Question 198. Which type of LC will be used if an Employer needs to recruit an Older Employee? Is an Older Employee obliged to contribute to compulsory SI?

  1. The type of LC to be entered with an Older Employee

The Employer can negotiate with an Older Employee, who reaches the retirement age provided by-laws[1], to continue working for the Employer and even sign a definite-term LC[2] many times. The law does not require confirmation by a competent medical facility established and operated in accordance with the law stating that the Older Employee must be in good health to work after retirement age. However, the Employer is not allowed to assign the Older Employee to do arduous, toxic, or dangerous work that will clearly exert an adverse effect on his or her health ​if the Employer cannot guarantee safe working conditions. In this regard, at present, there are no specific provisions on job title and job as mentioned above, so the Employer may have difficulties in determining which position will be considered to be arduous, toxic, dangerous work or extremely arduous, toxic, dangerous work.

The Employer can consider signing the LC with a senior Employee with an appropriate term, but not over 12 months to ensure his or her health condition in accordance with the laws.

Assuming that if the Employer and the Older Employee have entered into an indefinite-term LC before reaching the retirement age, both are totally entitled to unilaterally terminate this LC as soon as the Employee reaches the retirement age, except both parties agree otherwise[3]. If the parties continue the labour relationship by the indefinite term LC, the Employer can, on a periodic basis (12 months if doing normal work or 06 months if doing arduous, toxic or dangerous work) require the Older Employee to attend health checks and provide a certificate issued by a competent medical facility which demonstrates whether or not the Employee is in good health condition; whereby the Employer can assign the Employee to a suitable position to maintain his or her right to work and help utilise human resource effectively.

2. Mandatory participation in SI in regard to the Older Employee

The law on SI prescribes that a pensioner who is also working under a LC will not be the subject to participate in the compulsory SI[4]. The issue is how a “pensioner” should be defined in accordance with the law?

Article 169.1 of the Labour Code prescribes that an Employee must fully satisfy the following two conditions to be entitled to the pension[5]:

i.  The Employee has reached the prescribed retirement age; and

ii. The Employee has had paid SI for at least the full 20 years.

Thus, in principle, only when the above two conditions are fully satisfied, including the retirement age and payment for the full 20-year period, the Employee will be considered entitled to pension and no longer required to participate in mandatory SI. In regard to the Older Employee, it is apparent that the Older Employee is not always considered to be the pensioner because he or she only meets the age requirement. Therefore, in order to determine whether the Older Employee is entitled to the pension or not, it is necessary to take into account of the period for which SI was paid by the Older Employee. Thus, if the Older Employee has not had enough 20 years of SI contribution which is not yet eligible for the pension, he or she is still subject to participation in compulsory SI.

Regarding HI, a pensioner is a subject to participate in HI and HI premiums will be paid by the SI agency[6]. If the Older Employee has not had enough 20 years of SI contribution, he or she must pay HI premiums by themselves at the applicable rate (the Employee pays 1,5% and the Employer pays 3% of the salary serving as the basis for SI contribution).

Be noted that any foreign Employee who is enjoying pensions paid by his or her country will obviously not be considered to be eligible to enjoy the pension in accordance with Vietnamese law.

[1] Article 169.2 of the Labour Code and Appendix I attached to the Government’s Decree 135/2020/ND-CP of the Government dated 1 November 2020

[2] Article 149.1 of the Labour Code

[3] Article 35.2.(e) and Article 36.1.(dd) of the Labour Code

[4]Article 123.9 Law on SI

[5] Article 54.1 of the Law on SI and Article 219 of the Labour Code

[6]Articles 12 and 13 of Law on HI