Do business households have to participate and pay social insurance for their employees like enterprises? Do business households need to sign a paper contract with employees or is it only a verbal agreement? In what cases is it not necessary to pay social insurance?
Do business households have to participate and pay social insurance for employees?
According to Article 2 Law on Social Insurance 2014 then the workers have labor contract 1 month or more are subject to compulsory social insurance. And in Clause 3 of Article 2 Law on Social Insurance 2014 also stipulates that employers participating in compulsory social insurance include household business hire labor
Therefore, if a business household hires workers with a labor contract of 1 month or more, must participate in social insurance for workers.
Why have many businesses not participated in social insurance for a long time?
The fact that many business households do not participate in social insurance (SI), despite clear regulations in the Social Insurance Law 2014 (Article 2, Clause 1 and Clause 3), can be explained by the following main reasons:
1. Not understanding social insurance law correctly
- Many business owners do not clearly understand or do not fully understand the regulations of the Law on Social Insurance 2014, especially the obligation to participate in compulsory social insurance for employees working under labor contracts of 1 month or more.
- Lack of information or inadequate propaganda from authorities makes them unaware of their legal responsibilities.
2. Social insurance costs are considered a financial burden.
- According to Decree 115/2015/ND-CP and Decision 595/QD-BHXH 2017, business households must pay 25,5% social insurance, 4,5% health insurance, and 2% unemployment insurance (a total of 32% of the base salary), of which the business owner pays 21,5% and the employee pays 10,5%. For small-scale, low-profit businesses, this is a significant expense.
- Many businesses believe that social insurance costs reduce competitiveness or profits, especially when employees are not required to participate in social insurance.
3. Characteristics of business households: Small scale, seasonal labor, employees not required to participate in social insurance
- Many businesses use seasonal or temporary workers. "oral contract"The relationship between the employer and the employee is not as close as the labor contract relationship, but is often verbally agreed upon with incomplete and unclear terms, making it difficult to determine the labor contract.
- Industries such as sales, food services, or small manufacturing often have a high rate of unstable labor, making participation in social insurance difficult due to the constant change of employees.
- Many employees in business households (such as sales staff, seasonal workers) do not have knowledge or do not care about social insurance, health insurance, and unemployment insurance benefits. They often prioritize receiving higher salaries instead of requiring social insurance contributions, leading to business owners not proactively implementing them.
5. Complicated processes and complicated administrative procedures are a barrier.
- The process of registering and paying social insurance, making periodic payments, and reconciling social insurance is considered complicated for businesses without specialized personnel.
- The process of timekeeping, payroll calculation, salary payment and reporting is complicated for businesses without specialized personnel.
What risks do businesses face if they do not participate in social insurance for their employees?
According to Article 39 of Decree 12/2022/ND-CP, the penalty level related to compulsory social insurance payment is prescribed as follows:
- Fine of 18 - 20% of total social insurance and unemployment insurance premiums payable (maximum 75 million VND) if the Business Owner does not pay social insurance and unemployment insurance, not to the extent of criminal prosecution.
- Fine of 50 - 75 million VND if the business owner evades paying social insurance and unemployment insurance but has not been criminally prosecuted.
From July 01, 07, business owners who do not participate in social insurance for employees are at risk of being heavily fined according to the provisions of Law on Social Insurance 2024 (effective from July 01, 07), there is even a criminal violation of social insurance evasion.