Latest social insurance obligations for foreign enterprises in Vietnam in 2025

In the context of globalization, Vietnam is becoming an attractive destination for foreign investors thanks to its stable political environment, competitive labor costs, and clear incentive policies. However, one of the key legal challenges that foreign-invested enterprises (FDIs) often face when starting operations in Vietnam is the obligation to participate in mandatory social insurance for their employees. A lack of understanding or incorrect application of social insurance regulations can lead to serious consequences: retroactive collection of unpaid contributions over several years, administrative penalties, and even damage to the company’s reputation during inspections or audits. Especially since the Social Insurance Law 2024 and Decree No. 158/2025/NĐ-CP officially came into effect, regulations regarding eligible participants, contribution rates, the salary base for calculation, and the method for determining foreign exchange rates have become more detailed, transparent, and strictly enforced.
The following article provides a comprehensive and in-depth analysis of the social insurance obligations for foreign enterprises in Vietnam, helping you not only to comply with the law but also to optimize costs and build a sustainable, professional human resources system.

1. Employees subject to mandatory social insurance participation

Vietnamese Employees: Employees who are Vietnamese citizens and work under indefinite-term labor contracts or fixed-term labor contracts with a duration of at least 01 month are subject to mandatory social insurance. This applies even when the employer and employee agree to use a different contract name, as long as the nature of the agreement involves paid employment and the presence of management, direction, or supervision by one party. It is important for enterprises to be aware that, in practice, many attempt to circumvent the classification of a “labor contract” by assigning alternative name to employment agreements. In necessary cases, enterprises may be required to provide explanations.

For Enterprise executives such as the General Director, Director, or members of the Supervisory Board, Social Insurance Law recognizes that this group falls under the category required to participate in compulsory social insurance. However, according to the latest guidance, it can be understood that if these individuals also concurrently serve as employees of the company, they participate in compulsory social insurance as employees. This provides clarification for a common question many enterprises face: whether a General Director or Director is required to participate in compulsory social insurance or not.

Foreign employees: Foreign nationals working in Vietnam are subject to mandatory social insurance participation if they are employed under a fixed-term labor contract with a duration of 12 months or more with a Vietnamese employer, except in the following cases: i) Internal transfer within the enterprise in accordance with regulations on foreign workers in Vietnam; (ii) At the time of signing the labor contract, the employee has reached the retirement age as prescribed in clause 2, Article 169 of the Labor Code; (iii) An international treaty to which the Socialist Republic of Vietnam is a signatory regulates otherwise.

2. Salaries on which compulsory social insurance is paid 

For employees whose salary policies determined by the employer, the salary basis for compulsory social insurance contributions is the monthly salary, including the salary for the job or title, salary allowances, and other additional amounts that are agreed upon and paid regularly and stably in each pay period.

In this context, enterprises must pay close attention to the allocation in the payroll to accurately identify which components qualify as salary for social insurance contribution. Specifically, the salary for the job or title is calculated based on time (monthly) of the job according to the salary scale or payroll table developed by the employer under Article 93 of the Labor Code and agreed upon in the labor contract;

Salary allowances that compensate for factors such as working conditions, job complexity, living conditions, and the level of labor attraction—which have not been fully accounted for or have been insufficiently covered in the salary specified in point a of this clause—shall be agreed upon in the labor contract. These do not include allowances that are dependent on or fluctuate according to work performance, working process, or the quality of the employee’s job performance;

Other additional payments with a specific monetary amount, determined together with the salary as specified in point a of this clause, shall be agreed upon in the labor contract and paid regularly and consistently in each pay period. These do not include additional payments that are dependent on or fluctuate according to work productivity, the working process, or the quality of the employee’s job performance.

The salary basis for compulsory social insurance contributions for part-time employees, whose monthly salary is equal to or higher than the minimum salary used as the basis for social insurance contributions, shall be determined as follows:

– If the labor contract stipulates hourly salaries, then the monthly salary is calculated by multiplying the daily salary by the number of working hours in the month as agreed in the labor contract;

– If the labor contract stipulates daily salaries, then the monthly salary is calculated by multiplying the daily salary by the number of working days in the month as agreed in the labor contract;

– If the labor contract stipulates weekly salaries, then the monthly salary is calculated by multiplying the weekly salary by the number of working weeks in the month as agreed in the labor contract.

In cases where the salary specified in the labor contract and the salary paid to the employee are foreign currency, the salary basis for calculating compulsory social insurance contributions shall be calculated in Vietnamese Dong based on the salary amount in foreign currency, which is converted into Vietnamese Dong according to the average buying exchange rate via bank transfer between Vietnamese Dong and the foreign currency, as announced by the four state-owned commercial banks at the end of the day on January 2nd for the first half of the year and July 1st for the second half of the year; In case these dates fall on a public holiday or non-working day, the exchange rate of the next immediate working day shall be applied.

Compliance with social insurance regulations is not only a mandatory legal obligation but also a reflection of the professionalism and credibility of foreign enterprises operating in Vietnam. To avoid legal risks and optimize labor costs, enterprises should:

First, review all labor contracts, including so-called “renamed” agreements such as collaboration or service contracts. If these agreements involve salary payments and labor management in terms of nature, they are still subject to compulsory social insurance contributions.

Second, clearly define the salary used as the basis for social insurance contributions, distinguishing between fixed allowances/supplements and those that fluctuate based on performance to ensure a transparent and lawful payroll structure for avoiding arrears or unnecessary over-contributions.

Third, pay attention to social insurance obligations for foreign employees, particularly in cases where contracts last 12 months or more and do not fall under exemptions (internal transfers, reaching retirement age, or where international treaties regulate otherwise).

Fourth, establish processes to regularly review and update social insurance policies, and train responsible personnel to stay informed of legal changes—especially in light of the Social Insurance Law 2024 and Decree 158/2025/NĐ-CP, which have imposed stricter regulations on coverage, contribution rates, and salary calculations involving foreign currency conversion.

Complete and accurate compliance with social insurance obligations helps foreign enterprises in Vietnam: comply with Vietnamese laws; avoid administrative sanctions and arrears; optimize human resource costs in a reasonable and transparent manner; and enhance financial management capacity.

Social insurance is not only a mandatory legal obligation, but also a vital component of human resource policies, social welfare, and corporate culture. For foreign enterprises investing and operating in Vietnam, fully complying with social insurance regulations helps build a reputable and professional image, ensures legitimate employee rights, and minimizes potential legal risks during business operations. As social insurance laws and regulations become increasingly clear and stringent—especially with the enforcement of the 2024 Social Insurance Law and Decree No. 158/2025/NĐ-CP—businesses must proactively update, review, and adjust their internal practices in a timely manner to ensure compliance. This not only protects the enterprise from unnecessary penalties, but also lays the groundwork for sustainable development, operational stability, and enhanced competitiveness in the Vietnamese market.

Time of writing: 04/07/2025

The article contains general information which is of reference value, in case you want to receive legal opinions on issues you need clarification on, please get in touch with our Lawyer  at  info@cdlaf.vn

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