Plan to narrow insurance coverage for business owners

The latest revised Social Insurance Bill proposes including only registered business owners in the mandatory social insurance scheme, excluding those without registration.

In the latest draft of the revised Social Insurance Law submitted to the Ministry of Justice for review in June, the Ministry of Labour, Invalids and Social Affairs proposed including registered business owners, enterprise managers, cooperative managers who do not receive salaries, and part-time workers in the mandatory contribution category. These individuals do not have labor contracts and do not receive salaries, therefore they are not yet subject to mandatory social insurance.

Those who contribute to mandatory social insurance will receive full benefits including retirement, death, maternity, sickness, occupational disease, and unemployment benefits.

Compared to the draft in March, the bill, after synthesizing and incorporating feedback, has undergone several changes. Specifically, the scope of mandatory contributions has been narrowed to include household heads with registered businesses, not all, and does not apply to those who have reached retirement age. With this new proposal, the number of household heads participating in mandatory social insurance will decrease to nearly 2 million instead of the initially projected 5 million.

Mr. Nguyen Duy Cuong, Deputy Director of the Social Insurance Department, Ministry of Labor, Invalids and Social Affairs, explained that there are approximately 5 million business households nationwide, divided into two groups. The first group consists of about 2 million registered businesses with annual revenue exceeding 100 million VND and currently paying taxes. The second group is unregistered businesses with low revenue, such as those engaged in agriculture, forestry, and informal trading.

The proposal is to narrow the scope of those required to pay to household heads with registered businesses, in order to ensure feasibility in management and implementation, when linking with the business and tax management system's database. "If we include all household heads in the payment category, it will be too broad, making management difficult, not to mention collecting the mandatory contributions," Mr. Cuong said.

For this group, the salary used as the basis for social insurance contributions is at least half and at most eight times the minimum wage in Region I (currently 4.68 million VND). Compared to the initial draft, the contribution level has changed, no longer a rigid regulation of 2-36 million VND. This group will deduct 25% of their salary each month as the basis for social insurance contributions, including 22% to the Retirement and Death Benefit Fund and 3% to the Sickness and Maternity Fund.

"Specific guidelines will be provided later on regarding how the fees will be collected, possibly including authorization through a management agency similar to the system for those working abroad," Mr. Cuong said.

Small traders stand in front of their flower stalls at Quang Ba Market (Hanoi), January 2023. Photo: Giang Huy — Small traders stand in front of their flower stalls at Quang Ba Market ( Hanoi ), January 2023. Photo: *Giang Huy*

Former Deputy Minister of Labour, Invalids and Social Affairs Pham Minh Huan believes that narrowing the eligibility requirements for registered business households is appropriate, but it is regrettable that it allows unregistered business households to participate in mandatory social insurance. In the long term, the law should consider gradually expanding eligibility to include this group as well.

He suggested that instead of the old contribution-benefit ratio, different rates should be designed to give them choices. Most of the household heads included in the mandatory contribution scheme are 30-40 years old, with few in their twenties. Therefore, their years of social insurance participation are very short, and by retirement age, they may not have enough years of contribution, easily falling into the group that voluntarily makes a lump-sum payment for the remaining period to receive a pension.

If they choose a low contribution rate, with a minimum benefit rate of 45% for 15 years of participation, their pension will be low. In that case, the state will once again have to adjust or compensate. Currently, the drafting agency has not considered this issue and is still applying the current contribution-benefit rate for the mandatory social insurance sector.

The draft revised Social Insurance Law is expected to be submitted to the Government in June, presented to the National Assembly for discussion at the October 2023 session, passed at the May 2024 session, and take effect from January 1, 2025.

Hong Chieu

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