Common Social Insurance (SI) Violations That FDI Enterprises Are Often Retrospectively Collected For During Inspections

During social insurance (SI) inspections and audits, FDI enterprises are among the groups most frequently subject to retrospective collection of large SI amounts, mainly due to differences in management systems, payroll practices, and interpretations of Vietnamese laws.

Below are the most common SI violations that lead to retrospective collection, penalties, and late payment interest.

1. Failure to pay social insurance for employees with labor contracts of 01 month or longer

Many FDI enterprises believe that:

• Seasonal workers
• Short-term employees
• Employees with extended probation periods

are not required to participate in social insurance.

This is a very common violation, especially since July 2025 when the Social Insurance Law was amended.

Under current regulations, any employee who signs a labor contract with a term of 01 month or longer is subject to compulsory social insurance, regardless of the contract’s name or job title.

Consequences include:

• Retrospective collection of all unpaid social insurance contributions from the time the obligation arose
• Late payment interest
• Administrative penalties

2. Failure to pay social insurance for foreign employees subject to compulsory participation

FDI enterprises often misunderstand that:

• Foreign employees only need a work permit, or
• It is sufficient to purchase commercial insurance

In fact, foreign employees who sign a labor contract with a term of 12 months or longer are required to participate in compulsory social insurance.

Common violations include:

• Not paying social insurance for foreign employees
• Paying social insurance for an insufficient period

3. Paying social insurance based on an incorrect salary as the contribution basis

This is the most frequently identified violation and often involves very large retrospective amounts.

Common cases include:

• Paying social insurance based only on the basic salary
• Excluding salary components such as:
  • Position allowance
  • Responsibility allowance
  • Fixed monthly allowances
• Splitting salary into multiple components to reduce social insurance costs

During inspections, social insurance authorities will review payroll records, labor contracts, salary appendices, and actual payments to retrospectively collect the underpaid amounts.

4. Failure to pay social insurance for part-time employees

Many enterprises believe that employees who:

• Work part-time
• Work in shifts
• Do not work full office hours

are not required to participate in social insurance.

However, if the employee:

• Has signed a labor contract, and
• Receives a salary equal to or higher than the minimum salary threshold for social insurance contribution (VND 2,340,000 per month)

Compulsory social insurance participation is still required, even for part-time work.

5. Signing job-based or service contracts that are, in substance, labor contracts

Some FDI enterprises use:

• Job-based contracts
• Service contracts
• Collaboration contracts

However, if the individual:

• Works regularly
• Is subject to the employer’s management and supervision
• Has fixed working hours

Inspectors will “look through the substance over the form”, reclassify the arrangement as a labor contract, and retrospectively collect social insurance contributions for the entire working period.

6. Failure to timely report increases or decreases in social insurance participants

Common issues include:

• Late reporting of new employees joining the company
• Failure to report employees who have resigned
• Reporting incorrect effective dates for employee termination

Consequences include:

• Retrospective social insurance collection
• Administrative penalties
• Inability to finalize social insurance records for employees

7. Failure to pay social insurance during probation when a labor contract is signed

Many FDI enterprises sign:

• An official labor contract
• Which includes a probationary period

but do not pay social insurance during the probation period.

If the probation period is stipulated within the labor contract, social insurance contributions must be paid from the very first working day.

✅ Conclusion

Most cases of retrospective social insurance collection involving FDI enterprises are not intentional, but result from:

• Misinterpretation of regulations
• Applying parent company practices without local adaptation
• Lack of periodic reviews of labor and social insurance compliance

Proactively reviewing social insurance compliance before inspections is the most effective way to:

• Avoid significant retrospective collections
• Avoid penalties and late payment interest
• Protect the company’s reputation

If you require consultation or support, please feel free to contact TPM’s specialists for assistance.

Ms. Đỗ Thị Thu Quỳnh
Head of HR & Payroll Services
✉️ quynh.do@tpm.com.vn

Reference: Law on Social Insurance No. 41/2024/QH15