Evasion and debt of social insurance in enterprises

Lesson 1: Alarming situation

The issue of social insurance evasion and debt by enterprises in the province has been mentioned for about 5 years now and has become a "difficult problem" to solve. By February 2011, the provincial Social Insurance was still the "creditor" with a debt amounting to tens of billions of dong...

According to the report of the provincial Social Insurance Agency, currently, our province has nearly 7 thousand enterprises, with a total of more than 266 thousand workers, of which 4,694 are non-state enterprises, 204 thousand workers. However, as of December 31, 2010, only 2,302 enterprises (accounting for more than 32%) with more than 74,300 workers participating in social insurance, health insurance and unemployment insurance, of which 1,723 are non-state enterprises with more than 43 thousand workers. Thus, in the province, there are up to 68% of enterprises with many workers working but not participating in social insurance. In addition to enterprises that have been equitized, have had labor conversions and rearrangements, so they are slow to register for social insurance for employees, enterprises that have registered for business but are not operating or have been dissolved... as of February 25, there are still 271 units with social insurance arrears of 3 months or more with a total debt of 26,877 billion VND, 48 units with arrears of 6 months or more with a total debt of 20,210 billion VND and 31 units with arrears of 12 months or more with a total debt of 16,661 billion VND. The construction industry is the place with the most enterprises owing social insurance, followed by the industries of Traffic - Transportation, Mineral Exploitation, Fisheries...

Construction labor is a tough field but workers' rights have not received due attention from some businesses.
Photo: Dang Dinh Nhat

Among the typical enterprises that owe social insurance, we must mention Truong Son Automobile Industry Joint Stock Company (under Vietnam Automobile Corporation Vinamotor). This company is headquartered in Bac Vinh Industrial Park, initially had more than 200 employees, but due to business losses, the company stopped operating since April 2008 and now has only 12 employees. The company's social insurance debt period is more than 13 years and the debt amount is 1,282 billion VND. Besides, we must also mention the Sea Dredging Company 2 which has 179 employees, but has not paid social insurance for employees for more than 30 months; the social insurance debt of Sea Dredging Company 2 has reached more than 3 billion VND. In addition, in the list of the provincial social insurance, there is also Nghe An Bridge and Road Design Consulting and Construction Joint Stock Company which owes 33.76 months with the amount of 3,086 billion VND; Investment and Construction Joint Stock Company 24 owes 2,298 billion VND; Construction Joint Stock Company 484 owes 1,965 billion VND; Central Traffic Construction Company owes 1,791 billion VND; Nghe An Seafood Import-Export Company owes 1,402 billion VND; Nghe An Ship Transport Joint Stock Company owes 1,175 billion VND... It is worth mentioning that besides the enterprises that do not deduct employees' salaries to pay to the Social Insurance agency, there are many enterprises that still deduct social insurance contributions from employees' salaries every month but use them for other purposes, typically the following units: Dredging Company 2, Nghe An Bridge and Road Design Consulting and Construction Joint Stock Company, Traffic Construction Company 473, Construction Joint Stock Company 484...

Through research, the "eternal" reason that enterprises give to explain the violation of the Labor Code and the Social Insurance Law is that due to the impact of economic recession, production and business have encountered many difficulties, or because the construction project has been completed but the investor has not paid... However, except for enterprises that are really facing difficulties, operating at a loss, and are no longer able to pay salaries to employees and pay social insurance, for many enterprises, the above reason is just an excuse.

In addition to the above reasons, enterprises also have many ways to "circumvent the law" to avoid paying social insurance. According to Mr. Ngo Ngoc Thanh - Head of Collection Management Department (Provincial Social Insurance), one of the common ways to avoid paying social insurance is to pay social insurance lower than the actual salary stated in the labor contract. According to the Law on Social Insurance, the monthly salary and wages deducted for social insurance are the salary and wages stated in the labor contract. Enterprises do not regularly increase the salary level for employees according to regulations but increase other payments besides salary to reduce the cost of paying social insurance.

In addition, another "trick" used by many enterprises is not to sign contracts with employees or to sign contracts of less than 3 months, for jobs of a regular nature, both to avoid paying social insurance and to easily terminate labor contracts when necessary, while reducing mandatory costs for enterprises when terminating contracts according to the provisions of the Labor Law and also to easily deal with inspections and checks. A typical example is Hoa Hai Private Enterprise - a transportation business headquartered in Dong Vinh Ward (Vinh City). This enterprise employs more than 20 employees but does not have any labor contracts, so employees in this enterprise are not allowed to participate in social insurance and health insurance. Similar is the case of Minh Anh Kim Lien Garment Company, which employs more than 500 employees but only signs contracts for 165 people. In addition, there are many enterprises that do not sign labor contracts with more than 50% of employees, commonly enterprises in the Construction and Mining industries. Therefore, it is very difficult for state management agencies to control the declaration of employees subject to compulsory social insurance and monthly salaries and wages for social insurance and unemployment insurance at these enterprises. In addition, some enterprises also register to pay social insurance for a lower number of employees than the actual number of employees working at the unit.

Along with the above "tricks", loopholes in the Social Insurance Law also unintentionally create conditions for enterprises to delay paying social insurance debts. According to the Social Insurance Law, when enterprises pay social insurance beyond the prescribed time limit, they must pay late payment interest to the Social Insurance agency at 10.5%/year. However, this interest rate is much lower than the bank's interest rate, and they do not have to go through mortgage procedures, so many enterprises deliberately pay social insurance late, while still collecting 5% of employees' salaries to use for production and business, accepting to pay late payment interest on social insurance.

These are the legal loopholes that businesses often use to evade the responsibilities and obligations of employers to employees in the province in recent years, at the same time turning the provincial Social Insurance agency into an unwilling "creditor" with a difficult debt collection journey to ensure legitimate rights for employees.

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Minh Quan