Q&A Labor Law: Financial support for the employee involved with non-occupational accident
November 16, 2018 Labor & Employment
An employee who is currently in the position of Director has an accident, which is not considered to be an occupational accident. The employee obtains a written confirmation from the hospital that he was undergoing treatment at home. Thus, the salary of the employee is considerably reduced because of his/her absence from work for treatment. The employee raised the question of that the Social Insurance Authority pays an allowance for non-working days, which is only equal to 75% of the social insurance contribution, so how the company settle the difference between such allowance and the salary stated in the labor contract? Please advise the company on this case?
First of all, the fact that the company does not pay for an employee when the employee is covered by the social insurance is in accordance with the law (Article 186.2, the 2012 Labor Code). Therefore, the company should clarify this with the employee so that the employee understands that the company is in compliance with the law. The rights and interests of employee is not violated in this case. [*Note: At present, the monthly salary used for calculating the social insurance premiums include: job-based salary, allowances and other additional amounts stated in the labor contract; in the event that the monthly salary exceeds 20 times the State basic salary, the monthly salary used for calculating the social insurance premiums is equal to a maximum of 20 times the State basic salary (Article 89, the 2014 Law on Social Insurance). Thus, the company should review the salary structure which is used to calculate the social insurance premiums for the said employee to ensure that it is in accordance with the prevailing law.]
Whether the employee is given any additional financial support from the company is at its sole discretion. If the company considers that the employee is seriously disadvantaged due to a reduction of his income; and the company wishes to support the employee with the goal of fostering a long-term employment relationship (which applies not only to the employee involved with accident but also for other current employees), there are various options:
Solution 1: Providing financial support by the company’s budget
The amount of support will be decided by the company. However, in order for this payment to be considered a deductible expense for the company when it comes to the calculation of corporate income tax, the company should pay close attention to some of the following matters:
– Creating an annex to the labor contract involving the payment of the support.
Article 3.2, Circular No.25/2018/TT-BTC regulates the expenses which are not deductible when calculating the taxable income: “Salaries and bonuses for employees of which the conditions for entitlements and rates of entitlement are not specified in one of the following documents: Labor contract; Collective bargaining agreement; Financial regulations of the company, corporation or group; the bonus regulations approved by the chairman of the board of management, the general director or the director in accordance with financial regulations of the company or the corporation”. Therefore, to satisfy these conditions, the company should create an annex to the labor contract which agrees on the payment of the support and includes the specific terms of eligibility and benefit amounts the employee is entitled to receive. Also, medical treatment documents of the employee should be enclosed with the annex to the labor contract as supporting documents to verify the eligibility of the employee for the payment from the company.
– The amount of the support (along with other welfare expenses) shall not exceed one month’s average salary that is actually paid in during the taxable year of the company.
Pursuant to the provisions of Article 3.4, Circular No.25/2018/TT-BTC, the maximum total amount for welfare expenses directly paid to the employees must not exceed the actual average of one month’s salary in the taxable year of the company. The determination of “the actual average of one month’s salary in the taxable year” shall comply with provisions of Article 6.2.30, Circular No.78/2014/TT-BTC (amended by Article 4, Circular No.96/2015/TT-BTC). The company should refer to these regulations to determine the appropriate amount of support.
Solution 2: Providing financial support by utilizing the grassroots trade union fund
In case where the company has set up a grassroots trade union, that grassroots trade union is entitled to retain a part of the trade union contributions (which is contributed by the company to the State trade union fund) and a part of the trade union fees (which is contributed by the employees to the State trade union fund) for use in the activities of the grassroots trade union. The retained percentage will be in line with the annual guidelines of the Vietnam General Confederation of Labor. For example, in 2018:
– The trade union contributions: The grassroots trade union is entitled to retain an amount equal to 68% of the total trade union contributions (Section II.2.4, Guideline No.1784/HD-TLD). The monthly trade union contribution by the company is equal to 2% of the salary budget which is used as the basis for calculating the social insurance premiums for employees (this salary budget is the total salary of employees subject to the social insurance contribution in accordance with the law on social insurance) (Article 5, Decree No.191/2013/ND-CP).
– The trade union fees: The grassroots trade union is entitled to retain an amount equal to 60% of the total trade union fees (Official Letter No.906/TLD dated June 12, 2017). The monthly trade union fee paid by the employee is equal to 1% of the salary which is used as the basis for calculating social insurance premiums in accordance with the law on social insurance, but must not exceed 10% of the State basic salary (Article 23.3 of the Regulations on managing trade union’s budget, trade union’s assets, collection and distribution of revenues, and rewards and penalties relating to collection and remittance of trade union revenues and expenditures promulgated together with Decision No.1908/QD-TLD).
The payment of the support to the employees is one of the allowable expenditures of the grassroots trade union fund (Decision No.1910/QD-TLD). However, the amount of the support must comply with the financial regulations of the grassroots trade union. The company should discuss with its grassroots trade union’s executive committee to determine the appropriate amount of support. This option shall not only reduce the financial burden to the company but also help to effectively allocate the trade union fund (which is, in fact, mainly contributed to by the company).
Solution 3: A combination of the two options above
The company may consider combining both the company’s fund and the grassroots trade union’s fund.
However, the company should take precautions so that financial support for this specific employee should not (1) create a misconception that the company is favoring certain employees over others and/or (2) create conflicts amongst the working relationship of employees. The Company may consider issuing a policy of financial support, in which specific conditions and the amount of support are clearly stated which will apply to similar circumstances later on. In case the employees do not meet such criteria of eligibility, he or she shall have no grounds to request support from the company, since this policy is generally applicable to all employees.
– Written by LE & TRAN | Vietnam’s Premier Business Litigation Firm
This insight is quoted from the Vietnam Labor Law Review (October 2018), you can download and read the full file of Vietnam Labor Law Review (October 2018) here.