KEY CHANGE EFFECTIVE OF 2024 VIETNAM’S SOCIAL INSURANCE LAW: EXPANDED SCOPE OF COMPULSORY SOCIAL INSURANCE
On July 1, 2025, Vietnam’s new Social Insurance Law No. 41/2024/QH15, ratified by the National Assembly on November 29, 2024, (2024 Social Insurance Law), will take effect. This legislation replaces the Social Insurance Law No. 58/2014/QH13, aiming to modernize the social insurance framework, enhance compliance, and align with evolving labor practices in Vietnam.
The new law introduces significant changes to expand the scope of compulsory social insurance, ensuring broader coverage for workers while addressing ambiguities in labor relationships. This key objective is to strengthen social security by clarifying which labor arrangements fall under compulsory social insurance, thereby protecting workers’ rights and ensuring employer compliance with contribution obligations.
KEY AMENDMENT: EXPANDED SCOPE OF COMPULSORY SOCIAL INSURANCE (ARTICLE 2.1.A)
Under Article 2.1.a, the 2024 Social Insurance Law expands the definition of employees subject to compulsory social insurance. Vietnamese citizens working under agreements—regardless of their title—that involve remuneration, wages, and management, supervision, or control by one party are now included. This amendment aligns with the definition of a labor contract under Article 13.1 of the Labor Code No. 45/2019/QH14, which emphasizes the substance of the work relationship over its formal designation.
This change targets arrangements previously labeled as “service contracts” or other agreements that, in practice, resemble employment relationships. Such contracts, if deemed labor contracts, will trigger obligations for employers to contribute to compulsory social insurance, health insurance, and unemployment insurance.
RISKS FOR SERVICE CONTRACTS AND OTHER AGREEMENTS
The expanded scope poses significant compliance risks for businesses relying on service contracts or non-employment agreements:
Reclassification Risk:
Contracts labeled as “service agreements” or “consultancy contracts” may be reclassified as labor contracts if they involve:
- Payment of remuneration or wages; and
- Management, supervision, or control by the hiring party (e.g., fixed working hours, performance evaluations).
Example: A freelance consultant paid a monthly fee and subject to project oversight may be deemed an employee, requiring social insurance contributions.
Financial Implications:
If reclassified, the hiring party (as an employer) must:
- Contribute the employee’s salary for social insurance, health insurance, and unemployment insurance.
- Retroactively pay contributions, penalties, and interest for non-compliance.
RECOMMENDATIONS FOR BUSINESSES
To mitigate risks, businesses should take proactive steps:
- Review and Revise Contracts: Conduct a thorough audit of all service contracts, consultancy agreements, and other arrangements to ensure they do not exhibit characteristics of labor contracts.
- Seek Legal Advice: Engage legal counsel to redraft agreements, clearly defining the independent contractor status and excluding employment-like terms.
- Enhance Compliance: Implement internal policies to monitor contractor relationships and ensure compliance with social insurance obligations where applicable.
APFL Partners is ready to assist businesses in reviewing contracts, drafting compliant agreements, and navigating the new requirements under the 2024 Social Insurance Law. Contact us to ensure your operations align with Vietnam’s evolving legal framework.
Disclaimer: This newsletter and its content are for informational purposes only and do not constitute legal advice. Readers should seek legal or professional advice before taking or refraining from any action.
