IS A WORK CONTRACT SUBJECT TO COMPULSORY SOCIAL INSURANCE CONTRIBUTIONS?

A work contract is established based on a civil agreement between the Parties. Under such agreement, the Contractor is responsible for carrying out and completing the assigned work within the agreed scope, ensuring the quality, timeline, and requirements mutually agreed upon by the Parties. The Contractor has full autonomy over the method, schedule, and personnel involved in performing the work and is solely responsible for organizing the work to achieve the committed results. The relationship between the Parties under this Contract is not an employment relationship and does not give rise to the rights and obligations of an employer and employee under applicable labor laws. Let’s explore this issue with Pham Consult.

 

I. Is a Work Contract Subject to Social Insurance Contributions?

Pursuant to Clause 1, Article 2 of the Law on Social Insurance 2024:

Article 2. Subjects Participating in Compulsory and Voluntary Social Insurance

1. Vietnamese employees subject to compulsory social insurance include:

(a) Employees working under indefinite-term labor contracts or fixed-term labor contracts with a duration of at least one month, including cases where the parties use a different title for the agreement but the content reflects paid employment, wages, and the management, administration, and supervision of one party over the other;

[…]

(l) Employees specified in Point (a) of this Clause who work part-time and receive a monthly salary equal to or higher than the minimum salary used as the basis for compulsory social insurance contributions;

[…]

Accordingly, if a work contract does not contain provisions regarding wages/salary and the management, administration, or supervision by one party over the other, it is generally not subject to compulsory social insurance participation.

In principle, a work contract is a civil transaction established in accordance with the Civil Code, whereby the contractor performs a specific task or produces a specific result and is compensated based on the completed outcome. Since it is not a labor contract, a work contract is generally not subject to compulsory social insurance contributions.

However, in practice, the determination of social insurance obligations is based not only on the title of the contract but also on the actual nature of the relationship between the parties. If a contract is titled a “work contract” but the contractor works regularly, is subject to the employer’s management, administration, and supervision, follows fixed working hours, and receives remuneration in a manner similar to an employee, competent authorities may determine that the relationship is, in substance, an employment relationship. In such cases, the parties may be required to comply with compulsory social insurance obligations under applicable laws.

Therefore, for a contract to be recognized as a genuine work contract, it should clearly provide that the work is assigned based on a deliverable or result; the contractor has autonomy regarding the time, location, and method of performing the work; and payment is made based on the acceptance and completion of the agreed deliverables rather than on working time.

Accordingly, whether an individual working under a work contract is required to participate in social insurance depends on whether the contract is deemed to be a labor contract in substance or a civil service/work contract, specifically:

• If the contract contains the essential elements of a labor contract, even though it is titled as a work contract, and its actual nature is that of an employment relationship, compulsory social insurance contributions are required.
• If the contract is genuinely civil in nature and does not contain provisions regarding paid employment, wages/salary, or the management, administration, and supervision of one party over the other, it is not governed by the Labor Code 2019 and is therefore not subject to compulsory social insurance contributions.

II. What Is the Penalty Rate for Late Payment of Compulsory Social Insurance Contributions?

Pursuant to Clause 1, Article 40 of the Law on Social Insurance 2024:

Article 40. Measures for Handling Late Payment of Compulsory Social Insurance and Unemployment Insurance

1. The employer must fully pay the outstanding contributions and an additional amount equal to 0.03% per day calculated on the unpaid compulsory social insurance and unemployment insurance contributions and the number of days of delay. Such amount shall be remitted to the social insurance and unemployment insurance funds.
2. Administrative penalties may be imposed in accordance with applicable laws.
3. The violator may not be considered for commendations, awards, or emulation titles.
4. The Government shall provide detailed regulations for the implementation of this Article.

Accordingly, late payment of compulsory social insurance contributions is subject to an additional charge of 0.03% per day calculated on the overdue amount and the number of days of delay, in addition to the obligation to fully pay the outstanding contributions.

III. What Constitutes Late Payment of Compulsory Social Insurance and Unemployment Insurance?

Pursuant to Article 38 of the Law on Social Insurance 2024, an employer is deemed to have committed a late payment violation in the following cases:

• Failure to pay, or failure to fully pay, the registered compulsory social insurance or unemployment insurance contributions after the statutory contribution deadline, except in the following circumstances:
  • Failure to pay or fully pay registered compulsory social insurance contributions for more than 60 days after the latest statutory contribution date and after having been urged by the competent authority in accordance with regulations;
  • Failure to pay or fully pay registered unemployment insurance contributions for more than 60 days after the statutory contribution deadline and after having been urged by the competent authority in accordance with regulations.
• Failure to register, or incomplete registration of, persons required to participate in compulsory social insurance within 60 days from the expiry of the registration deadline.
• Failure to register, or incomplete registration of, persons required to participate in unemployment insurance within 60 days from the expiry of the registration deadline prescribed by law.
• Cases that do not constitute evasion of compulsory social insurance or unemployment insurance contributions under applicable laws.