Experts call for tougher measures as businesses evade social insurance payment

April 26, 2024 - 08:00
Deliberate evasion of social insurance contributions should be legally prosecuted, as administrative penalties or criminal prosecution are stipulated by law.
Employers in discussions with inspection authorities due to delayed social insurance payments for their employees. — Photo courtesy of Hà Nội's Social Security

HÀ NỘI — Delaying and evading social insurance payments still occurs in many businesses, significantly impacting the rights of employees.

From 2018 to 2023, the Vietnam Social Security submitted 417 files recommending prosecution to the investigation agency.

These cases involved insurance fraud, unemployment and health insurance violations, as well as cases related to evasion of insurance contributions.

In 2023, 26 cases were brought to prosecution. Of these, 15 have been prosecuted, yielding eight legally binding verdicts. Individuals and organisations implicated are required to pay over VNĐ2.69 billion (some US$106,000) to the social insurance agency, with VNĐ2.38 billion ($93,800) already recovered.

The figures indicate a complex and ongoing issue of debt and evasion of social insurance payments, sparking significant consequences, the Voice of Việt Nam reported.

This not only affects the rights of workers but also undermines long-term social security benefits and trust in the social insurance system.

Experts have called for stricter penalties for employers delaying or evading social insurance payments.

Phạm Minh Huân, former deputy minister of the Ministry of Labour, Invalids and Social Affairs, said that the failure to fulfil social insurance obligations lies with the businesses.

While some businesses face difficulties and seek extensions for insurance payments, agreements must be reached between insurance agencies and businesses.

Once businesses recover, they must promptly fulfil their social insurance obligations.

Deliberate evasion of social insurance contributions should be legally prosecuted, as administrative penalties or criminal prosecution are stipulated by law.

He also emphasised the complexity of addressing such violations. Legal provisions exist for both administrative and criminal measures, yet challenges remain due to policy mechanisms and practical implementation.

Businesses found at fault must face severe penalties, and coordination among insurance agencies, inspection bodies, labour unions and workers themselves is essential.

Clear distinctions must be made between deliberate evasion and objective difficulties, with appropriate measures applied accordingly.

The amended laws explicitly outline which issues fall under administrative or criminal jurisdiction.

Furthermore, strengthening inspection and enforcement measures is necessary to safeguard the rights of workers, Huân said.

Stronger penalties urged

Weighing in on penalties for businesses dodging social insurance contributions for employees, lawyer Nguyễn Danh Huế, head of Hừng Đông Law Company Limited, said that the Social Insurance Law prohibits evasion of mandatory social insurance and unemployment insurance contributions, as well as delayed payments. Violating businesses face prescribed sanctions, including possible administrative fines.

These fines are set at 12 per cent to 15 per cent of the total mandatory contribution amount at the time of the violation report, with a maximum cap of VNĐ75,000,000 (over US$2,950) for employers.

If a company fails to cover social insurance and unemployment insurance for all its workers, the fine can range from 18 per cent to 20 per cent of the total contributions.

Additionally, businesses evading social insurance payment could face criminal liability, fines and up to seven years of imprisonment.

Workers at Hana Micron Vina Co., Ltd., in the Vân Trung Industrial Zone, Bắc Giang Province. — VNA/VNS Photo

Huế said that the current sanctions, particularly regarding administrative penalties, fall short at effectively deterring violations. Limiting the maximum fine to VNĐ75 million might incentivise many businesses to exploit the system for profit.

For instance, companies with a large workforce could owe billions of đồng in monthly social insurance contributions. Evading payments for several months could lead to substantial profits for the company, potentially reaching tens of billions of đồng.

Consequently, imposing a mere VNĐ75 million fine still leaves businesses with considerable gains, while employees are the ones who suffer.

The maximum fine should not be capped, and businesses should be required to pay fines based on a percentage of the total contribution amount, Huế said.

Regarding criminal liability, there hasn't been any criminal prosecution against businesses for dodging social insurance contributions thus far.

"I believe the root cause lies in difficulties in identifying the violating behaviours. Consequently, there's a lack of grounds to levy administrative penalties for evading payment, which serves as the basis for criminal proceedings," Huế said.

In reality, during administrative penalty proceedings, social insurance agencies can only determine whether payments were missed, insufficient, or incorrectly calculated according to regulations - without sufficient tools or methods to conclusively identify evasion.

Additionally, proving that individuals intentionally neglected their duties and engaged in deceitful acts is also quite challenging, the lawyer said.

He highlighted that collecting social insurance payment is currently a daunting task due to deficiencies in penalty mechanisms and deterrent policies for businesses.

Despite regular inspections and the detection of violations by the social insurance agency, they lack the authority to impose penalties. Businesses increasingly disobey regulations, either by evading, delaying or inadequately contributing to social insurance for their employees.

To address the issue of social insurance debts, stronger measures are needed, specifically targeting business management personnel.

These could involve imposing travel bans for a specified period, withholding honours or commendations from businesses with outstanding insurance debts, publicly disclosing lists of such businesses on information portals, or subjecting businesses with overdue insurance debts of over six months to inspection.

Directly impacting a business's production and operations is perhaps the most effective approach, Huế said.

Businesses that are late or fail to pay social insurance within a specific timeframe or a certain amount of delayed payment should be barred from issuing invoices.

"However, we also need to consider another view when it comes to business operations, which often depends on external factors such as natural disasters, fires or epidemics. Therefore, there must be clear and appropriate regulations tailored to each specific case." — VNS