Use a 'reference level' instead of the base salary for social insurance contributions starting July 1st.
Báo Thanh niên•27/05/2024
The Government and the Standing Committee of the National Assembly have agreed on a regulation regarding the reference level to replace the base salary as the basis for social insurance contributions after the salary reform takes effect from July 1st, as stipulated in the amended Social Insurance Law.
On the morning of May 27th, continuing the 7th session of the 15th National Assembly, the National Assembly discussed the draft revised Social Insurance Law. Regarding the salary used for social insurance contributions after the basic salary was abolished following the salary reform effective July 1st, the Chairwoman of the National Assembly's Social Affairs Committee, Nguyen Thuy Anh, stated that this issue was not fully anticipated when the Government submitted the draft to the National Assembly at the 6th session at the end of 2023.
Chairwoman of the National Assembly's Social Affairs Committee, Nguyen Thuy Anh, presented the report on the acceptance and revision of the draft Social Insurance Law.
GIA HAN
During the process of receiving and revising the draft law, after numerous requests, on May 15th, the Government proposed replacing the "basic salary" with a "reference level" in the draft law. However, on May 25th, the Government submitted Report No. 286 to the National Assembly proposing related contents in the revised draft Social Insurance Law due to the impact of the new wage policy. Regarding the use of a "reference level" to replace the "basic salary," the Government stated that, to ensure correlation with the proposed wage reform plan that the Steering Committee has agreed upon and reported to the competent authority, it is proposed to include the concept of a "reference level" in the draft law. Specifically, the Government proposes that the reference level be the amount of money used to calculate the contribution and benefit levels for certain social insurance schemes in this law. The reference level is calculated based on the base salary. When the base salary is abolished, the reference level will be adjusted by the Government based on the increase in the consumer price index and economic growth, in accordance with the capacity of the state budget and the social insurance fund. Regarding the monthly salary for compulsory social insurance contributions as stipulated in Clause 1, Article 89 of the 2014 Social Insurance Law, the Government proposes to maintain the content as presented at the 6th session in October 2023. Accordingly, for employees subject to the salary regime regulated by the State, the salary used as the basis for compulsory social insurance contributions is the monthly salary according to the salary scale regulated by the State; seniority allowance exceeding the standard rate, and professional seniority allowance (if any).
How will pension and lump-sum benefit calculations change?
Government Report No. 286 also stated that, with the salary reform plan that the Government has agreed upon and reported to the competent authorities, it is basically not necessary to comprehensively amend Article 62 (on the average monthly salary for calculating pension and lump-sum benefits based on social insurance contributions) and Article 63 (on adjusting salaries already subject to social insurance contributions) of the current law as previously proposed by the Government. The Government also proposed to retain these provisions as drafted for submission to the National Assembly at the 6th session in October 2023.
Minister of Labour, Invalids and Social Affairs Dao Ngoc Dung, representing the lead agency in charge of verification, at the discussion session.
GIA HAN
According to Ms. Thuy Anh, based on the Government's report, on May 25th, the National Assembly Standing Committee issued a report on the acceptance, explanation, and revision of the draft revised Social Insurance Law regarding the average salary used as the basis for calculating pensions and lump-sum benefits (Article 76) and the adjustment of the salary used as the basis for mandatory social insurance contributions (Article 77), submitted to the National Assembly. According to Ms. Thuy Anh, the National Assembly Standing Committee agreed with the Government's proposal, but argued that these regulations affect millions of people who have received, are receiving, and will receive pensions. Therefore, they need to be considered comprehensively and thoroughly in the context of salary reform, and the impact on pensioners at different times, in different regions and sectors needs to be carefully assessed. The National Assembly Standing Committee requested that National Assembly deputies carefully study, discuss, and provide frank and clear opinions on this issue. The revised Social Insurance Law was initiated at the 6th session in October 2023, in the context of implementing salary reforms. According to the agenda, the law will be approved by the National Assembly at the 7th session of the 15th National Assembly.
The regulations in Articles 76 and 77 are as proposed by the Government.
Article 76. Average salary used as the basis for calculating social insurance contributions for pension and lump-sum benefits1. For employees subject to the salary regime prescribed by the State who have contributed to social insurance for the entire periodunder this salary regime, the average salary used as the basis for social insurance contributions for the years of contribution before retirement shall be calculated as follows:a) If social insurance participation began before January 1, 1995, the average salary used as the basis for social insurance contributions shall be calculated for the last 5 years before retirement;b) If social insurance participation began between January 1, 1995 and December 31, 2000, the average salary used as the basis for social insurance contributions shall be calculated for the last 6 years before retirement;c) If social insurance participation began between January 1, 2001 and December 31, 2006, the average salary used as the basis for social insurance contributions shall be calculated for the last 8 years before retirement;d) If you started participating in social insurance between January 1, 2007 and December 31, 2015, the average salary used as the basis for social insurance contributions will be calculated based on the last 10 years before retirement;e) If you started participating in social insurance between January 1, 2016 and December 31, 2019, the average salary used as the basis for social insurance contributions will be calculated based on the last 15 years before retirement;f) If you started participating in social insurance between January 1, 2020 and December 31, 2024, the average salary used as the basis for social insurance contributions will be calculated based on the last 20 years before retirement;g) If you started participating in social insurance from January 1, 2025 onwards, the average salary used as the basis for social insurance contributions will be calculated based on the entire period of social insurance contributions.h) In cases where, during the period of social insurance contributions under the salary regime stipulated by the State as specified in points a, b, c, d, e, and f of this clause, the employee has a period of social insurance contributions with an average salary used as the basis for contributions that is higher than the average salary used as the basis for social insurance contributions in the final years, the employee may choose the salary used as the basis for social insurance contributions corresponding to the number of years specified in this clause to calculate the average salary used as the basis for social insurance contributions.i) The Government shall regulate the calculation of the average salary used as the basis for social insurance contributions when the State implements salary policy reforms for cadres, civil servants, public employees, and the armed forces.2. For employees whose entire period of social insurance contributions is based on the salary regime determined by the employer, the average salary used as the basis for social insurance contributions shall be calculated based on the entire period.3. For employees who have both periods of social insurance contributions under the state-regulated salary regime and periods of social insurance contributions under the employer-determined salary regime, the average salary used as the basis for social insurance contributions will be calculated based on the periods of contributions under the state-regulated salary regime. The average salary for the period of contributions under the state-regulated salary regime will be calculated according to Clause 1 of this Article, based on the total period of contributions under the state-regulated salary regime.4. The Government shall provide detailed regulations for this Article. "Article 77. Adjustment of wages used as the basis for compulsory social insurance contributions1. The wages used as the basis for compulsory social insurance contributions to calculate the average level stipulated in Article 76 of this Law for employees subject to the state-regulated salary regime shall be adjusted as follows:a) For employees who started participating in social insurance before January 1, 2016, the adjustment shall be based on the basic salary at the time of receiving retirement benefits. The Government regulates the adjustment of wages used as the basis for compulsory social insurance contributions when the State implements salary policy reforms for officials, civil servants, public employees, and the armed forces.b) For employees who started participating in social insurance from January 1, 2016 onwards, the adjustment is as stipulated in Clause 2 of this Article.2. The wages used as the basis for compulsory social insurance contributions to calculate the average level stipulated in Article 76 of this Law for employees subject to the wage regime determined by the employer shall be adjusted based on the consumer price index of each period as prescribed by the Government.
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