Increasing social insurance premiums: Enterprises face bankruptcy or dodge the law?
By Minh Anh
September 04, 2017 | 03:26 PM GMT+7
Becoming effective from January 1, 2018, the amendment of 2014 Law on Social Insurance has some articles influencing detrimentally on both enterprises and employees.
Enterprises would find ways to reduce wages in order to reduce the insurance fee.
Obstacles for enterprises
According to the amendment, from January 1, 2018, the social insurance (SI) premiums will be the salary, allowances and other supplements like bonuses, food, etc., not just basic salary like before.
Director of AZ Art., JSC. Nguyen Khac Hieu said that the Government has reached a compromise of 6.5% increase in the regional minimum wage which would come into effect in 2018. This is suitable in the context that Vietnam’s Gross Domestic Product (GDP) is increasing, forcing enterprises to take responsibility to raise their employees’ salary in order to meet the demands of life.
However, the way SI contribution would be calculated is unreasonable because when SI premiums increase, other fees would rise too, reducing the competitiveness of companies and putting enterprises, especially exporters of textiles, on the verge of bankruptcy. Vietnamese enterprises can only survive if the government stands by them and creates favorable conditions for them to develop.
Another question related to the necessity of the SI has been raised as employees do not need the SI and a long-term promise while what they want is just more money for their current life.
Dodging the law is inevitable
Lawyer Truong Thanh Duc, Chairman of the Members’ Council of Basico Law Firm said that there is a paradox that the social insurance is assumed to ensure employees’ interest while the current minimum wage is not enough for them to afford a better life, leading to a low pension from the SI in the future.
Vietnam tends to increase the insurance premiums and till 2018 most of people’s incomes must be calculated to insurance contribution. As a result, enterprises would struggle and find ways to dodge the law, especially reducing salary or income to reduce the insurance premiums. Therefore, Duc said, the State needs to reconsider the issues related to salary and insurance as well as implement measures to balance the interest of each side and the whole community.
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