Foreign experts say Vietnam would have high labor costs

Decree 143, which contains detailed regulations on compulsory social insurance for foreign workers in Vietnam, was issued on October 15, 2018 and took effect on December 1.

At the Vietnam Business Forum 2018 held on December 4, Nicolas Audier, co-founder of Eurocham, voiced his warning that the application of the decree would lead to a sharp rise in labor costs, which would reduce the attractiveness of Vietnam as a destination for foreign investors.

“The increased cost for foreign workers may discourage employers from recruiting foreign workers, and therefore, would prevent talents from many countries who can help train and support the training of Vietnam’s labor force, from coming to work in Vietnam,” he said.

Social insurance is compulsory for foreign citizens who work under an indefinite term or a one-year or longer labor contract.

Tran Hai Nam from the Ministry of Labor, War Invalids and Social Affairs (MOLISA) said at a press conference in April that the decree was designed in a way to ensure a reasonable roadmap for enterprises. 

By 2022, Vietnam expects to complete the signing of the agreements on double social insurance payment avoidance with other countries.

Under the decree, the social insurance premiums employers and foreign employees have to pay are the same as Vietnamese citizens. Labourers have to pay 8 percent, while employers 17.5 percent of labourers’ monthly salaries. The highest premium is equal to 20 times of basic wages as stipulated by the government.

Foreign invested enterprises complain that the cost to observe the law will be high.

The Investment & Trade Working Group of the Vietnam Business Forum estimated that from 2020, employers will have to pay $362.6 for one worker who receives monthly pay $4,000, or 10 percent higher than previously. 

If so, the total cost businesses have to pay to employ foreign workers in Vietnam will be among the highest level in the region, it said.

Decree 143 stipulates that MOLISA take the responsibility of negotiating and signing bilateral and multilateral agreements on social insurance. However, the agreements and influence of the agreements on the current regulations on social insurance for foreign workers have not been provided or fully explained.

The participants at a dialogue between HCMC authorities and businesses held in late November also complained that it was still unclear if some subjects have to pay compulsory insurance premiums, even though the decree was promulgated two months ago.

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