FIEs seek support over social insurance payout schedules

FIEs seek support over social insurance payout schedules

In the context that the production and business situation continues to be severely affected due to the latest outbreak of COVID-19, foreign-invested enterprises in Vietnam are looking to suspend or extend deadlines for payment of social insurance premiums, just as the Vietnamese government has reduced and exempted taxes since last year.

Stresses of the pandemic are causing some businesses to struggle to pay up in insurance premiums. Photo: Le Toan

Despite accounting for a relatively large proportion of the total investment capital and total social insurance premiums, businesses from South Korea in particular have recently been accused by Vietnamese workers of deliberately delaying or evading social insurance payments.

In mid-May, 306 workers working at South Korean electronic component manufacturers Magic Vina Co., Ltd., based in the Mekong Delta province of Long An, sued the company for the social insurance debt of nearly $56,000.

Chairman of the Labour Federation of the northern city of Haiphong, Tong Van Bang, also said that the federation has received a complaint about more than 200 workers gathering at Gleeco Vietnam International Sewing Co., Ltd. in An Duong to ask the company to pay social insurance benefits.

Gleeco Vietnam is a ready-made garment manufacturer owned by South Korean investors. From April 2019, the total amount of payable social insurance debt of this business was nearly $521,800 and up to now, the company has only paid around $26,000.

Last year, another enterprise with 100 per cent South Korean investment capital, Texmart Vina Co., Ltd. in the northern province of Phu Tho, was also detected to have evaded social insurance contributions for the period from 2016 to 2018 with an amount of up to $256 million.

According to Hong Sun, vice chairman of the Korea Chamber of Business in Vietnam, one of the reasons for the phenomenon is that most South Korean businesses are facing a lot of difficulties or the risk of bankruptcy due to export restrictions to the United States and the EU because of COVID-19.

Sun said, “This is the most difficult period in history for foreign businesses operating in Vietnam, and they need the Vietnamese government’s support to extend the deadlines for payments of social insurance premiums.”

As of October 2020, South Korea was the top investor in Vietnam with more than 9,000 valid projects with the total registered investment of $71.5 billion, accounting for 18.5 per cent of the total foreign direct investment into Vietnam, according to the Ministry of Planning and Investment.

According to Vietnam Social Security (VSS), the total number of FIEs participating in social insurance, health insurance, and unemployment insurance was over 26,000 businesses by the end of 2019, accounting for 6.8 per cent of the total number of enterprises participating in social insurance in Vietnam. The total premiums of social insurance, health insurance, and unemployment insurance from FIEs was 46.5 per cent of the total premiums of all businesses in the economy.

As of March, the total number of FIEs participating in social, health, and unemployment insurance was just under 27,000 units, an increase of 3.53 per cent compared to 2019. The total number of participants is just shy of five million people, an increase of 5.9 per cent compared to 2019. The average salary for participating in social, health, and unemployment insurance, meanwhile, is more than $260 per person per month, an increase of 5 per cent compared to 2019.

VSS commented that the main reason for the increase in the amount of social insurance debt among FIEs in recent times is that the pandemic has slowed down production and business activities, making enterprises unable to balance the budget to pay social insurance premiums for employees.

In order to support businesses to reduce difficulties caused by the pandemic, VSS has decided to suspend payment of retirement and survivorship funds for more than 1,800 businesses, including both domestic and foreign enterprises operating in Vietnam.

For businesses that are less affected by the pandemic, VSS will continue to organise dialogues and seminars with businesses and employees on the fulfilment of the obligation to pay social insurance contributions, as well as promptly detect and strictly handle violations.

It is not uncommon for FIEs to be found to intentionally avoid paying social insurance for their employees, or to owe social insurance debt for a long time.

A few years ago, Vietnam also recorded many cases of foreign business owners fleeing elsewhere, leaving large debts on wages and social insurance for employees such as KL Texwell Vina Co., Ltd. (South Korea), KaiYang Vietnam Co., Ltd. (Taiwan), and Metacor Vietnam Co., Ltd., and Quatron Steel JSC (both Canada).

A representative of the Vietnam General Confederation of Labour said that the enterprises’ evasion of social insurance contributions not only violates the law but also leads to many serious consequences for employees as they will not receive unemployment benefits in difficult times, or will not be entitled to benefits such as insurance covering sickness, maternity, retirement, and death.

VIR