Due to life difficulties, mainly due to the raging Covid-19 pandemic, many employees have chosen the methods of collecting flat-rate social insurance in Vietnam, instead of worrying about 10 , 20 years to come. Although taking a huge amount of money at one time may seem like a lot, however, employees should carefully reconsider the pros and cons of doing so. So, what are the advantages and disadvantages of benefiting from flat-rate social insurance in Vietnam?
Although most experts strongly disagree with the action of taking out lump-sum social insurance, it should be noted that there are many circumstances in which employees have no choice but to participate in the social insurance scheme. lump-sum social insurance in Vietnam.
It is because they are in critical condition and have no other means to treat disease, cover their life with food and other basic needs in life, etc.
In these situations, although we still disagree, we can understand why they did what they did.
However, for situations where employees just need to take a huge amount of money to invest in some activities, or basically just don’t believe in social insurance system in Vietnam, etc., these actions are strongly condemned because they are basically ruining their future while they still have other choices.
So, in the end, what are the advantages and disadvantages of benefiting from flat-rate social insurance in Vietnam?
Benefits when collecting flat-rate social insurance in Vietnam
First of all, there are certain types of benefits when receiving lump-sum social insurance in Vietnam, as employees would not take it if it was of no use to them.
Specifically, the employee will earn a huge amount of money in a short time. The money can reach hundreds of millions of VND, or in rare cases half a billion or even more.
They can use this money to reinvest in banks, the stock market, gold, foreign currencies, etc. to multiply that money.
Although most of these methods are risky, if the employee has a good strategy to invest in, he will have a high chance of success.
The specific amount of money that the employee participates in the social insurance system can get when he decides to subscribe to the flat-rate social insurance system in Vietnam is:
For employees affiliated to compulsory social insurance
The flat-rate social insurance benefit is calculated based on the number of years of payment of social insurance contributions, each year is calculated as follows:
– 1.5 months the average monthly salary on which the social insurance contributions are based for the years of payment before 2014;
– 02 months the average monthly salary on which the social insurance contributions are based for the payment years from 2014;
– Employees who have contributed to social insurance for less than a year, the lump sum social insurance allowance is calculated at 22% of the monthly salary for which social insurance contributions have been paid, and the maximum level is equal to 02 month of the average monthly salary on which social insurance is paid.
For employees affiliated to voluntary social insurance
This case is extremely rare in real life because the self-employed person who has decided to contribute to voluntary social insurance is not likely to subscribe to flat-rate social insurance, in particular because he will lose a lot of money to recover very little in the end. .
Nevertheless, the flat-rate social insurance benefit is calculated according to the number of years of social insurance contributions, each year is calculated as follows:
– 1.5 months the average monthly income on which the social insurance contributions are based for the years of payment before 2014;
– 02 months of average monthly income on which social insurance contributions are based for payment years from 2014;
– In case the social insurance premium payment period is less than one year, the rate of social insurance benefits is equal to the amount paid, and the maximum level is equal to 02 months of the average monthly income for which social insurance is paid.
Notes when self-calculating lump-sum social insurance
When calculating the flat-rate social insurance benefit in the event that the period of payment of social insurance contributions has odd months, from 01 month to 06 months is counted as half a year, from 07 months to 11 months is counted as a year.
In the event that the employee takes the payment of social insurance contributions before and after January 1, 2014, but the payment period before January 1, 2014 has odd months, these odd months will be replaced by the payment period social insurance from 1 January 2014. , as the basis for calculating flat-rate social insurance benefits.
Disadvantages of receiving flat-rate social insurance in Vietnam
Although the advantages are somewhat debatable, the disadvantages of benefiting from a flat-rate social insurance in Vietnam are very clear, for the experts of the Labor Code as well as for the employees who have decided to take out a flat-rate social insurance in Vietnam.
Benefiting from social insurance once may solve some immediate difficulties, but it means that employees lose the possibility of benefiting from social security when they reach old age.
Accordingly, the period of payment of social insurance premiums already calculated to qualify for flat-rate social insurance benefits for employees will not be taken into account as the basis for calculating other social insurance benefits.
Employees will no longer be in the state-protected social insurance system for social security. This means that they lose the opportunity to participate in health insurance for 5 consecutive years to receive benefits with high-tech medical services and expensive drugs.
They will also have to pay the costs of medical examination and treatment themselves with a ratio of 100% if they unfortunately suffer from an illness or accident (except in the case where the employee reaches an age who will receive medical and financial support from the government).
