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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.
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:
Minimum time to participate in social insurance:
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:
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:
For women:
In case of premature retirement due to reduced working ability:
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:
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).
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
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.
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.
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:
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.
Note: The content of the articles published on the website of Long Phan Investment Consulting Company is for reference only regarding the application of legal policies. Depending on the time, subject, and amendments, supplements, and replacements of legal policies and legal documents, the consulting content may no longer be appropriate for the situation you are facing or need legal advice on. In case you need specific and in-depth advice according to each case or incident, please contact us through the methods below. With our enthusiasm and dedication, we believe that Long Phan will be a reliable solution provider for our clients.
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