EXPANDING THE SCOPE OF SOCIAL INSURANCE TO COVER PERSONS NOT RECEIVING WAGES

The 2024 Social Insurance Law, which will come into effect on July 1, 2025, marks a significant milestone in expanding the coverage of Vietnam's social security system. One major change that businesses must pay close attention to is this: management positions within enterprises – even if they do not have labor contracts or receive a salary – are still required to participate in mandatory social insurance (SI).

This is a notable adjustment aligned with the goal of building a universal SI system, ensuring fairness and sustainability in the distribution of social responsibilities among different labor groups.

Legal Provisions

Before the enactment of the 2024 SI Law, individuals who did not sign labor contracts and did not receive salaries from enterprises – such as board members, controllers, representatives of state capital or enterprise capital in affiliated companies – were understood not to be subject to mandatory SI participation.

• Managers of enterprises, controllers, representatives of state capital, and representatives of enterprise capital in companies and parent companies, as stipulated in the Law on Enterprises;

• Members of the board of directors, general directors, directors, members of the supervisory board or controllers, and other elected managerial positions of cooperatives and cooperative unions as defined in the Law on Cooperatives.

This regulation is based on the principle that any individual who plays a role in managing, operating, supervising, or representing capital in an organization – essentially influencing business operations – must contribute to the social insurance system, regardless of compensation method. This approach is consistent with international practices and aims to close existing legal loopholes.

The concept of “enterprise manager” is clearly defined in Clause 24, Article 4 of the 2020 Law on Enterprises, including managers of private enterprises and company managers such as: private business owners, general partners, Chairpersons of the Members' Council, members of the Members' Council, company Chairpersons, Chairpersons of the Board of Directors, board members, Directors or General Directors, and other managerial titles as stipulated in the company charter.

Thus, to determine social insurance obligations, enterprises must compare actual managerial titles within their organizational structure against the current legal framework.

How will individuals holding multiple managerial positions contribute to social insurance?

In practice, it is common for one person to serve simultaneously as a board member in Company A, a director in Company B, and a capital representative in Company C. This raises the question: Where should they pay social insurance, and is it required in multiple places?

For an individual concurrently holding managerial or executive positions in multiple organizations, mandatory SI participation is made at the first entity where they assume such a role – whether a company, cooperative, or cooperative union. If the individual falls under multiple categories as outlined in Clause 1, Article 2, then participation shall follow government regulations.

Salary Basis for SI Contributions

The 2024 SI Law allows managers without a salary to choose their own salary level as the basis for SI contributions, under the following conditions:

• The minimum level cannot be lower than the reference level announced by the government;

• The maximum level cannot exceed 20 times the reference level at the time of contribution.

According to Clause 13, Article 141 of the Law, if the government has not yet issued a reference level, the basic salary shall be used as a temporary basis. Therefore, using the basic salary as a reference in the early implementation phase is lawful and appropriate.

Additionally, SI participants have the right to adjust their contribution salary once every 12 months from the most recent selection, offering flexibility in long-term social security planning.

SI Contribution Rates

According to Point a, Clause 4, Article 33 of the 2024 Law, the contribution rates for unpaid managers are defined as follows:

• 3% of the selected salary to the sickness and maternity fund;

• 22% of the selected salary to the retirement and survivorship fund.

Total: 25% of the chosen salary.

W&A Recommendations

To effectively prepare for the new regulations under the 2024 SI Law, W&A recommends that enterprises immediately implement the following steps:

1. Review all management personnel within the parent company, subsidiaries, and affiliates – particularly those who do not have labor contracts or do not receive salaries.

2. Classify and identify the primary SI contribution entity if an individual holds multiple positions across different units.

3. Draft, sign, and archive internal documents, including: appointment decisions, assignment letters, SI contribution agreements, and salary agreements for contribution purposes.

4. Closely monitor upcoming decrees and circulars (11 decrees and 3 circulars expected) to stay updated and ensure consistent application across the organization.

Conclusion

The new provisions of the 2024 SI Law represent a major step forward in perfecting the legal framework for social security. Mandating SI participation for unpaid managers reflects a shift in legislative thinking – from recognizing only "employees" to encompassing all individuals with organizational management responsibilities as workers in a broader sense.

Businesses should not wait until the law takes effect to take action. Proactively reviewing, planning, and implementing changes now will not only ensure legal compliance but also strengthen governance capacity, protect reputation, and promote long-term internal stability.

Contact Us for Detailed Consulting:

☎️ +84 93 594 8688

📧 Email: waconsulting@waco.com.vn

🌐 Website: https://www.waconsulting.vn/

📌 Floor 18, Vincom Center Dong Khoi, District 1, Ho Chi Minh City

🏢 Floor 2,  Saigon Paragon Building, District 7, Ho Chi Minh City