More importantly, the employee will not receive the monthly pension at the end of the retirement age or take early retirement before the retirement age due to deteriorating health at work.
Assistance when certain unfortunate events occur
Not only retirement and the medical system – the 2 most important aspects for employees, but they will also not have many other benefits if they decide to take out flat-rate social insurance.
Specifically, these benefits below are completely gone:
- Funeral allowance for family/caretaker in case of death of employee: 10 times basic salary (currently around VND 15 million. This amount will probably increase in the following years)
- Survivor’s allowance for the employee’s relatives in the event of the employee’s death: Depending on the case, they are entitled to a monthly or lump-sum survivor’s allowance.
Regarding the above policies that take place if employees unfortunately pass away, in today’s society there is a kind of ideal that employees are afraid to contribute for 20, 30 years in continuity and died just before or just a few months when entitled to a pension and enjoying old age.
However, if this scenario does occur, the social insurance system in Vietnam will not simply abandon them. If the employee is deceased, his spouse, children or parents or relatives will be those who will be taken care of by the government.
It should be clarified that although the employee will not normally receive the full amount that he has paid into the system, he or his relatives will receive a large part of this amount.
On the other hand, in some cases, if the employees, unfortunately, catch a fatal disease and have to undergo medical care for years, they will actually be the ones who benefit from the system because they will probably not have enough money. paying medical bills for years, creating a burden on their children and loved ones.
Clear calculation of what employees lose if they participate in a flat-rate social insurance scheme
To get a clear answer on how much money employees could lose if they participate in the flat-rate social insurance system, we need to consider an example: An employee has 20 full years of social insurance contributions (from 2001 to 2020), the average salary serving as the basis for paying social insurance being 4,000,000 VND/month (this amount is lower than the current minimum salary for paying social insurance in 2022).
Assuming employees are eligible for a pension or a lump sum social insurance benefit in 2022, the employee will receive the following amount (this number is the lowest and has not included beneficiary factors such as slippage of social Security) :
For male employees:
The minimum rate of pension benefits is 45%, the pension being 1,800,000 VND/month.
Currently, the average life expectancy for men is 71 years, and the number of months of a retirement pension at age 60 and 6 months (in 2022) until death is 126 months.
The total pension received is therefore:
126 x VND1,800,000 = VND226,800,000
In addition, the male employee will also enjoy the benefits:
– Paid health insurance card (4.5% monthly pension: 4.5% x 126 x 1,800,000 = 10,206,000 VND)
– Funeral allowance (10 months basic salary): 14,900,000 VND
– Lump-sum survivor’s allowance (03 months of pension before death): 5,400,000 VND
The total amount of money to which the social insurance fund is entitled when receiving a pension for a male employee is 257,306,000 VND
The minimum rate of pension benefits is 55%, the pension being 2,200,000 VND/month.
Currently, the average life expectancy for women is 76.3 years and the number of months of retirement pension at age 55 and 8 months (in 2022) until death is 247 months.
The total pension received is therefore:
247 x VND2,200,000 = VND543,400,000
In addition, the employee will also benefit from the following advantages:
– Paid health insurance card (4.5% monthly pension): 4.5% x 247 x 2,200,000 = 24,453,000 VND
– Funeral allowance (10 months basic salary): 14,900,000 VND
– Lump-sum survivor’s allowance (03 months of pension before death): 6,600,000 VND
The total amount of money to which the social insurance fund is entitled when receiving a pension for an employee is 589,353,000 VND
Losses when taking lump sum payment from social insurance
Assuming an employee has 20 years of social insurance contributions and is eligible for the social insurance lump sum, the social insurance lump sum payment will be:
4,000,000 VND x (1.5 x 13 years + 2 x 7 years) = 134,000,000 VND
Male employees receiving a pension will receive more benefits than those receiving a flat-rate social insurance with the following amounts: 257,306,000 VND – 134,000,000 VND = 123,306,000 VND
Employees receiving a pension will receive more benefits than those receiving flat-rate social insurance with the following amounts: 589,353,000 VND – 134,000,000 VND = 455,353,000 VND
Thus, it is clear that employees who benefit from a pension plan will have more advantages than those who choose to benefit from a flat-rate social insurance. Benefiting from flat-rate social insurance means that the employee leaves the social insurance system and deprives himself of his basic security rights.