📌 6 COMMON MISUNDERSTANDINGS AMONG ENTERPRISES REGARDING MANDATORY SOCIAL INSURANCE OBLIGATIONS
Are enterprises required to pay mandatory social insurance contributions when entering into contracts with individuals?
The answer does not depend on the title of the contract, but rather on the substance of the relationship between the parties and how the contract is actually performed in practice.
Below are six common situations encountered by enterprises:
1️⃣ SEPARATE PROBATIONARY CONTRACT
Under the 2019 Labour Code (effective from 1 January 2021), the parties may agree on probation under a separate probationary contract.
During the term of a separate probationary contract, the probationary employee is not subject to mandatory social insurance contributions.
Enterprises should note that:
✔ An employee may undergo probation only once for each position;
✔ The probationary period must not exceed the statutory time limit;
✔ Upon successful completion of the probationary period, if the employee continues working, the parties must enter into an appropriate employment contract.
📖 Legal basis: Article 24 of the 2019 Labour Code.
2️⃣ EMPLOYEES WHO DO NOT WORK AND DO NOT RECEIVE SALARY FOR 14 OR MORE WORKING DAYS IN A MONTH
Working fewer than 14 days in a month does not automatically mean that no social insurance contributions are payable.
Social insurance contributions are not required for that month only when the employee:
✔ Does not work; and
✔ Does not receive salary for 14 or more working days during the month.
Public holidays, Lunar New Year holidays, annual leave, and other periods of paid leave are still regarded as periods for which salary is received.
📖 Legal basis: Clause 5, Article 33 of the 2024 Law on Social Insurance.
📅 Effective from July 1, 2025.
3️⃣ CONTRACT FOR SPECIFIC WORK
A contract for specific work is commonly used when an enterprise assigns an individual or another party to perform a specific task or work item and makes payment based on the completed results.
The contractor generally:
✔ Determines their own working schedule;
✔ Determines the method of performance;
✔ Independently arranges the personnel, tools, and equipment required to perform the work;
✔ Receives payment based on the results accepted upon completion.
Examples:
▪ Website design;
▪ Software development;
▪ Translation;
▪ Video filming and editing;
▪ Construction of a specific project item.
Where the arrangement is, in substance, a civil contractual relationship rather than an employment relationship, it is generally not subject to mandatory social insurance contributions.
📖 References:
Article 13 of the 2019 Labour Code regarding the determination of an employment relationship; The 2015 Civil Code.
4️⃣ SERVICE CONTRACT
An enterprise engages an individual or an organization to provide a specific service and makes payment in accordance with the parties’ agreement.
The service provider generally:
✔ Determines their own working schedule;
✔ Independently arranges the personnel required to provide the service;
✔ Determines the method of performance;
✔ Assumes responsibility for the deliverables or results provided.
Examples:
▪ Consulting;
▪ Design;
▪ Training;
▪ Photography;
▪ Transportation;
▪ Cleaning;
▪ Security services.
Where the relationship does not involve management, direction, or supervision similar to that exercised over an employee, a service contract generally does not give rise to mandatory social insurance obligations.
📖 References:
Article 513 of the 2015 Civil Code; Article 13 of the 2019 Labor Code.
5️⃣ INTERNSHIP CONTRACT
The purpose of an internship is to facilitate learning, practical experience, and exposure to a real-world working environment.
Interns generally:
✔ Participate in a structured training program;
✔ Work under the guidance of a supervisor or mentor;
✔ Have their learning outcomes evaluated;
✔ May receive financial support or an allowance.
Where the arrangement is genuinely an internship for training purposes, rather than the recruitment of an individual to perform duties as a regular employee, it is generally not subject to mandatory social insurance obligations.
📖 Legal basis:
The 2019 Labour Code does not currently specify interns as persons subject to mandatory social insurance. The determination depends on the substance of the actual relationship between the parties.
6️⃣ COMMISSION-BASED COLLABORATOR AGREEMENT
This type of agreement is commonly used in sales, brokerage, or service referral activities.
Collaborators generally:
✔ Determine their own working schedules;
✔ Choose their own places of work;
✔ Are not subject to attendance tracking;
✔ Are not assigned to specific work shifts;
✔ Receive income based on sales or actual performance results.
Where a collaborator works independently and receives commissions solely based on the results of the work performed, the arrangement is generally not subject to mandatory social insurance obligations.
📖 References:
Article 13 of the 2019 Labor Code; 2015 Civil Code.
⚠️ IMPORTANT POINTS FOR ENTERPRISES TO NOTE
Mandatory social insurance obligations cannot be determined solely based on the title of a contract.
Even if a contract is titled:
❌ Service Contract;
❌ Contract for Specific Work;
❌ Collaborator Agreement;
❌ Internship Contract;
The relationship may still be considered an employment relationship if, in practice, the business:
❌ Tracks the individual’s attendance and working hours;
❌ Assigns work shifts;
❌ Controls the individual’s working time and place of work;
❌ Regularly assigns tasks and supervises the performance of the work;
❌ Pays a fixed monthly salary;
❌ Applies internal labour regulations and labour disciplinary measures;
In such cases, the competent authorities may classify the relationship as an employment relationship , thereby giving rise to mandatory social insurance obligations.
📖 Legal basis: Article 13 of the 2019 Labor Code.
✅ KEY TAKEAWAY
Merely changing the title of a contract does not exempt a business from mandatory social insurance contributions.
Enterprises should select the appropriate type of contract, ensure that the arrangement is implemented in accordance with its actual substance, and retain complete records and supporting documents for submission or explanation when required by the social insurance authority, tax authorities, or labour inspectorate.
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