Vietnam Legislature Votes to Amend Social Insurance Law

Vietnam’s legislature has agreed to amend a policy that prohibits employees from collecting a lump-sum payment of their social insurance coverage if they resign, after the law prompted tens of thousands of factory workers to hold a rare week-long strike in March.

The National Assembly, or parliament, ruled to overturn Article 60 of the social insurance law, which would have gone into effect next year and required workers to wait until retirement age—60 for men and 55 for women—to collect their insurance payments, state media reported Thursday.

The law will be revised to allow workers to choose between taking a lump-sum payment immediately after resigning or waiting until they reach legal retirement age.

The official Lao Dong newspaper cited Minister of Labor, Invalids and Social Affairs Pham Thi Chuyen as saying that many workers at factories in industrial complexes prefer lump-sum payments because they earn so little.

He said that many of the workers come from the countryside and simply want to earn a little money, but have no intention of staying with the companies for an extended period, and this helped to influence the decision to amend the current policy.

According to a report by the state-run Vietnam News Service, Deputy Minister of Labor, Invalids and Social Affairs Pham Minh Huan had urged workers to reconsider demands for a one-time pension payment ahead of the vote in parliament, saying a monthly payout after retirement would benefit them more.

Workers only qualify for retirement payments if they have paid social insurance for a total of 20 years.

At the end of March this year, as many as 90,000 workers—most of them employed by the Pou Yuen Vietnam footwear factory at an industrial park outside of the economic capital Ho Chi Minh City—went on a week-long strike to protest Article 60.

The employees, who work long hours and tend to be unsure about future plans, argued that they would not be able to accumulate 20 years of payments, and so demanded that their pensions be doled out in a one-time lump sum.

Vietnamese Prime Minister Nguyen Tan Dung promised to amend the article in early April and the workers returned to their jobs.

The strike at the Taiwanese-owned factory—which makes shoes for companies, including Adidas and Nike, as well as for brands such as Converse and Reebok—marked a rare demonstration against government policy in the tightly-controlled communist nation.

Vietnam is known for taking a hard line with unrest that has affected other textile-manufacturing rivals, such as China and Cambodia.

System on the ropes

According to the International Labour Organization (ILO), the Vietnam Social Security Fund—created in 1995—is expected to run a deficit by 2021 and dry up completely by 2034 if it does not undergo reforms.

Unreasonably high pensions for civil servants and a declining birth rate in Vietnam are hampering the system, which is also crippled by fraud.

Employers often underreport wages to avoid paying the 14 percent of an average worker’s salary required by the social security fund, and those companies that adhere to the rules are less attractive when hiring because workers know they will be forced to sacrifice more of their pay to the system.

During the Pou Yuen strike, many of the workers said they had planned to use their lump-sum payouts after a few years of work to invest in small businesses, while others said they did not trust the government to hold their money.

Reported by Gia Minh for RFA’s Vietnamese Service. Translated by Ninh Pham. Written in English by Joshua Lipes.