Headlines 08/06/2018 17:00 CH

8 significant changes in salary and social security policies that employees should know

Kim Huệ

The Central Executive Committee of the Communist Party of Vietnam has recently enacted the Resolution No. 27-NQ/TWand the Resolution No. 28-NQ/TW on reform of salary and social security policies.

These Resolutions comprise major policy changes that employees need to know, including:

1. Imposition of additional regulations on the minimum pay per hour

At present, the Government has managed to adopt the region-specific minimum pay per month that is enforced in accordance with the Decree No. 141/2017/ND-CP However, regulations on the minimum pay for part-time employees have not been available yet.

Therefore, imposition of additional regulations on the minimum pay per hour will contribute to ensuring the rights of employees belonging to this group and flexibility of the labor market.

2. Increase in the region-specific minimum pay rate applied in the 2018 – 2020 period

In this period, the objective of the Government’s approving an increase in the region-specific minimum pay is to ensure that it can meet the minimum living standards of employees and their family by 2020 (rather than the minimum living demands as currently regulated).   

3. Elimination of the base pay and application of 5 pay structures

The Central Executive Committee has adopted the plan for reform of salary policies for public-sector employees. During the reform process, the base pay will be no longer valid and 5 pay structures will take effect from 2021. The specific regulations are as follows: 

- Executive pay structure designed for public officials, officers and employees elected and appointed to hold leadership positions in the political system at the central level down to the communal level;

- Non-executive pay structure, consisting of grades of public officers and professional ranks of public employees, which is designed for public officers and employees who do not hold leadership positions;     

- Pay structure designed for military officers, police officers and commissioned officers holding non-executive positions (classified by professional status, titles and military grades or ranks); 

- Pay structure designed for operational and technical police personnel;

- Pay structure designed for national defence and police staff.

4. Elimination of 5 types of allowances (in the public sector)

Together with establishment of 5 new pay structures, the Government will waive 5 types of allowances, including:

- Seniority allowance specific to sectors (military, police and cryptography are excepted to ensure salaries in these sectors are commensurate with salaries paid to public officials and officers);    

- Allowance specific to executive leadership positions (this allowance is eliminated because it is determined through design of the executive pay structure by those holding leadership positions in the political system);

- Allowance specific to tasks assigned by the Communist Party and socio-political associations;
- Allowance specific to civil services (this allowance is eliminated since it has already been included in the base pay);

- Allowance specific to hazards or dangers (this allowance is eliminated for the reason that the allowance paid for hazardous and dangerous work has been available in requirements for the allowance specific to sectors).

5. Addition of 4 persons subject to compulsory social security contributions

In addition to persons already having to pay compulsory social security contributions as per the 2014 Law on Social Security, the number of persons subject to compulsory social security contributions will be increased in the future to cover the following persons:

- Home business owners.

- Corporate managers.

- Chiefs and managers of cooperatives who are not paid salaries.

- Workers under flexible work arrangements.

6. Shortening of the timelength of payment of social security contributions for entitlement to the retirement pension from 20 years to 15 years

In order to enable elderly employees who have a few of years of social security participation to have access to and be entitled to social security benefits, the State will reduce the timelength of social security contribution from 15 years to only 10 years in the future that is eligible for entitlement to retirement pensions. 

7. Modification of regulations on social security contribution rate and base

In order to prevent evasion of payment and insufficient payment of social security contributions which result in any negative impact on employee’s benefits, there will be a change in social security policies to modify regulations on the basis for social security contribution with respect to businesses under which they are required to pay at least 70% of total of payroll and other incomes related to employee’s salaries. 

8. Amendments to the law that aim to curb claims for one-off payment of social security benefits

These amendments will be expected to make social security participant’s right increase, if they agree to get the timelength of social security participation to accrue, to be entitled to retirement pensions; and to make such right decrease, if they decide to receive one-time payment of social security benefits. 

Besides, regulations shall be subject to changes with a view to encouraging employees to participate in social security programs in a longer time; legitimate retirement age will be gradually increased and the rate at which retirement pension amount is taken away with respect to employees wishing to receive retirement pension benefits earlier will be increased as well.

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