Accounting for social insurance contributions for non-salaried enterprise managers is a specific accounting task that many businesses are unsure about. Current law allows Chairpersons of Members’ Councils/Boards of Directors, Directors, or other management titles (who do not receive a salary) to still contribute to compulsory social insurance (BHXH). However, recording these expenses in the accounting books in a way that is both legally compliant and tax-optimized is a challenge. This article will analyze legal regulations in detail and guide you on how to account for social insurance contributions for non-salaried enterprise managers most accurately, from determining expense accounts to necessary journal entries.
1. Regulations on social insurance contributions for non-salaried enterprise managers
According to the Law on Social Insurance of Vietnam 2024, enterprise owners or non-salaried directors are subject to compulsory social insurance (BHXH) participation, regardless of whether they have a labor contract. Specifically, Point n, Clause 1, Article 2 of the Social Insurance Law 2024 stipulates that enterprise managers, including directors, general directors, members of the board of directors, and other management titles according to the company’s charter, must contribute to compulsory social insurance.
This regulation applies to directors of one-member limited liability companies (MTV), private enterprise owners, and business household owners with business registration. However, if the director has reached retirement age according to Clause 2, Article 169 of the Labor Code of Vietnam 2019 and is not in the case of lacking a maximum of 06 months of social insurance contributions to receive a pension, then participation is not compulsory.
The compulsory social insurance contribution rate for this group is stipulated in Clause 4, Article 33 of the Social Insurance Law 2024, including: 3% of the salary used as the basis for contributions to the sickness and maternity fund, and 22% to the retirement and survivor’s benefit fund, totaling 25% of the salary used as the basis for contributions. The salary used as the basis for contributions is chosen by the manager, but it must be at least equal to the reference level and not exceed 20 times the reference level at the time of contribution. The reference level is regulated by the Government, adjusted based on the consumer price index, economic growth, and budget capacity.
2. Who bears the cost of social insurance contributions: Individual or company?
Regarding who bears the cost of social insurance contributions, the law does not explicitly state whether this 25% contribution must be paid by the individual or the company. However, common practice and reality show that:
- If the company pays: If the director does not receive a salary, the enterprise may decide to cover all or part of the social insurance costs to ensure legal compliance and avoid the risk of retroactive collection or penalties. This is often applied when the enterprise wants to optimize management costs and ensure social welfare benefits for the director. The enterprise can consider this an operating expense to support the manager.
- If the individual pays: The director can personally contribute to social insurance directly at the social insurance agency or through the enterprise. This method is suitable when the director wants to manage personal finances or when the enterprise has a limited budget. According to Clause 4, Article 33 of the Social Insurance Law 2024, managers can contribute directly to the social insurance agency or through the enterprise on a monthly, quarterly, or semi-annual basis.
The decision for either the company or the individual to bear the costs should be based on an agreement between the enterprise and the director, while also considering the enterprise’s financial capacity and the long-term benefits of social insurance participation. The enterprise needs to discuss clearly with the director and record this agreement in the company’s charter or internal documents to avoid future disputes.
3. Guide to accounting for social insurance contributions for non-salaried enterprise managers
The method of accounting for social insurance contributions depends on who bears the cost (company or individual) and is carried out according to the provisions of Vietnamese Accounting Standards (VAS) and Circular 200/2014/TT-BTC. Below are specific instructions:
If the company pays:
When the company pays social insurance for the director, this cost is recorded as personnel expenses or general administrative expenses. The accounting entries are as follows:
- Debit Account 642 (General administrative expenses) or Account 641 (Selling expenses, if the director participates in sales activities): The amount of social insurance paid by the company (17.5% or the entire 25%, depending on the agreement).
- Debit Account 138 (Other receivables): The amount of social insurance to be borne by the director (if there is an agreement for the director to reimburse).
- Credit Account 334 (Payables to employees) or Account 111/112 (Cash/Bank): The total amount of social insurance paid to the social insurance agency.
Example: The director chooses a social insurance contribution salary of 5,000,000 VND/month. The total social insurance payable is 25% x 5,000,000 = 1,250,000 VND. If the company pays in full:
- Debit Account 642: 1,250,000 VND
- Credit Account 112: 1,250,000 VND
If the enterprise manager pays personally:
If the enterprise manager personally contributes social insurance directly to the social insurance agency, the enterprise does not need to account for it. However, if the director pays through the enterprise, the enterprise records an intermediary obligation:
- Debit Account 111/112 (Cash/Bank): The amount the director pays to the enterprise.
- Credit Account 338 (Other payables): The amount of social insurance to be paid to the social insurance agency.
- When paying to the social insurance agency: Debit Account 338, Credit Account 112.
Enterprises need to keep records such as the social insurance declaration form (Form TK1-TS), the list of employees participating in social insurance (Form D02-TS), and social insurance payment receipts to ensure transparency and compliance with inspections from the social insurance agency.
