Compulsory social insurance for foreigners working in Vietnam is creating a heavy burden on local enterprises, according to a report by the Investment and Trade Working Group of the Vietnam Business Forum.

Foreign workers are seen at a construction site in Vietnam

The group regards the payment of social insurance for expat workers in Vietnam as a kind of tax, noting that Vietnam thereby has the highest taxes in the region in terms of quantity, rates and large-scale application.

The report also shows that the draft government decree on compulsory social insurance does not adjust the rule of an accumulating period of social insurance payment. For example, if a foreign worker has paid social insurance for five years in Thailand, and another five years in Singapore before coming to work in Vietnam, such periods are still not accumulated for the expat into Vietnam's social insurance system under the new decree.

According to the report, this rule is only applicable to nationals from countries with which Vietnam has signed bilateral agreements on social insurance. So far, the country has inked such deals with Germany and South Korea and targets Japan in the future.

The 2014 Law on Social Insurance stipulates that expats with work permits and practice certificates in Vietnam must fully comply with social insurance payment requirements, which became effective from January 1. According to the draft decree providing guidelines for implementing the law, the five social insurance parameters applicable to foreign workers are the same as those for local workers---sickness, maternity, occupational accidents, retirement and death.

The draft decree offers two options. The five mentioned parameters will be effective from the first day of 2018, or the three parameters of sickness, maternity and occupational accidents will be applicable from January 1, 2018, while the provisions on retirement and death will be effective from January 1, 2020.

Besides this, foreign workers will receive one-time social insurance returns in case their work permits or labor contracts expire, under the condition that the workers must submit a request 30 days prior to the expiration date, while social insurance agencies have to pay the returns to them within 10 days of receiving the eligible requests.

The group voiced concerns over this regulation, saying that no foreign worker can receive social insurance returns due to long and tedious administrative procedures. This shows that the regulation is out of touch with the reality, raising doubts over its feasibility among many foreign direct investment (FDI) firms.

Moreover, mandatory social insurance for foreign workers is considered to bring benefits to expats working in Vietnam and ensure equality among local and overseas workers, but it turns out to be more of a responsibility than a benefit, the group said, citing the regulations of the 2014 Law on Social Insurance.

Addressing an earlier meeting, themed, “social insurance,” Tran Hai Nam, deputy head of the Social Insurance Department under the Ministry of Labor, Invalids and Social Affairs, noted that the Vietnamese working overseas had to pay for social insurance both in Vietnam and the foreign country. He added that compulsory social insurance for foreign workers would not lead to additional costs for FDI enterprises but would create equality among workers at home and abroad.

SGT