Enterprises and employees must participate in compulsory social insurance in the locality where the enterprise is headquartered and must comply with the regional minimum wage.

This article was consulted by Lawyer Nguyen Quang Trung

Legal grounds:

• Decree No. 115/2015/ND-CP;
• Decision No. 595/QD-BHXH.

We have received the following question:

Hello. My company doing transportation business has its headquarters applying the minimum wage in region 1, and many branches in many different provinces in region 4. The company wants to centralize management, so all drivers sign labor contracts with the headquarters, but the majority of drivers mainly operate in the provinces. Now the company wants to pay social insurance for all drivers according to the minimum wage of region 4, is it possible? Because many drivers only operate in region 4.

When paying wages to employees, businesses must refer to regulations on regional minimum wages applicable to each geographical administrative area. Accordingly, employers with headquarters and branches operating in different regions will apply the minimum wages in the corresponding region.

Pursuant to Clause 3, Article 7, Decision No. 595/QD-BHXH as follows:

Article 7. Payment method according to the provisions of Article 85 and Article 86 of the Law on Social Insurance and its guiding documents, specifically as follows:

3. Payment by area

• 3.1. The unit whose head office is located in any province must register to participate in social insurance contributions in that province according to the decentralization of the provincial social insurance agency.
• 3.2. Whichever area an enterprise’s branch operates in must pay social insurance in that area.

According to the above regulations, the employer will pay compulsory social insurance according to the area located and there is a distinction between the company’s headquarters and the branch’s adress.

Therefore, in the case of the specific question mentioned above:

• If the company is headquartered in an area of region 1, the employee who signs a labor contract with the company will participate in social insurance in the area according to the company’s headquarters;
• Branch located in areas of region 4, if employees sign a labor contract with the branch, will participate in social insurance in the area according to the branch located;
• If the company has signed a labor contract with the employee, the branch cannot pay social insurance for that employee.

However, businesses need to pay attention to the salary to calculate social insurance contributions. Specifically, based on Article 17 of Decree No. 115/2015/ND-CP as follows:

Article 17. Monthly salary paid for compulsory social insurance

Monthly salary paid for social insurance for employees paying social insurance according to the salary regime decided by the employer in Clause 2, Article 89 of the Law on Social Insurance is regulated as follows:

1. From January 1, 2016 to December 31, 2017, the monthly salary paid for social insurance is the salary and salary allowances according to the provisions of labor law stated in the labor contract.
2. From January 1, 2018 onwards, the monthly salary paid for social insurance is the salary, salary allowances and other supplements according to the provisions of labor law stated in the labor contract.
3. The monthly salary paid for social insurance for enterprise managers who receive the salary specified in Point dd, Clause 1, Article 2 of this Decree is the salary decided by the enterprise, except for full-time management officials in one-member limited liability company owned by the state.

The monthly salary paid for social insurance for cooperative managers receiving the salary specified in Point dd Clause 1 Article 2 of this Decree is the salary decided by the general meeting of members.

According to the above regulations, the monthly salary for calculating social insurance contributions is not based on the regional minimum wage, but is based on the salary, salary allowances and other additional amounts stated in the labor contract.

Therefore:

• If businesses and employees participate in social insurance according to the regional minimum wage, it may lead to underpayment of social insurance, health insurance, and unemployment insurance;
• Enterprises need to base on the salary and salary allowances in the labor contract signed with employees to calculate social insurance, health insurance, and unemployment insurance contributions.