Ceiling For Social Security Contributions Raised

In line with the policy to adjust the maximum ceiling of the insurable earnings under the National Social Security Fund (“NSSF”) framework at five times the minimum wage set by the Government of Lao PDR and adjusted from time to time, as of 1 January 2017 the maximum ceiling of insurable earning has been raised from 2 million Kip to 4.5 million Kip under Ministry of Labour and Social Welfare Decision No. 1740/MOLSW dated 25 April 2016 (the “Decision”).

Articles 55 and 56of the Social Security Law (No. 34/NA dated 26 July 2013) requires non-government employers to contribute 6% of an employee’s monthly salary to the NSSF, with a further 5.5% to be contributed by insured employees. In preactice, the 5.5% employee contribution should be deducted from an employee’s salary and be paid by the employer to the NSSF.

Employees of the government will have 8.5% of their monthly salary contributed to the NSSF by the government and are required to make an additional contribution of 8 percent themselves.

As a result of the new maximum ceiling of insurable earnings coming into force, the maximum monthly NSSF contribution payable on behalf of non-government employees earning 4.5 million Kip or above per month shall be capped at 6% of 4.5 million Kip – 270,000 Kip. Likewise, NSSF contributions made by insured non-government employees earning 4.5 million Kip or over per month shall be capped at 5.5% of 4.5 million Kip – 247,500 Kip.

The Decision also sets the minimum level of insurable earnings at not less than 50% of the current monthly minimum wage (900,000 Kip) where an employee’s monthly income is lower than the prescribed monthly minimum wage. As such, the current minimum level of insurable earnings on which NSSF contributions are to be made by employers on behalf of individual employees is 450,000 Kip.

As noted, the Decision is now in force, replacing the previous Decision No. 1851/MOLSW, and must be strictly implemented by all employers and employees in Lao PDR.

Benefits under the NSSF include the provision of funds for health care during child birth, workplace injuries and illnesses, old age pensions, funeral grants, surviving family benefits, and unemployment benefits.

This article has been provided by Arion Legal, an Australian law firm established in Laos in 2008, offering international standard legal advice and documentation for foreign investors operating in, or looking to invest in, Laos.