Regulations on amounts subject to calculating the payable social insurance for employees

Social insurance, though not a new topic, remains a “hot” one when it comes to its relevant issues due to its direct impact on balancing salary payments for employers and compliance with legal regulations in the field of social insurance in particular, and within framework of labor law for employers in general. For employees, the direct impact on income is when the actual amount of money received is the one deducted after social insurance payments and/or personal income taxes. Some common and frequently asked questions associated with the keyword “social insurance” include queries about regulations on which amounts are subject to calculating the payable social insurance and which ones are not, or whether paying social insurance for bonuses or payments for achieving targets/sales (also known as KPI – Key Performance Indicator) is subject to calculating the payable social insurance, or what the risk/legal liability is in case KPIs and bonuses are excluded by the labor inspectorate from amounts which are not subject to calculating the payable social insurance payments; ect This article will focus on addressing old issues that still remain “hot” as mentioned above, so that employees and employers can understand and comply with the legal regulations. 

The payable social insurance for employees
The payable social insurance for employees

1. Amounts that are and are not subject to calculating the payable social insurance for Employees according to the law

1.1 Amounts that are subject to calculating the payable social insurance for employees according to legal regulations 

For employees who pay social insurance according to the salary regime determined by the employer, the monthly salary for social insurance payment is the salary, allowances and other additional amounts stated in the labor contract. In there:

+ Salary: the time-based calculation of the job or job title according to the salary scale and salary table established by the employer according to the provisions of Article 93 of the Labor Code; For employees receiving product-based wage or piece wage, record the wage calculated by time to determine the unit price of the product or piece wage.  

+ Allowance:

  • Allowances are additional amounts intended to compensate for factors such as working conditions, complexity of work, living conditions, level of labor attraction, which may not have been considered of fully taken into account in the agreed-upon salary in the labor contract.  
  • Allowances related to the employee’s work process and performance results. 

+ Other additional amounts as agreed by both parties as follows/Các khoản bổ sung khác theo thỏa thuận của hai bên như sau:

  • Additional amounts can be determined with a specific amount of money along with the agreed-upon salary in the labor contract and paid regularly in each pay period; 
  • Additional amounts whose specific amount of money cannot be determined along with the agreed-upon salary in the labor contract, paid regularly or irregularly in each pay period associated with the working process and performance results of employees.
  • For other regimes and benefits such as bonuses as prescribed in Article 104 of the Labor Code, initiative bonuses; food expenses between shifts; subsidies on petrol, telephone, transportation, housing, child care, and raising children; allowances for employees whose relatives passed away, employees whose relatives get married, employees’ birthday, allowances for employees facing difficulties due to their labor accidents, occupational diseases and other allowances and benefits: record in a separate section in the labor contract. 

In case the monthly salary is higher than 20 times the base salary, the monthly salary paid for social insurance is equal to 20 times the base salary. 

1.2 Amounts that are not subject to payable social insurance 

According to the provisions of Article 30.3 of Circular 59/2015/TT-BLDTBXH amended and supplemented by Article 1.26 of Circular 06/2021/TT-BLDTBXH, there is a regulation that Monthly salary for mandatory social insurance does not include other regimes and benefits, such as: 

+ Bonuses as prescribed in Article 104 of the Labor Code: 

A bonus means an amount of money, a piece of property or item that is provided by the employer for his/her employees on the basis of the business performance or the employees’ performance. 

+ Initiative bonus;  

+ Food expense between shifts; 

+ Subsidies on petrol, telephone, transportation, housing, child care, and raising children; 

+ Allowances for employees whose relatives passed away, employees whose relatives get married, employees’ birthday, allowances for employees facing difficulties due to their labor accidents, occupational diseases; and 

+ Other allowances and benefits which are recorded in a separate section in the labor contract prescribed in sub-point c2, point c, clause 5, Article 3 of Circular No. 10/2020/TT-BLDTBXH. 

2. Regulations related to calculation of payble social insurance for KPIs, Bonuses and statutes related to KPIs and Bonuses

From one perspective, it can not be denied that naming the amounts paid to employees is essential to determining whether that amount will be considered as an amount subject to calculating the payable social insurance.

