Ministry of Home Affairs proposes to "eject" the social insurance reference level from the base salary

The Ministry of Home Affairs is seeking opinions on the draft Law amending and supplementing a number of articles of the Law on Social Insurance (BHXH).

Notably, in the draft submission, the Ministry of Home Affairs said that Resolution No. 27-NQ/TW dated May 21, 2018 of the 7th Conference of the 12th Party Central Committee on salary policy reform has set out a roadmap to " abolish the base salary level", but so far this content has not been implemented.

Although the 2024 Law on Social Insurance has stipulated the reference level to serve as a basis for calculating contributions and enjoying some social insurance regimes; however, the Law still stipulates that when the base salary is not abolished, the reference level specified in this Law is equal to the base salary.

At the time the base salary is abolished, the reference level is not lower than that base salary, leading to the consequence that when the Government implements adjustments to the base salary and adjusts pensions with different increases (such as in July 2024, adjusting to increase 30% of the base salary and 15% of the pension level).

This will lead to a pension gap between retirees (from the state sector) before and after the time of adjusting the pension level and the base salary.

To overcome this situation (because the specific time to implement the abolition of the base salary has not been determined), the draft Law abolishes Article 74 and Clause 13 Article 141 of the 2024 Law on Social Insurance with the aim of helping the reference level "escape" from the base salary.

At the same time, the draft Law amends and supplements Clause 3, Article 7 in the direction that the Government stipulates the time and level of adjustment of the reference level specified in this Article to assign authority to the Government to adjust the periodic reference level together with the time of pension adjustment.

Amending Article 73 in the direction of adjusting salaries as the basis for social insurance contributions for employees subject to the state-regulated salary regime based on the increase in the reference level of each period; specifically for the period of social insurance contribution before the effective date of this Law, adjust according to the base salary at the time this Law takes effect, then adjust according to the increase in the reference level of each period.

The draft amended Law also assigns the Government to detail how to adjust. Basically, the method of adjusting according to the increase of the reference level of each period will be similar to the adjustment according to the consumer price index (for employees subject to the salary regime decided by the employer), but the increase is consistent with the increase of the pension, ensuring that there is no large difference in the pension level when the Government adjusts to increase pensions and the base salary level like the increase in July 2024.

Read the original here.