Are foreign workers required to pay social insurance?
Have. Foreign workers working in Vietnam under a fixed-term labor contract of 1 year or more, have a valid work permit or practicing certificate, are required to participate in compulsory social insurance (except unemployment insurance) and compulsory health insurance like Vietnamese workers, with the same contribution rate: businesses pay 17.5% social insurance + 3% health insurance, employees pay 8% social insurance + 1.5% health insurance.
Consequences of not paying or underpaying social insurance
When the social insurance agency or labor inspectorate discovers that an enterprise does not pay, does not pay enough for the required number of people, or does not pay the correct salary, the enterprise must:
- Pay back the full amount of outstanding social insurance for the entire period of violation.
- Pay late payment interest calculated on the amount of late payment according to the interest rate announced by the social insurance agency.
- Subject to administrative sanctions according to regulations on administrative violations in the field of labor and social insurance - the fine is calculated as a percentage of the total amount to be paid and the number of violating employees, which can be up to hundreds of millions of dong for businesses with many foreign workers.
- In case of evasion of paying a large amount of money for a long period of time, criminal liability may be considered according to the law.
Why do FDI enterprises easily make this mistake?
- Misunderstanding that foreign workers only need to pay personal income tax and do not need social insurance.
- Not updated promptly when the foreign expert's labor contract was extended beyond the 1-year mark.
- Using a consulting unit that does not specialize in foreign workers, omitting the registration obligation.
How to avoid risks
Enterprises should periodically review the list of foreign workers, compare contract terms and work permits, and use outsourcing payroll services or EOR to ensure correct and full payment of social insurance and health insurance for both Vietnamese and foreign workers, avoiding unexpected arrears when there is an inspection.
Do foreign workers who have worked for less than 1 year need to pay social insurance? It is usually not required if the labor contract is less than 1 year, but needs to be closely monitored because when the contract is extended beyond the 1-year mark, the obligation to pay social insurance arises from that moment.
Can an enterprise that self-discovers and proactively collects the fines be reduced? Proactively correcting the problem before being detected by an inspector is often considered a mitigating circumstance, but must still pay the full amount and pay late payment interest according to regulations.