Reduce the Unemployment Insurance Contribution Rate from 1% to 0.5% until 2019

shall adjust the unemployment insurance contribution rate for employers (Article 57 Labor Law 2013) from 1% to 0.5% of the monthly payroll fund for employees participating in unemployment insurance until December 31, 2019.

Previously, the Ministry of Labor - War Invalids and Social Affairs also proposed 02 options for reducing the unemployment insurance fund contribution as follows:

- First, reduce the unemployment insurance contribution rate from 1% to 0.5% for employers.- Second, reduce the unemployment insurance contribution rate from 1% to 0.5% for employers, but within a certain period.

According to the content of the Proposal to the National Assembly by the Government of Vietnam, the Labor Law effective from January 1, 2015 expanded the subjects participating in unemployment insurance, resulting in an 11.8% increase in the number of participants in 2015 compared to 2014, a 7.3% increase in 2016 compared to 2015, and a continuous upward trend although the growth rate is not high in subsequent years.

Under current regulations, the State Budget supports the Unemployment Insurance Fund with up to 1% of the monthly payroll fund for employees participating in unemployment insurance when the Fund's surplus is less than twice the total unemployment insurance expenditure of the preceding year. Currently, due to the large surplus of the Unemployment Insurance Fund, in 2015, 2016, and some subsequent years, the Unemployment Insurance Fund received no support from the State Budget, and the total unemployment insurance revenue in the year only included contributions from employees and employers as per regulations.

According to the report of Vietnam Social Security, the estimated surplus of the Unemployment Insurance Fund by the end of 2016 was VND 56,486 billion, and it is projected that by 2020, the Fund will remain safe. Thus, along with the relatively large surplus of the Unemployment Insurance Fund to facilitate businesses in enhancing competitiveness and promoting business development, adjusting the unemployment insurance contribution rate is necessary.

Adjusting the unemployment insurance contribution rate will entail amending the Labor Law. This amendment is also a complex issue that takes a considerable amount of time, thus the regulation to adjust the unemployment insurance contribution rate is only implemented within a certain period.

Currently, the Ministry of Labor - War Invalids and Social Affairs is gathering comments for the Draft Resolution. It is anticipated that this will be finalized before March 2017 to present to the Government of Vietnam.

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