Law on Social Insurance 2014, amended and supplemented in 2018 stipulates that “The monthly salary on which social insurance premiums are based will be the salary plus salary-based allowance and other amounts as prescribed in the labour law”. In labor contracts, besides the salary, the agreement about payment of social insurance is an issue of particular concern to the employer and the employee and there are still many unclear points. We, a law consulting firm Inco Minh Anh, will analyze and clarify in this article based on new circulars issued by the Ministry of Labor, War Invalids and Social Affairs.

Firstly, the amounts included in the monthly salary to pay social insurance premiums (mandatory) include:

1. The salary by job or title is the salary calculated according to the time of the job or title according to the salary scale and salary table developed by the employer in accordance with the law; for employees who are paid by product or package salary, it is the salary calculated over time to determine the product unit price or package salary;

2. Salary-based allowance to compensate for factors on working conditions, job complexity, living conditions, and level of labor attraction that the salary agreed in the labor contract has not been taken into account or calculated not enough.

3. Other amounts can determine the specific salary along with the salary agreed in the labor contract and pay regularly in each pay period.

The amounts included in the monthly salary on which social insurance premiums are based are regular incomes, and it is easy to determine a specific amount. This makes it easy for enterprises to determine the insurance payment obligation for each employee. At the same time, the insurance agency also easily manages the declaration and payment of social insurance.

Second: Amounts not included in the monthly salary to calculate the payment of social insurance (stipulated in Circular 06/2021/TT-BLDTBXH effective from September 1, 2021) include:

Bonuses; initiative bonus; mid-shift meal; allowances for petrol, phone, transportation, housing, child care, and child rearing; support when the employee has a dead relative, the employee has a married relative, the employee’s birthday, allowances for the employee in difficult circumstances when suffering from a work accident, occupational disease and other allowances that are recorded in a separate amount in the labor contract.

Thus, not all incomes recorded on labor contracts are included in the monthly salary on which social insurance premiums are based. Therefore, employers need to understand these provisions in order to stipulate salaries, expenses, and support for employees in accordance with the demand of the business as well as to ensure the provisions of the law.

In reality, many enterprises are confused in determining the amounts included in the monthly salary on which social insurance premiums are based, leading to the result of miscalculation of the insurance obligation. In case the enterprise determines the monthly salary on which social insurance premiums are based, including optional amounts, it will lead to an increase in the obligation for both employees and employers. In case, due to an error, there is a lack of calculation of the amounts included in the monthly salary on which social insurance premiums are based, the enterprise may be sanctioned for the act of improperly paying social insurance premiums when the insurance agency checks their business.

Thirdly, about pay grades, each salary-based allowance and other amounts, the law does not stipulate a minimum or maximum level

The current Labor Code prefers the agreement between the parties and the regulations of the enterprise. Article 103 of the Labor Code 2019 stipulates that: “Regimes on wage raise, wage rank promotion, allowances and subsidies and incentive regimes for employees shall be agreed upon in labor contracts and collective labor agreements or regulations of employers”. Therefore, the employee’s monthly salary on which social insurance premiums are based depends on the agreed salary by the parties recorded in the labor contract (not lower than the regional minimum salary) and other regulations of the enterprise. When declaring and paying social insurance premiums, employers need to pay attention to the above provisions not only for ensuring their interests but also ensuring complying with the law.

Enterprises and employees have questions about regulations related to labor law, labor agreement, social insurance in Vietnam, need to learn and update new points of labor law, legal insurance law or have any other legal advice needs, please contact us immediately:

INCO MINH ANH CO., LTD

Hotline: 0982674857

Email: [email protected]

Best regards!