Why unemployment benefit payments are lower than workers' actual earnings

Real earnings of workers are not low, but the wage used as the basis for social insurance contributions is typically lower, which leads to unemployment benefits, even when calculated at 60%, being lower than workers' actual income, according to a representative of the Employment Department (Ministry of Internal Affairs). Employment Law 2025 and the guiding Decree continue to uphold the basic principle that the monthly unemployment benefit equals 60% of the average wage for the six consecutive months in which the worker contributed to unemployment insurance prior to becoming unemployed. REAL EARNINGS OF WORKERS ARE HIGHER THAN THE INSURED WAGE According to Mr. Tran Tuan Tu, Head of the Unemployment Insurance Division (Employment Department), the 60% entitlement is defined as temporary financial support for a fixed period to help workers maintain their living standards when they lose their jobs and have no income yet. He notes that, following the recommendations of the International Labour Organization (ILO) and international practice, the benefit should be at least 50% of wages. Vietnam specifies 60%, which is higher than this recommended threshold. However, in practice, some workers feel the entitlement is still low, because the wage used as the basis for insurance contributions is often lower than actual income. Currently, contributions are mainly based on contractual wages and do not fully reflect income. “In reality, workers' actual income is often higher than the wage used as the basis for insurance contributions. In enterprises, besides contractual wages, there are many other income sources, but these have not been included in the wage base for insurance contributions. The reason is that fully accounting for them would force employers to raise their contribution obligations, so there is a tendency to keep contributions at a minimum,” explains Mr. Tu. Therefore, although workers' actual income is not low, the average wage used to calculate social insurance contributions remains lower. This leads to unemployment benefits, even when calculated at 60%, being lower than the actual income workers receive. “For example, if a worker’s insurance contribution base is around VND 6 million, while actual income may reach around VND 10 million, especially in labor-intensive sectors like textiles and footwear, then 60% of the insured base will be considerably lower than 60% of actual income,” Mr. Tu cites. From this practical experience, Mr. Tu says that going forward, the aim is to base social, unemployment, and health insurance contributions on income, thereby providing a basis to raise the entitlement and ensure benefits that better reflect workers' realities. The 60% rate is not set too high in order to balance support with maintaining work incentives, and to align with the principle of sharing in unemployment insurance. According to the Employment Department, policy development has seen proposals to raise the unemployment benefit rate. However, the 60% rate has been retained for its particular significance: it is a temporary financial support for a defined period, not a full replacement of income. If the entitlement were too high, say 70% or 80%, it could reduce workers’ incentives to return to work. Thus, 60% is calculated to balance the fund and align with international practice while still providing necessary support. The essence of unemployment benefits is pooling among fund participants. Beneficiaries receive not only from their own contributions but also from others', reflecting the humanitarian aspect of the policy. FLEXIBILITY IN BENEFIT ELIGIBILITY Related to benefit levels, the new law clarifies a number of important points. Under the previous 2013 Employment Law, unemployment benefits were calculated based on the average wage of the six consecutive months before unemployment. Linh hoạt hơn trong điều kiện hưởng bảo hiểm thất nghiệp nhằm đảm bảo quyền lợi cho người lao động. However, according to Mr. Tran Tuan Tu, the concept of “adjacent” in the new regulation is designed to be flexible and humane, aligning with workers' realities. In principle, for short-term insurances, contributions typically continue until the risk occurs. But for unemployment insurance, in addition to its short-term nature, there is a long-term aspect. That is, the entire period paid but not yet claimed is preserved, even if there are interruptions in employment. Labor law allows workers to temporarily suspend labor contracts, take maternity leave, sick leave, unpaid leave, or stop working. These periods do not generate unemployment insurance contributions, leading to possible interruptions in participation. Therefore, although the rule states six consecutive months, there is still some flexibility to protect workers' rights in cases of reasonable interruptions during participation. “Principally, if there is an interruption in participation, benefits are normally not payable. However, with unemployment insurance, due to the policy's humanitarian nature, periods when workers do not contribute but are allowed by law, such as contract suspensions, maternity leave, unpaid leave, etc., are still considered during participation,” explains Mr. Tran Tuan Tu. Hence, counting six months strictly as six consecutive months with no interruptions would not fit reality. The new regulation adjusts toward being stricter yet more flexible: it defines the last six months in which unemployment insurance was paid before the contract termination, regardless of interruptions. This approach ensures both the contribution-and-benefit principle and aligns with workers' actual working history. UNEMPLOYMENT INSURANCE: A LIFELINE AGAINST THE RISK OF JOB LOSS Unemployment insurance: From passive support to a robust workforce-safety net UNEMPLOYMENT INSURANCE: A SHIFT FROM PASSIVE SUPPORT TO A KEY TOOL FOR THE LABOR MARKET UNEMPLOYMENT INSURANCE: AGREEING ON A SINGLE MAXIMUM WAGE BASE FOR UNEMPLOYMENT INSURANCE CONTRIBUTIONS FROM 2026 From the perspective of policy, there are multiple articles and updates around unemployment insurance and related reforms in 2026, including adjustments to how wages are defined for contribution bases and how eligibility is calculated. These changes aim to strengthen the protection against job loss while maintaining incentives to work and ensuring sustainability of the unemployment insurance fund. Keywords: Unemployment Insurance, 2025 Employment Law, workers, actual income, unemployment benefits Read more and related updates on unemployment insurance reform, wage bases for social insurance, and labor market policies.