How does increasing regional minimum wage affect social insurance contributions?
The monthly salary stated in the labor contract is the basis for paying insurance premiums. Therefore, increasing the regional minimum wage will cause social insurance premiums to increase accordingly.
The Ministry of Labor, Invalids and Social Affairs is drafting a Decree regulating regional minimum wages for employees working under labor contracts to replace Decree 141/2017/ND-CP. According to calculations, the minimum wage in 2019 will increase from VND 160,000 - VND 200,000 compared to 2018, corresponding to a percentage increase of 5 - 5.8% depending on the region, with an average increase of 5.3%.
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| According to calculations, the minimum wage in 2019 increased from 160,000 VND - 200,000 VND compared to 2018. |
According to Mr. Le Dinh Quang, Deputy Head of the Labor Relations Department (Vietnam General Confederation of Labor), the above minimum wage is calculated based on the basis of fully compensating for the 2018 cost of living inflation, improving labor productivity and ensuring the implementation of the adjustment roadmap to ensure the minimum living standards of workers and their families. Although the 2019 regional minimum wage increase has not met expectations, it still helps reduce difficulties for workers and shares with businesses.
When the Government adjusts the regional minimum wage, businesses are responsible for reviewing, amending, and supplementing the salary scale and payroll. The monthly salary stated in the labor contract is the basis for businesses to pay social insurance, health insurance, and unemployment insurance. The increase in the minimum wage makes many businesses worry about increasing the burden of having to both ensure salary increases and worry about increasing social insurance contributions.
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| The monthly salary stated in the labor contract is the basis for the enterprise to pay insurance. |
Commenting on this issue, Mr. Le Dinh Quang said that the regional minimum wage is only the lowest salary floor that units and enterprises pay to ordinary workers, doing simple work under normal conditions. According to a survey by the Vietnam General Confederation of Labor, the income of workers in many enterprises is higher than the regional minimum wage.
In fact, there are businesses that still rely on the regional minimum wage to pay social insurance for employees. However, according to the provisions of the Law on Social Insurance 2014, the social insurance contribution level is based on the salary, salary allowances and other additional amounts stated in the employee's contract. Therefore, if the regional minimum wage is applied in 2019, the social insurance contribution level will increase but not significantly.