Confusion, Worry Reigns Over Vietnam’s New Insurance Policy

Dat Nguyen - Hung Le

10:01 16/11/2018

If foreigners do not plan to retire in Vietnam, does the policy of making social insurance compulsory for them make sense?

Confusion, Worry Reigns Over Vietnam’s New Insurance Policy

A foreigner teaches English for children in Vietnam. Photo acquired by VnExpress

This is the question on many expat lips, as also that of their employers.
As an expatriate working in Hanoi with a full-time contract, Oliver is worried about several aspects of the new compulsory social insurance policy introduced by the Vietnamese government.
The 33-year-old Estonian teacher is concerned that he will have to spend part of his monthly income on social insurance premiums and will have less chance of securing a pay rise as his employer will also have to pay insurance contributions for him.
Like many other expatriates, he already has adequate medical coverage from his company. He also has no plans to retire in Vietnam and is not thinking about pensions here. Thus, he sees no sense in asking him to pay the insurance.
"I haven’t made the decision to stay in Vietnam until my retirement", said Oliver, who asked to be identified only by his first name.
Under a decree on compulsory social insurance for foreigners working in the country issued by the government last month, all foreign workers with labor contracts of one year or more will be subject to compulsory social insurance.
The decree, which will come into effect on Dec. 1, 2018, regulates that employees would, from 2022, pay a monthly insurance premium of 8 percent of their income, which would go to their retirement fund and death benefit.
Impractical rule
A representative from the American Chamber of Commerce in Vietnam commented that expats often work in Vietnam for short periods of time. They neither want nor are eligible for pensions, so the new regulation is impractical.
Philip Carlson has been working for a non-governmental organization (NGO) in Vietnam for several years. He plans to leave for Thailand in a few months, one of several destinations on his itinerary before returning to his native country, Belgium, where he will spend his retirement.
As much as he loves Vietnam, the country has never been on his mind as the final place for him to enjoy the last days of his life.
"I’m not sure if I’ll go back to Vietnam. I don’t think I’ll benefit at all from the pension", he said.
The decree has also been opposed by foreign enterprises, which say it would increase their costs.
The new decree requires employers to contribute three percent of an employee's monthly salary to the sickness and maternity fund, and 0.5 percent to the occupational diseases and accidents fund, from Dec. 1, 2018.
They will have to pay 14 percent to the retirement fund and death benefit from 2022 onwards.
Some companies have said they can’t implement the new policy without clarity and guidance from the authorities.
Pham Thi Thu, a human resource manager at a dental equipment company in central Da Nang City, which has many South Korean employees, said that her enterprise has not been directly informed about the new regulation.
"Usually local authorities will send us instructions concerning changes in the law, but we haven’t got anything", she said.
Although Thu’s company is willing to pay the insurance, she is not sure how beneficial it will be for her foreign staff, as they are only sent here by the parent company in South Korea for a few years. Such employees already get social insurance coverage in their home country.
"How will the pension benefit them if they have no plans to retire in Vietnam?" Thu asked.
At a recent forum hosted by insurance and labor authorities to clarify the decree, hundreds of businesses complained that they are not in a position to implement the policy in its current form.
Representatives of many companies said they have received no guidance from the authorities on the new policy. They said that foreign employees will have trouble getting medical care because of the language barrier.
Expats will face challenges in getting medical support at public hospitals, since the decree doesn’t make clear whether international hospitals will be covered.
Dao Viet Anh, deputy director of Vietnam Social Security, said at the forum that the new decree is a work in progress.
He said that Vietnam is working to sign bilateral agreements with other countries to avoid double insurance and ensure the entitlements of employees.
But while authorities are thinking long-term, expats are only committing themselves for the short-term.
Oliver has only been signing one-year contracts with his employer in order to have the freedom to leave Vietnam whenever he wants to.
"I wouldn’t want to pay my money to the government for nothing".

Theo VnExpress