Designing a compliant pay, allowance and benefits structure to optimise social insurance and PIT costs

Compulsory insurance contributions currently total 32% of the contribution salary: 21.5% paid by the employer and 10.5% by the employee. Every million dong inside or outside the social insurance salary base therefore has a price. Yet the line between optimisation and contribution evasion is thin: both the social insurance agency and the tax authority look at the substance of a payment, not the label in the contract. This article looks at three lenses: social insurance, personal income tax (PIT) and corporate income tax (CIT).

What the social insurance salary base includes under current law

Under Article 31 of the Law on Social Insurance No. 41/2024/QH15 (effective 1 July 2025) and Decree 158/2025/ND-CP, for employees whose pay is set by the employer, the compulsory contribution base is monthly salary comprising the job or title wage, salary allowances and other additional amounts agreed and paid regularly and stably in each pay period. The ceiling is 20 times the reference level; while the reference level equals the statutory base salary, the base salary of VND 2,530,000 from 1 July 2026 lifts the social and health insurance ceiling to VND 50.6 million per month.

What falls outside? In a reply published on the Ministry of Finance policy Q&A portal, Vietnam Social Security, citing Clause 5, Article 3 of Circular 10/2020/TT-BLDTBXH, confirmed that benefits recorded as separate items in the labour contract are not part of the compulsory contribution base, including:

• Bonuses under Article 104 of the Labour Code and innovation bonuses.
• Mid-shift meal allowances.
• Support for fuel, phone, travel, housing, childcare and raising young children.
• Support when an employee loses a family member, when a relative marries, and on the employee's birthday.
• Hardship support for employees suffering a work accident or occupational disease, and other support items recorded separately.

Three principles that make a structure inspection-proof

1. Substance before label. A fixed monthly payment that compensates for working conditions, responsibility, position or seniority is a salary allowance and must be included. Renaming a responsibility allowance as travel support does not change its nature.
2. Benefits need a basis and a genuine need. Fuel, phone and housing support should be set out in an internal policy, with amounts by job group applied consistently - not a slice of salary carved out person by person.
3. The job wage must be reasonable. It cannot be below the regional minimum wage (VND 5,310,000 per month for Region I from 1 January 2026 under Decree 293/2025/ND-CP) and should match the role. A chief accountant with a VND 6 million title wage and VND 20 million of support payments is a red flag for both the social insurance agency and the tax authority.

The PIT lens: exemptions and deductions from 2026

The Law on Personal Income Tax No. 109/2025/QH15 takes effect on 1 July 2026 (its employment-income rules apply from the 2026 tax year) and is implemented by Decree 253/2026/ND-CP and Circular 87/2026/TT-BTC. Points directly relevant to benefits design:

• Cash mid-shift meal allowances are exempt up to VND 1.2 million per person per month from 1 July 2026; the excess is taxable. Meals organised by the company or provided through meal vouchers are not taxable income.
• Overtime pay, night-work pay and payment for unused annual leave, when paid in line with the Labour Code, are exempt under the new rules.
• Housing built by the employer for current employees, including electricity, water and related services, is exempt.
• Contributions to voluntary pension insurance, life insurance and supplementary pension schemes are deductible up to VND 3 million per month, combining employer and employee contributions; employer contributions above the cap are taxable income.
• Severance and job-loss allowances above statutory levels are exempt if provided for in the internal labour rules, labour contract or collective labour agreement.

The CIT lens: welfare spending is capped

Saving on social insurance only to lose the deduction at CIT finalisation is a zero-sum game. Under Decree 320/2025/ND-CP implementing the Law on Corporate Income Tax No. 67/2025/QH15: total direct welfare spending for employees (holidays, weddings and funerals, medical support, etc.) is deductible up to one month of actual average salary for the year (Clause 4, Article 10); contributions to voluntary pension or life insurance for employees above VND 5 million per person per month are not deductible; and overtime pay beyond the limits of labour law is not deductible. Conditions and benefit levels should be stated in the labour contract, collective agreement or internal policy, and payments of VND 5 million or more require non-cash payment evidence.

Illustrative example: how big is the difference really?

Illustrative example: a team leader earns a total of VND 25 million per month. Option A records everything as salary: the contribution base is VND 25 million, the employer pays VND 5,375,000 and the employee VND 2,625,000. Option B keeps VND 22.6 million as title wage and responsibility allowance, and pays VND 1.2 million as mid-shift meals and VND 1.2 million as travel and phone support under a genuine business-travel policy. The employer saves VND 516,000 per month, the employee VND 252,000, and the meal allowance is also PIT-exempt. The numbers are modest, and that is the point: a compliant structure delivers moderate but sustainable savings.

How Kaizen can help

Kaizen's team, with more than 17 years of Big4 experience, reviews your labour contracts, pay and bonus policies and payroll through all three lenses: social insurance, PIT and CIT. Start with our free tax health check to see how well your current structure is optimised and where the risks sit.