The rate of compulsory social insurance contribution by the employer to the fund for occupational accidents and diseases will be reduced by half a percentage point from June 1, 2017.

Employees are at work at a garment factory in Vietnam. From June 1, 2017, the rate of compulsory social insurance contribution by employers to the fund for occupational accidents and diseases will be reduced by 0.5%

The Law on Social Insurance in 2014 stipulates that the employer pays a sum equivalent to 1% of the monthly salary as a basis for social insurance contribution to the occupational accident and disease fund.

Meanwhile, Decree 44/2017/ND-CP recently released by the Government says the employer monthly contributes to the two funds 0.5% of the basic salary for social insurance contribution. This level will be applied to persons working under permanent, term and seasonal labor contracts or for certain jobs with a term of three months to less than 12 months.

The 0.5% rate is calculated on the basic salary as defined by Point e, Clause 1, Article 2 of the Law on Social Insurance, including rank-and-file military officers and soldiers; rank-and-file police officers and policemen serving a certain term; and police and military cadets with allowances.

This new regulation does not apply to domestic workers.

For enterprises, cooperatives, business households or cooperative groups operating in the fields of agriculture, forestry, fishery and salt production and paying for their employees based on work efficiency, the monthly contribution rate is 0.5% of the salary as the basis for social insurance. The contributions are made every month, every three months or every six months.

Particularly for persons working under labor contracts with a term of between one month and less than three months, contributions to the occupational accident and disease fund under the new regulations shall be implemented from January 1, 2018.

Under the current regulations, each employer must make a contribution equaling 22% of the salary used as the basis for payment for social insurance (18%), health insurance (3%) and unemployment insurance (1%). Thus, with the new decree, the rate of monthly compulsory social insurance, voluntary insurance and health insurance contributions by the employer are down from 22% to 21%.

Earlier, in October 2016, at a regular cabinet meeting in Hanoi, Minister of Labor, Invalids and Social Affairs Dao Ngoc Dung suggested lowering social insurance contributions to the unemployment insurance fund and the occupational accident and disease fund to help businesses grow and create more jobs. A reduction of one point for both funds would have positive effect on employers, especially struggling ones, according to the labor ministry.

The fall from 1% to 0.5% in the rate of payment into the unemployment insurance fund corresponds to an annual reduction of some VND2.4 trillion. Meanwhile, with the rate of contribution to the occupational accident and disease fund brought down from 1% to 0.5%, employers may save about VND3 trillion a year.

SGT