practice certificate or practice permit expires without being renewed."
Thus, when a foreign worker terminates his/her labor contract or his/her work permit, practice certificate, or practice permit expires without being renewed, he/she may immediately request to receive the lump-sum social insurance. This is an advantage of foreign employees compared to Vietnamese employees because Vietnamese employees will have to wait 1 year from the time of termination of compulsory social insurance payment before they can carry out the procedure to apply for this regime.
Regarding procedures: a dossier of application for lump-sum social insurance benefits for foreigners includes:
- The employee's application for lump-sum social insurance enjoyment;
- Social insurance book.
Regarding implementation time: Within 05 working days from the date of receipt of complete dossiers for entitlement to lump-sum social insurance as prescribed, the social insurance agency is responsible for processing and organizing payment for foreign employees. In case of failure to settle, the social insurance agency must reply in writing and clearly state the reason.
In case a foreign worker quits his job but has not yet enjoyed the lump-sum social insurance benefit, the time of paying the social insurance premium of the foreign worker will be preserved.
Regarding benefits:
Pursuant to Points b and c, Clause 2, Article 60 of the Law on Social Insurance, the lump-sum social insurance enjoyment rate is calculated according to the number of years of paying social insurance premiums, for each year is calculated as follows:
b) 02 months of average monthly salary on which social insurance premiums are based for the years of payment from 2014 onwards;
c) In case the period of payment of social insurance premiums is less than one year, the social insurance allowance shall be equal to the paid amount, and the maximum level shall be equal to 02 months of the average monthly salary on which social insurance premiums are based.
Pursuant to Clause 7 Article 9 of Decree No. 143/2018/ND-CP, foreign employees will receive a lump-sum social insurance allowance according to the provisions of Point b, Clause 2, Article 60 of the Law on Social Insurance. Thus, for each year of paying social insurance premiums, foreign employees are entitled to 2 months of the average monthly salary on which social insurance premiums are based.
However, when the compulsory social insurance regime took effect on January 1, 2022, up to now, the majority of foreign employees have not participated in the full 12 months of paying social insurance premiums. Accordingly, the determination of the level of lump-sum social insurance benefits is not grounded because there are no specific regulations. This is a difficulty for the social insurance agency when handling the regime for foreign employees working in Vietnam at the present time.
Thus, in the current context, foreign employees working in Vietnam have the right to enjoy the lump-sum social insurance regime, however, the lack of basis for determining the level of benefits for employees with a participation period of fewer than 12 months has shown a loophole in the Vietnamese legal system. Consequently, the Vietnamese Government needs to provide detailed instructions to ensure the legitimate rights and interests of foreign employees while maintaining and ensuring a fair and attractive working environment in Vietnam.
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Originally published OCTOBER 26, 2022.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
