JOURNALIST: Sir, starting from July 1, 2025, under the 2024 Social Insurance Law, business households must participate in compulsory social insurance. From a legal perspective, how do you evaluate this new regulation?
LAWYER NGUYEN THANH HA:
The regulation mandating business households to participate in compulsory social insurance starting July 1, 2025, is an important adjustment in Vietnam's social welfare policy. It demonstrates the effort to expand the coverage of social insurance, ensuring long-term benefits for workers and contributing to the sustainability of the social security system.
From a legal perspective, this regulation helps enhance transparency and consistency in labor management, ensuring fairness between different types of businesses and business households. According to point b, Clause 1, Article 2 of the 2014 Social Insurance Law, employees working under fixed-term labor contracts from 1 to less than 3 months are required to participate in compulsory social insurance. Expanding this to business households is reasonable, as they are also a form of business employing workers.
However, the implementation of this policy may face challenges, particularly for small business households without dedicated accounting systems and often with unstable incomes. Therefore, regulatory bodies need to have flexible mechanisms for social insurance collection and payment, apply appropriate support policies, reduce administrative procedures, and strengthen communication efforts so that business households understand the benefits of participating in social insurance.
Overall, this regulation is necessary and aligns with broader development trends. However, a reasonable implementation roadmap is required to ensure feasibility and minimize negative impacts on business household operations.
JOURNALIST: Regarding this regulation, in the draft Decree detailing and guiding the implementation of certain provisions of the Social Insurance Law on compulsory social insurance, the Ministry of Labor, Invalids, and Social Affairs has proposed two options.
Option 1 includes business household owners with business registration who pay taxes using the declaration method, as well as those who do not declare taxes but wish to participate in compulsory social insurance.
Option 2 includes business household owners with registration and a request to participate in compulsory social insurance.
What is your opinion on these two options?
LAWYER NGUYEN THANH HA:
Both options aim to expand the scope of social insurance participation, but each has its advantages and limitations:
Option 1 has a broader scope as it includes both business households that pay taxes via the declaration method and those that do not declare but wish to join compulsory social insurance. This can help increase social insurance participation rates and broaden the protected group. However, identifying and managing the group of non-declaring business households who wish to participate may pose difficulties in practice, especially the risks of fraud or avoidance of social insurance obligations.
Option 2 narrows the scope of participants, applying only to business household owners with registration and a request to participate. This approach simplifies management and is easier to implement, but it risks leaving out many small business households, limiting the expansion of social insurance coverage.
In principle, an option with greater inclusiveness should be chosen, but effective supervision and management mechanisms must be in place to ensure fair implementation. If Option 1 is chosen, detailed guidance on identifying the non-declaring group wishing to participate, as well as monitoring and inspection measures to prevent fraud, is necessary. If Option 2 is chosen, supplementary policies encouraging small business households to voluntarily join should be considered to ensure long-term benefits for them.
Moreover, the government should have appropriate support policies, such as reducing the contribution rate during the initial phase, simplifying procedures, and increasing awareness of the benefits of social insurance, to encourage voluntary participation.
In summary, the choice of option should be based on a comprehensive evaluation of feasibility, effectiveness, and the impact on business households. The authorities should continue consulting with the business community and industry associations to make appropriate adjustments before finalizing the regulations.
JOURNALIST: Vietnam Social Insurance has proposed adding an implementation roadmap for business household owners with registration. Accordingly, starting from July 1, 2025, business household owners with registration who pay taxes using the declaration method will participate in compulsory social insurance. Business household owners with registration who pay taxes under the lump-sum method will join compulsory social insurance starting from July 1, 2027. For business household owners with registration who fall outside these two groups, participation in compulsory social insurance will begin on July 1, 2029.
Vietnam Social Insurance believes that this phased approach ensures the "compulsory" nature of social insurance participation while also ensuring the "readiness" of registered business household owners. What is your view on this proposal?
LAWYER NGUYEN THANH HA:
From July 1, 2025: Apply to business household owners
- Business households with annual revenues of 100 million VND or more (according to current tax regulations).
- Business households with more complex operations requiring complete invoices, receipts, and accounting systems to calculate taxes.
- Business households in sectors requiring clear declarations (such as large-scale services, commerce, manufacturing, etc.) or those with incurred costs that need to be declared in detail.
This group is generally already familiar with tax administration procedures, so requiring compulsory social insurance participation from 2025 is reasonable and feasible without significant financial or organizational difficulty.
From July 1, 2027: Apply to business household owners
- Business households with annual revenues below 100 million VND (according to current regulations).
- Small-scale business households, often individual businesses, without detailed accounting systems or lacking the capacity to declare taxes in detail.
- Business households in sectors where tax authorities can set lump-sum tax rates, such as food services, small grocery stores, or other small businesses.
Requiring compulsory social insurance participation from 2027 is reasonable, as this group will need additional time to prepare financially and organizationally, ensuring their ability to meet the social insurance obligation without significantly disrupting business operations.
From July 1, 2029: Apply to business household owners with registration who fall outside the two aforementioned groups (freelance business owners or households with business forms not subject to declaration or lump-sum taxation). This group typically has unstable incomes and small business scales, so they will need more time to prepare and adapt to the compulsory social insurance regulation. By 2029, when business households have gradually become familiar with tax and administrative obligations, the requirement to participate in compulsory social insurance will be more feasible.
However, the implementation of this roadmap may still encounter several challenges, including:
- Financial capacity of small business households: For those paying lump-sum taxes (2027) and other small households (2029), their financial capacity could be a significant barrier. These households often lack sufficient reserves, making the compulsory social insurance contribution difficult to maintain without impacting business operations.
- Management and oversight difficulties: Implementing compulsory social insurance for multiple groups, especially small or freelance business households, may pose challenges due to the dispersed and uneven nature of these businesses.
- Difficulty in changing financial management habits: Many small business households have simple financial management practices and lack formal accounting. Requiring them to participate in compulsory social insurance may face resistance or difficulty in altering their financial habits.
JOURNALIST: Currently, there are approximately 5 million business households across the country, divided into two groups: those with registration (over 2 million households) and annual revenues exceeding 100 million VND who are already paying taxes, and the others who are not registered, such as agricultural, forestry, and freelance households. To harmonize their needs and ensure social welfare, do you believe they should be allowed to participate in voluntary or compulsory social insurance?
LAWYER NGUYEN THANH HA:
Participation in social insurance for business households should be categorized with flexible mechanisms to ensure both social welfare benefits and practical feasibility for each group.
Currently, there are around 5 million business households, of which over 2 million have business registration, annual revenues over 100 million VND, and are fulfilling their tax obligations. This group has more financial stability and organized business operations, so it is suitable to consider including them in the compulsory social insurance scheme, similar to small and micro-sized enterprises. Compulsory participation in social insurance would provide them with long-term insurance benefits, ensuring coverage for retirement, illness, or work-related accidents. However, the policy needs to be crafted carefully, ensuring contribution rates align with their financial capacity to avoid excessive burdens that could disrupt business operations.
For unregistered business households, mostly in agriculture, forestry, and small-scale trading with unstable incomes, voluntary social insurance participation remains a more feasible option. To encourage participation, the government should offer support with contribution rates and actively promote the benefits of social insurance, emphasizing that it is a long-term investment for their future. Additionally, simplifying the process of joining social insurance will be crucial to attracting participation from this group.
In conclusion, for business households with registration and stable revenue, compulsory social insurance should be implemented with a suitable roadmap. For small, unregistered business households, voluntary participation should continue, but with stronger government support mechanisms to ensure their social welfare rights.
JOURNALIST: Thank you for your insights!
