Enterprises are worried about the new level of social insurance

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Many enterprises reflect that the social insurance premiums of 32.5% of total incomes is too high. Photo: Huu Linh.

Enterprises face up with difficulties

Under the provisions of the Social Insurance Law, from 1^st January 2016 to 31^st December 2016, social insurance premiums were calculated on the basis of salary and allowances stated in the labor contract. From 1-1-2018 on salaries and social insurance allowances and additional amounts stated in the labor contract. Accordingly, employees must pay 8%, employers (enterprises) must pay 18% and then, a total of 26% will be paid into to the social insurance fund.

Mr. Vu Tien Loc, the Chairman of the Vietnam Chamber of Commerce and Industry (VCCI) said that the current social insurance premiums in Vietnam (including pension insurance, medical insurance and unemployment insurance) are the highest in ASEAN with 32.5% of the monthly salary (enterpises pay 22% and employees contribute 10.5%). Besides, they have to pay 3% of union fees. Meanwhile, in ASEAN, the social insurance premiums of Malaysia account for only 13% of salary, the social insurance premiums of the Philippines account for 10% of salary, Indonesia and Thailand with 8% and 5% respectively. According to the roadmap to 2018, these social insurance premiums will cause difficulties for businesses.

Through the analysis of economic experts, when social insurance premiums are calculated on the basis of total incomes, the amount of employees’ payments will increase, so real incomes of employees will fall. However, the impact of social insurance premiums on enterprises will be much heavier than workers because employees must pay only 8% of salary while enterprises must pay 18%. From 2018, workers and employees will have to pay social insurance based on total incomes, so the payment will increase.

In this regard, Mr. Nguyen Dam Linh, the Director of DLC VIET NAM Communication and Solution Joint Stock Company said that in this difficult context, social insurance premiums increased every year. The social insurance premiums accounting for 32.5% of the total incomes of employees will cause difficulties for enterprises. "In order to maintain production and business activities, enterprises are forced to make use of loopholes in the Law to declare the salary and allowances of employees with a lower amount to reduce social insurance contributions", Mr. Nguyen Dam Linh said.

He also said that, in some enterprises, accountants and financial directors were assigned to reduce social insurance contributions at the lowest level. This was one of the criteria to assess accountants and financial directors, otherwise they will be deducted salary and wage. In the case where enterprises cannot make use of loopholes of the Law, they reduce the salaries, bonuses and income of employees and workers.

Mr. Nguyen Duc Hoc, the Director of Dai Gia Trade and Services Company Limited, the total social insurance contribution of 32.5% is too heavy for enterprises. "From the day I first entered the business, social insurance premiums are on a progressive increase, at 20% and now up to 32.5%. If this rate continues to increase, enterprises will face up with the risk of production delay", he said.

Proposing to reduce social insurance premiums

Many employees are concerned that the increase of social insurance premiums will make enterprises reduce salary and allowances of employees to ensure the effectiveness of production. Thus, Mr. Nguyen Duc Hoc has proposed to remain the social insurance premiums at around 20% of the total incomes to facilitate enterprises, which does not affect the rights of employees and workers.

Mrs. Dao Thi Thu Huyen, the Senior Chief of the CEO office of Canon Vietnam Co. has also recommended that the Government should consider reducing this rate to improve competitiveness on the labor costs of Vietnam in comparison with other countries in the region. In addition, Mrs. Huyen said that, Article 89 of the Law on social insurance in 2014 which regulated the total incomes as basis for social insurance contributions from 2018 were unreasonable and caused many difficulties for enterprises. Because, in fact, allowances and other additional payments depend on the quality of work as well as the productivity of workers and the effectiveness of production and business of enterprises. "It will be difficult for State agencies to calculate the accurate figure of social insurance premiums. Besides, the global economy is declining, the increase of social insurance premiums will increase the burden on businesses. Therefore, if there are no changes and support from the State authorities, enterprises will face difficulties and employees will lose their jobs", Mrs Huyen said.

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Mr. Dinh Viet Thanh, the Deputy Head of Administrative Organization Division of Garment 10 Corporation said that his corporation will face the risk of bankruptcy if the corporation applies strictly under the roadmap of the Government on social insurance. Because in fact, the rate of the minimum wage increased much faster than the growth rate of labor productivity and the rate of inflation. Therefore, the increase of social insurance contributions and union fees will make the corporation be unable to continue to operate.