In Vietnam, determining whether an employee is subject to compulsory insurance is only the first step.
In several employment scenarios, an employee may fall outside the scope of compulsory Social Insurance (SI), Health Insurance (HI), Unemployment Insurance (UI), or Occupational Accident Insurance (OAI). However, this does not necessarily mean the employer has no further payment obligation.
Under Clause 3, Article 168 of the 2019 Labor Code, where an employee is not covered by the relevant compulsory insurance schemes, the employer may instead be required to pay the employee an amount equivalent to the employer-side insurance contribution together with salary.
This distinction is particularly important for payroll teams managing probationers, foreign employees, retirees, employees with multiple employment contracts, and short-term employment arrangements.
The key distinction: “not subject to insurance” vs. “no contribution due for the month”
Before calculating any additional payment, HR should first determine why no insurance contribution is being made.
There are two fundamentally different situations:
1. The employee is not subject to compulsory insurance.
In this case, an equivalent payment under Clause 3, Article 168 may arise.
2. The employee remains within the scope of compulsory insurance, but no contribution is payable for a particular month.
In this case, the employer should not automatically replace the insurance contribution with an additional cash payment.
This distinction is particularly relevant for employees taking unpaid leave, sickness leave or maternity leave for at least 14 working days in a month. They remain within the compulsory insurance framework even though no contribution may be payable for that month. Accordingly, the guide concludes that no additional payment under Clause 3, Article 168 arises in this scenario.
Seven employment scenarios HR should review carefully
1. Employment contracts of less than one month
An individual working under an employment contract of less than one month remains an employee under the Labor Code.
However, compulsory SI, HI and UI coverage generally applies to employment contracts with a term of at least one month.
Where the employee is therefore outside the relevant compulsory insurance schemes, the employer pays the corresponding amount together with salary.
The standard employer-side equivalent presented in the guide is 21.5%, comprising:
- 17.5% SI, including 0.5% OAI;
- 3% HI; and
- 1% UI.
Where an employer has been approved for the reduced 0.3% OAI contribution rate, the corresponding total becomes 21.3%.
2. Employees working under multiple employment contracts
Multiple employment relationships require a more detailed allocation of insurance obligations.
According to the guide:
- compulsory SI is contributed under the first employment contract concluded;
- HI and UI follow the employment contract used as the basis for compulsory SI participation; and
- OAI may still be payable under each qualifying employment contract.
For the second and subsequent employment contracts, the employer pays an additional 21% together with salary, comprising 17% SI, 3% HI and 1% UI, while continuing to contribute OAI separately where applicable.
For HR teams, this also creates an ongoing administration issue: the status of the employee's first employment contract should be monitored because the insurance obligation may shift when that contract terminates or is suspended.
3. Foreign employees under fixed-term contracts of at least 12 months
A foreign employee working under a qualifying fixed-term employment contract in Vietnam may be subject to compulsory SI, OAI and HI, subject to statutory exclusions.
However, foreign employees are not subject to unemployment insurance under the 2025 Employment Law referenced in the guide.
The employer therefore continues to contribute:
- 17% SI;
- 0.5% OAI, or 0.3% where the reduced rate has been approved; and
- 3% HI.
At the same time, the employer pays an additional amount equivalent to the 1% employer UI contribution together with salary.
This 1% should not simply be calculated on the employee's full salary. According to the guide, it follows the statutory UI contribution base and applicable contribution cap.
4. Foreign employees who have already reached retirement age when signing the employment contract
The timing of the employment contract matters.
Where a foreign employee has already reached retirement age at the time the employment contract is concluded, the guide treats the employee as excluded from the compulsory insurance schemes considered in the analysis.
In this situation, the corresponding employer payment is 21.5%.
A different result applies where the employee reaches retirement age only after the contract has already been signed. In that case, the existing insurance treatment continues until that employment contract terminates.
This is an important distinction when HR renews or reissues employment contracts for senior foreign employees.
