Latest instructions on how to calculate pensions for employees

Article overview

How to calculate pension for employees to ensure a stable income when reaching retirement age. Pension is determined based on the average salary, time participating in social insurance and pension rate, helping employees have a safe source of income after leaving work. The article below will specifically guide how to accumulate pensions for employees.

 Instructions on how to calculate pensions for employees
Instructions on how to calculate pensions for employees

Conditions for employees to receive pension

According to the provisions of Article 54 of the Law on Social Insurance 2014 amended by Point a, Clause 1, Article 219 of the Labor Code 2019, employees need to meet two main conditions to receive pension:

Retirement age:

  • For male workers, the retirement age is 60 years old.
  • For female workers, the retirement age is 55 years old.

Minimum time to participate in social insurance:

  • Employees must have at least 20 years of paying social insurance. If the social insurance payment period is less than 20 years, the employee is not eligible to receive pension. In this case, you can participate in voluntary social insurance to supplement the necessary number of years of social insurance payment.

In case the employee does not reach the prescribed retirement age or has not paid social insurance for 20 years, he or she can choose one of the following forms:

  • Continue paying voluntary social insurance to reach the full number of years.
  • Wait until you are old enough to enjoy a pension or switch to another regime such as one-time social insurance, depending on the specific case.
Conditions for employees to receive pension
Conditions for employees to receive pension

How to calculate pension for employees participating in compulsory social insurance

According to Article 7 of Decree 115/2015/ND-CP, the monthly pension of employees participating in compulsory social insurance is calculated according to the formula:

Monthly pension = Benefit rate x Average monthly salary paid for social insurance

Pension rate

The pension rate depends on the number of years of social insurance payment and the employee’s gender:

For men:

  • The pension rate starts at 45% when you have paid 20 years of social insurance.
  • Each additional year of payment, the benefit rate increases by 2%, and the maximum rate is 75%.
  • For example: If a male employee pays social insurance for 30 years, the benefit rate is 65% (45% for the first 20 years + 10 years x 2%).

For women:

  • The pension rate starts at 45% when you have paid full 15 years of social insurance.
  • Each additional year of payment, the benefit rate also increases by 2%, with a maximum of 75%.
  • For example: If a female employee pays social insurance for 25 years, the benefit rate is 65% (45% for the first 15 years + 10 years x 2%).

In case of premature retirement due to reduced working ability:

  • The pension rate will decrease by 2% for each year of retirement earlier than prescribed.
  • If the early leave period is 6 months or less, there will be an additional 1% reduction, from over 6 months there will be no further reduction.

Average monthly salary paid for social insurance (ASP)

The average monthly salary paid for social insurance depends on the time the employee starts participating in social insurance:

  • Before January 1, 1995: ASP is the average of the last 5 years (60 months) before leaving the job.
  • From January 1, 1995 – December 31, 2000: ASP is the average of the last 6 years (72 months) before leaving the job.
  • From January 1, 2001 – December 31, 2006: ASP is the average of the last 8 years (96 months) before leaving the job.
  • From January 1, 2007 – December 31, 2015: ASP is the average of the last 10 years (120 months) before leaving the job.
  • From January 1, 2016 – December 31, 2019: ASP is the average of the last 15 years (180 months) before leaving the job.
  • From January 1, 2020 – December 31, 2024: ASP is the average of the last 20 years (240 months) before leaving the job.
  • From January 1, 2025 onwards: ASP is the average level of the entire period of social insurance payment.

Specific examples: If a male employee has paid social insurance since 1990 and is eligible to retire in 2024, the average monthly salary paid for social insurance will be calculated over the last 20 years (from 2004 – 2024).

How to calculate pension for employees participating in voluntary social insurance

According to Article 3 and Article 4 of Decree 134/2015/ND-CP, the method of calculating pensions for employees participating in voluntary social insurance is similar to that of compulsory social insurance, however there are some differences in average income levels.

Calculation formula: Monthly pension = Benefit rate x Average monthly income paid for social insurance

Pension rate

  • For men: The pension rate is 45% with 20 years of social insurance payment, and increases by 2% for each additional year of payment, maximum 75%.
  • For women: The pension rate is 45% with 15 years of social insurance payment, and increases by 2% for each additional year of payment, maximum 75%.

Average monthly income paid for social insurance

The average monthly income paid for social insurance is calculated by dividing the total income of the months paying social insurance by the total number of months paid. In addition, this income level is adjusted according to the consumer price index (CPI) every year to ensure the actual value.

Social insurance paid income is adjusted according to the CPI index of each year announced by the General Statistics Office to reflect changes in monetary value and ensure the pension level has a commensurate value.

One-time allowance upon retirement

According to the provisions of Article 58 and Article 75 of the Law on Social Insurance 2014, employees whose time of social insurance payment exceeds the level necessary to reach the maximum pension rate of 75% will be entitled to a one-time benefit upon retirement.

How to calculate one-time allowance:

Number of years of social insurance payment exceeding the maximum:

For each year exceeding the maximum pension benefit of 75%, the employee will receive an additional 0.5 month of average salary or monthly income paid for social insurance.

For example: If a male employee pays compulsory social insurance for 35 years, and has a pension entitlement rate of 75% with 5 years of overpayment, they will receive a one-time benefit equal to 2.5 months of the average monthly salary paid for social insurance.

Objectives of the one-time subsidy:

The one-time benefit encourages employees to continue participating in long-term social insurance and contribute more to the social insurance system, while also providing an additional source of income when employees retire.

One-time allowance upon retirement
One-time allowance upon retirement

Instructions on how to calculate the latest pension for employees at Long Phan

To ensure maximum benefits for employees upon retirement, Long Phan provides detailed consulting services on how to calculate pensions based on the latest legal regulations. Long Phan’s services include:

  • Determine pension eligibility conditions according to the Law on Social Insurance.
  • Instructions on how to calculate the pension rate in accordance with the number of years of social insurance payment.
  • Consulting on average salary or monthly income to ensure correct calculation of benefits.
  • Calculate one-time benefits upon retirement for those whose time of social insurance payment exceeds the maximum limit.

Long Phan provides accurate, detailed and appropriate information for each individual case. If you need further assistance, please contact the hotline 0906735386 for specific advice.