Businesses that purposely find ways to evade paying social insurance for their employees will not only receive administrative fines but also attract steep monetary penalties once a new law comes into effect next year.

In Vietnam, insurance is not calculated based on the full salary of an employee, rather a part of it only, known as the ‘fund used to calculate insurance payment.’  

For instance, an engineer might have a total wage of VND7 million (US$308), however, the fund used to calculate his or her insurance payment may be only VND4 million ($176).

As of June 2017, an employer is required to pay 17.5 percent of this fund to social insurance, three percent to healthcare insurance and one percent to unemployment insurance on behalf of its employees.

Employees must themselves also contribute to the insurances, with respective rates of 25.5 percent, 4.5 percent and two percent of the ‘salary fund used to calculate insurance payment.’

From January 2018, when the amended law on social insurance takes effect, any employer caught evading these payments on purpose will be fined between VND50 million ($2,200) and VND200 million ($8,810).

They may also face non-custodial sentences of up to one year, or imprisonment of three to 12 months, Nguoi Lao Dong (Laborer) newspaper reported on Sunday.

The new law also stipulates cash fines ranging from VND200 million to VND500 million ($22,000), or jail terms of six months to three years for violations including evading insurance payments worth between VND300 million ($13,200) and VND1 billion ($44,000) and for dodging payments for between 50 and 200 employees.

If the evaded insurance payments are worth more than VND1 billion, or more than 200 employees are involved, fines will be set at VND500 million to VND1 billion, or two to seven years of imprisonment.