Accordingly, the payments for achieving targets/sales and bonuses, in essence, encourage employees to work more productively and effectively. Therefore, these amounts will be paid to the employee when the employee achieves the targets required by the employer. This is not a fixed amount of money, but it depends on the employee’s performance and contribution. According to Article 104 of the Labor Code 2019, bonuses for employees based on production and business results and the level of work completion as stipulated in Article 104 of the Labor Code 2019 are not subject to calculating the payable social insurance for employees. However, Clause 2 Article 104 of the Labor Code 2019 also clearly stipulates that the employees will decide the Statute on bonuses, but it must be publicly announced at the workplace after consulting with the employees’ representative organization at the facility for workplaces where there is an employees’ representative organization at the grassroots level. Therefore, for bonuses related to KPIs and Bonuses as above, if a Statute on bonuses has been developed and publicly issued for application, these amounts will not be subject to calculating the payable social insurance. 

One particular issue to note is that bonuses must be included in financial statutes or official rewards to be considered valid and eligible for deduction of corporate income tax, as stipulated in Article 6.2 of the Circular 78/2014/TT-BTC amended by Circular 96/2015/TT-BTC. 

3. Risk in case KPI and Bonuses are excluded from amounts not subject to calculating the payable social insurance and arrears

Arrears can be considered a mechanism or measure by which competent state authority recover payable amounts in cases of evasion, not paying enough for the number of people required to participate, or not paying enough of the payable amount according to the law, and appropriation of social insurance, health insurance, unemployment insurance, occupational accident and disease insurance premiums according to the provisions of Circular No. 20/2016/TT-BTC of the Ministry of Finance dated February 3rd, 2016 of the Minister of Finance guiding implementation of financial management mechanism and administrative expenses in social, health and unemployment insurances.

According to Clause 4 Article 89 of the Law on Social Insurance 2014, guided by Article 18 of Decree 115/2015/ND-CP, regulations on arrears of monthly salaries paid for compulsory social insurance are as follows:

+ Cases subject to arrears of monthly salaries paid for compulsory social insurance for employees and employers include:

  • Adjusting to increase monthly salary used for paying social insurance for employees; 
  • Compensation for unpaid time of employees working abroad according to labor contracts. 

+ The amount of arrears collected and paid for social insurance is calculated as follows:  

  • For the cases specified in Clause 1 of this Article, the arrears are not subject to late payment interest; 

In case arrears are collected only after 6 months from the date of the decision of adjusting to increase monthly salary used for paying social insurance for the employee or termination of the labor contract abroad and return to the home country, arrears collected and paid for social insurance are calculated including the amount of compulsory social insurance payment according to regulations and arrears of interest calculated on the payment. 

  • The interest rate of arrears is equal to the average interest rate of from the investment social insurance fund of the year immediately preceding the year of arrears calculation.

Employers are responsible for fully paying social insurance and unemployment insurance, including late payment interest according to regulations for employees who are eligible to receive social insurance or on the termination of labor contracts, working contracts to promptly resolve social insurance and unemployment insurance regimes for employees. 

+ Arrears of monthly salaries paid for compulsory social insurance for employees and employers, except for the cases specified in Clause 3, Article 122 of the Law on social insurance as follows: 

Employeers violate Clause 1, 2 or 3, Article 17 of the Law on social insurance 2014 for 30 days or more shall not only fully pay the amount not yet paid or paid late and be handled in accordance with law but also pay an interest equaling 02 times the average interest rate of investment from the social insurance fund in the preceding year, calculated based on the late paid amount and late payment period. If they fail to do so, at the request of competent persons, related banks, credit institutions or state treasuries shall deduct money from the employers’ deposit accounts in order to pay the amount not yet paid or paid late and the interest thereon to the accounts of social insurance authorities:

  • Evading paying compulsory social insurance and unemployment insurance premiums. 
  • Delaying the payment of social insurance or unemployment insurance premiums.
  • Appropriating social insurance or unemployment insurance premiums or allowances.

The specific penalty level will be determined based on the nature and severity of the violation in each specific case and will be considered by the competent authority. 

 

Disclaimers:

This article is for general information purposes only and is not intended to provide any legal advice for any particular case. The legal provisions referenced in the content are in effect at the time of publication but may have expired at the time you read the content. We therefore advise that you always consult a professional consultant before applying any content.

For issues related to the content or intellectual property rights of the article, please email cs@apolatlegal.vn.

Apolat Legal is a law firm in Vietnam with experience and capacity to provide consulting services related to Employment and contact our team of lawyers in Vietnam via email info@apolatlegal.com.

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