Vietnam: How will the salary be calculated for employees retiring from 2020?

According to the regulations, the monthly pension is calculated using the following formula:

Monthly pension = Pension rate x Average monthly income subject to social insurance contributions.

Based on the above formula, the pension depends on the pension rate and the average monthly income subject to social insurance contributions, specifically:

1. Pension rate

According to Article 56 of the Law on Social Insurance 2014 of Vietnam, for female workers retiring from 2020, the monthly pension rate is calculated at 45% corresponding to 15 years of social insurance contributions. For each additional year of social insurance contributions, an additional 2% is added; the maximum rate is 75%.

For male workers, if retiring from 2019, the pension rate is 45% corresponding to 17 years of social insurance contributions. However, for those retiring from 2020, achieving the 45% rate will correspond to 18 years of social insurance contributions, one year more than if retiring from 2019. For each additional year of social insurance contributions, an additional 2% is added, the maximum rate is 75%.

2. Average Monthly Income Subject to Social Insurance Contributions

According to Article 62 of the Law on Social Insurance 2014 (guided by Article 9 of Decree 115/2015/ND-CP), the average monthly income used to calculate pension and one-time allowance is based on the period of participation in social insurance.

Article 62. Average monthly income subject to social insurance contributions used to calculate pension and one-time allowance

1. Employees under state salary policies with entire social insurance contribution periods under this salary policy shall have the average monthly income calculated based on the years of social insurance contributions before retirement as follows:

a) Participation in social insurance before January 01, 1995, the average income is calculated using the last 5 years' contributions before retirement;

b) Participation in social insurance between January 01, 1995, and December 31, 2000, the average income is calculated using the last 6 years' contributions before retirement;

c) Participation in social insurance between January 01, 2001, and December 31, 2006, the average income is calculated using the last 8 years' contributions before retirement;

d) Participation in social insurance between January 01, 2007, and December 31, 2015, the average income is calculated using the last 10 years' contributions before retirement;

đ) Participation in social insurance between January 01, 2016, and December 31, 2019, the average income is calculated using the last 15 years' contributions before retirement;

e) Participation in social insurance between January 01, 2020, and December 31, 2024, the average income is calculated using the last 20 years' contributions before retirement;

g) Participation in social insurance from January 01, 2025, onwards, the average income is calculated using the entire contribution period.

2. Employees under employer-determined salary policies covering entire social insurance contribution periods shall have the average monthly income calculated based on the entire contribution period.

3. Employees with mixed contribution periods under both state and employer-determined salary policies shall have the average monthly income calculated proportionally. The periods under state salary policies shall be calculated as per clause 1 of this article.

Thus, there is no change in the pension policy for female workers, but for male workers, the number of years of social insurance contributions to achieve the minimum pension rate of 45% will increase from 17 years if retiring from 2019 to 18 years if retiring from 2020.

Ngoc Duy

>> CLICK HERE TO READ THIS ARTICLE IN VIETNAMESE