Sarah Galeski, associate director of KPMG Legal Firm cum co-chairwoman of Human Resources and Training Sector Committee of European Chamber of Commerce in Vietnam (EuroCham) talks about barriers foreigners are facing when working in Vietnam.
How do you evaluate the situation of foreign workers, especially European workers in Vietnam?
Sarah Galeski: More and more foreign workers are coming to Vietnam. This is partly a result of signing free trade agreements such as The Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP).
Especially, once the EU-Vietnam Free Trade Agreement (EVFTA) comes through, there will be a lot of European investors and companies which will establish their subsidiaries here in Vietnam. Therefore, the number of foreign laborers in Vietnam will certainly increase.
In such a context, what are pros and cons of the issuance of work permits for foreigners in Vietnam?
Sarah Galeski: The procedure is much more efficient. It is much easier now than it was just a few years ago. Recently, Vietnamese Government even issues a decree shortening the length of time to obtain work permits. So we see that as a positive development.
However, the work permit legislation for foreign workers is still limited. Under the previous legislation, workers had to have five years of working experience or a university degree. I think that model is actually better, avoid missing experienced experts who do not have a university degree.
For example, in the recruitment of English teachers, most people who come to Vietnam to work in this field have just graduated from university. Therefore, they will be unable to meet the current work permission.
Can you elaborate on this issue?
Sarah Galeski: Currently, to qualify an expert, workers must have three years of working experience and the university degree. Some skillful workers can’t meet those requirements. There are some people who are basically experts in their fields but do not have the university degree.
With this regulation, even Bill Gates couldn’t get a work permit as an expert for Vietnam. So I think having the requirement of both working experience and the university degree may limit some talents that could help Vietnam develop economically.
Is the fact that foreign workers in Vietnam must pay compulsory social insurance under the current Decree 143 of the Government is considered as another barrier? What is your recommendation?
Sarah Galeski: The new decree No. 143 implements mandatory social insurance for foreigners working in Vietnam. I really recommend not to make foreigners participate in long-term social insurance in the pension and survivorship allowance regimes. The reason is typically foreigners only stay in Vietnam for a few years and then they leave.
On the other hand, I also made recommendations on social insurance exemption. The regulation on "intra-company transferees" is not clear. This leads to difficulties in identifying beneficiaries of social insurance exemptions, especially in the case which employees receive work permits as intra-company transferees. And then subsequently these subjects also enter the local labor contract.
People sometimes do that if those local Vietnamese companies pay some benefits to the foreigners, so they need the local labor contract for its deductibility for cooperating purposes.
So, currently it is still not clear if they can enjoy that exemption if they have that situation. We receive different guidances from different officials.
The government is taking action in resolving issues related to the regulation of “intra-company transferees”. What is your opinion on this?
Sarah Galeski: It just seems that they haven’t come to the consensus between different authorities on exactly how that exemption should be interpreted. However, it seems that the Government will give specific instructions in the upcoming time and this is expected to solve the problem.
I think this is very useful, especially in helping businesses allocate personnel as foreign workers in a better way. We hope that the ambiguity problem in the definition will be resolved soon.
Statutory Social Insurance contribution for foreign workers in Vietnam
Under the Law on Social Insurance 2014 and Decree 143, from January 1, 2018, foreigners working in Vietnam will be subject to statutory Social Insurance (SI) contributions.
The people subject to mandatory SI scheme are those who:
Work under a work permit or practice certificate or practice license; and
Maintain a labour contract with an indefinite term or a definite term of one year or more with a Vietnamese company;
The exemption of mandatory SI contribution includes those who:
Work in Vietnam under intra-company transfer form as regulated in Decree 11 (managers, executive directors, experts or technicians of a foreign enterprise which has established a commercial presence in Vietnam and were employed by the foreign enterprise at least 12 months prior to being transferred); or
Have passed the retirement age in accordance with the Labour Code.
In short, the contribution scheme for foreigners including five regimes: sickness, maternity, labour accident, pension, and survivorship allowance. Upon the termination of the Vietnam labour contract or expiration of the work permit, and when the expatriates no longer live and work in Vietnam, they can claim a one-off allowance for the contribution period.