5. Pension recipients who continue working
A person who is already receiving a pension and continues to work under an employment contract is not treated in the same way as an ordinary employee for compulsory insurance purposes.
The guide indicates an equivalent employer payment of 21.5%.
However, HR should obtain evidence confirming that the employee is actually receiving a pension and retain this documentation in the personnel file.
Age alone is not sufficient to make this determination.
6. Separate probation agreements
The structure of the probation arrangement can materially change the insurance treatment.
Where probation is governed by a separate probation agreement, rather than being incorporated into an employment contract, the guide concludes that the probationer is not subject to compulsory insurance and the employer should pay the corresponding 21.5% equivalent amount together with salary.
By contrast, if the probation period is included in an employment contract with a term of at least one month, compulsory insurance applies during the probation period.
For HR teams, this means two employees performing the same probationary role may have different payroll and insurance treatment depending on how their employment documentation has been structured.
7. Unpaid leave, sickness leave or maternity leave of at least 14 working days
This scenario is particularly easy to misinterpret.
An employee taking qualifying leave may have no compulsory insurance contribution for the month. However, the employee has not ceased to be an insured person.
The absence of a contribution arises from a specific statutory rule governing the leave period.
Therefore, according to the guide, the employer does not make an additional equivalent payment under Clause 3, Article 168 simply because no contribution is payable for that month.
The guide also highlights that the 14-working-day threshold is calculated on a cumulative basis within the month and does not need to consist of consecutive days.
Common payroll risks
In practice, errors often arise not because HR applies the wrong contribution rate, but because the employee has first been placed into the wrong insurance category.
For example:
Foreign employee:
The company correctly excludes the employee from UI contributions but forgets to pay the corresponding employer-side UI amount together with salary.
Separate probation agreement:
No insurance is registered, but payroll also omits the insurance-equivalent payment.
Unpaid leave:
Payroll sees zero insurance contributions for the month and incorrectly assumes an equivalent payment must be made.
Multiple employment contracts:
The second employer pays no compulsory SI, HI or UI but does not make the corresponding payment to the employee.
These issues can remain unnoticed for several payroll cycles and become more difficult to correct during an inspection, termination calculation or payroll audit.
A practical HR approach
Before finalising payroll for an employee who is not making the usual compulsory insurance contributions, HR should work through four questions:
- Is the employee legally outside the scope of compulsory insurance, or is the contribution merely suspended for this particular month?
- Which specific insurance schemes apply or do not apply?
- Does Clause 3, Article 168 require an employer-side equivalent payment?
- What contribution base, statutory cap and applicable rate should be used?
This analysis should be documented in the employee's payroll or personnel records, particularly for foreign employees, retirees and employees with multiple employment contracts.
Final takeaway
A zero insurance contribution does not always mean a zero employer obligation.
For payroll purposes, the more important question is why the employee is not contributing.
Where the employee is genuinely outside the scope of a compulsory insurance scheme, an equivalent payment to the employee may arise. Where the employee remains within the insurance system but is temporarily exempt from contributing for a particular month, the result may be entirely different.
Getting that distinction right helps employers avoid both underpayment to employees and unnecessary additional payroll costs.
The guide consolidates the treatment of these scenarios based on the 2019 Labor Code together with the Social Insurance Law 2024, amended Health Insurance legislation, Employment Law 2025 and related implementing guidance referenced in the document.
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This article and the accompanying guide are provided for general information only and do not constitute legal, tax or insurance advice. Insurance obligations, contribution rates and equivalent payments in Vietnam depend on the employee's circumstances, the employment documentation, the competent authorities, current regulations and the agreed service scope, and are subject to change. Specific treatment should be confirmed for each case before payroll is finalised. Truzand provides HR consulting, payroll administration, employment administration and compliance support; it is not a law firm, tax agent, accounting firm, audit firm or recruitment agency, and does not guarantee full compliance.