The New Wage Code: Will Salaries Take a Hit After the Base Salary of VND 2.34 Million is Abolished on July 1?

Officially abolishing the base salary of 2.34 million VND

From July 1, 2025, the Social Insurance Law (SI) 2024 (No. 41/2024/QH15) officially takes effect, replacing the SI Law 2014. One of the important changes is the replacement of the concept of “base salary” with a “reference level” to calculate contribution rates and benefits for SI schemes. Especially, the reference level directly affects SI benefits such as retirement pensions, maternity, funeral, and monthly survivor allowances, as well as health recovery allowances.

In particular, the application of the reference level instead of the base salary makes the allowances more flexible and adaptable to economic realities, ensuring the actual value of SI benefits. These policies not only encourage long-term SI participation among workers but also build a multi-layered welfare system, promoting fairness and contributing to improving the quality of life and social stability in the context of Vietnam’s aging population.

According to Article 7 and Clause 13 of Article 141 of the SI Law 2024, which took effect on May 1, 2025, the reference level is defined as follows:

– The reference level is the amount decided by the Government and used to calculate contribution rates and benefit levels for certain SI schemes.

– The reference level is adjusted based on the consumer price index, economic growth, and the capacity of the state budget and the SI fund.

– Until the base salary is abolished, the reference level is equal to the base salary. When the base salary is abolished, the reference level will not be lower than that base salary.

Currently, the base salary is 2,340,000 VND/month (according to Clause 2, Article 3 of Decree 73/2024/ND-CP).

Accordingly, from July 1, 2025, when the base salary is abolished and replaced with the reference level to calculate contribution rates and benefit levels for some social insurance schemes, the reference level will not be lower than the base salary, i.e., 2,340,000 VND.

The transition to the reference level will affect some SI schemes. Especially from July 1, the SI Law 2024 will officially take effect, and the reference level will have a significant impact on many SI schemes that workers need to know about.

What are the mandatory SI contribution rates from July 1, 2025, and what do they include?

According to the provisions of Article 32 of the SI Law 2024:

SI Contribution Rates

1. The mandatory SI contribution rates include:

a) 3% of the salary used as the basis for SI contributions to the sickness and maternity fund;

b) 22% of the salary used as the basis for SI contributions to the retirement and survivor fund.

2. The voluntary SI contribution rate is 22% of the income used as the basis for SI contributions to the retirement and survivor fund.

Thus, the mandatory SI contribution rates include:

3% of the salary used as the basis for SI contributions to the sickness and maternity fund;

22% of the salary used as the basis for SI contributions to the retirement and survivor fund.

How is the salary basis for mandatory SI contributions determined?

According to Clause 1, Article 31 of the SI Law 2024, the salary basis for mandatory SI contributions is as follows:

– For employees subject to the State-regulated salary scheme, the salary basis for SI contributions includes the monthly salary according to their position, title, rank, grade, military rank, and allowances for position, seniority beyond the frame, professional seniority, and salary retention coefficient (if any);

– For employees subject to the salary scheme decided by the employer, the salary basis for mandatory SI contributions includes the monthly salary, consisting of the salary according to their job or title, salary allowances, and other regular and stable supplements agreed upon in each salary payment period.

In case an employee stops working but still receives a monthly salary equal to or higher than the lowest mandatory SI contribution basis, the contribution shall be based on the salary they receive during the stoppage period;

– For subjects specified in points d, e, and k of Clause 1, Article 2 of the SI Law 2024, the salary basis for mandatory SI contributions shall be determined by the Government;

– Subjects specified in points g, h, m, and n of Clause 1, Article 2 of the SI Law 2024 can choose the salary basis for mandatory SI contributions but not lower than the reference level and not higher than 20 times the reference level at the time of contribution.

After at least 12 months of contributing to SI based on the chosen salary basis, the employee can choose the salary basis for SI contributions again;

– The salary basis for mandatory SI contributions is not lower than the reference level and not higher than 20 times the reference level at the time of contribution.