From the outset of the Covid-19 pandemic in the beginning of 2020, employers and workers have all be hit hard by the economic downturn that resulted. In Vietnam, with a population of nearly 100 million people, the pandemic has only recently caused a major reduction in the need for human capital. But that reduction has hit a large number of employees, specifically, employees in the informal economy.
According to WIEGO, the informal economy is the diversified set of economic activities, enterprises, jobs, and workers that are not regulated or protected by the state. Fullbright University estimates that the informal economy of Vietnam accounts for anywhere from 25 to 30 percent of annual GDP. If one were to spread the GDP equally over each individual within the economy, that means that 25 to 30 million people are involved in the informal economy.
Regardless of how many people are actually involved in the informal economy, they face particularly harsh conditions during lockdowns like the one we are currently in as they do not necessarily have the support of the government that is given to laborers in the formal economy.
For instance, in July, the prime minister issued Decision No. 23/2021/ND-CP which provides for policies to assist both employers and employees during the Covid lockdown. While the decision gives enterprises the ability to discount or delay their payment of social security taxes, it also gives direct payments to employees who have had their work hours reduced or who have been temporarily suspended from work. But in order to receive these benefits, they must have an employment contract and have payments to the social security funds by their employers.
Informal workers frequently meet neither requirement.
Take for instance Grab drivers. In the contract between Grab and its drivers, there is very specific language stating that Grab is not an employer and the driver is not an employee. In fact, the language is such as to state that Grab is actually providing a service to the driver by providing connections with passengers. And in the terms and conditions for using GrabBike or GrabCar by passengers, the drivers are referred to as third parties. Grab takes no responsibility for paying social security for the individual drivers that use its technology and has no labor contract in place for them. This means that Grab drivers, as an example, do not have access to the Covid-19 relief benefits from the government aimed at employees because they are not “technically” employed.
The same is true throughout the informal economy. Men and women and young adults all work without being regulated by government policies and, unless they pay their own social security taxes, they are solely dependent on the money they receive from their work. And with Covid-19 lockdown measures in place for months in some locations, many of them are unable to work. In Ho Chi Minh City, for instance, delivery services were stopped for several weeks and Grab drivers were unable to earn any money because they could not make deliveries. Let alone the GrabBike and GrabCar drivers who have been prohibited from driving passengers for a much longer period.
According to TechinAsia.com, there are nearly 200,000 Grab drivers in Vietnam. And if Grab accounts for 75% of the ride-hailing market, that means there are nearly 270,000 ride-hailing drivers in the country, most of whom are currently limited in obtaining any income due to the lockdowns. These drivers are not eligible to receive any government Covid benefits because they are not employees nor are they making payments for their social security. They are domestic freelancers and are only subject to the payment of personal income tax.
But with the decision by the tax authorities late last year to impose tax on Grab and other ride-hailing platforms as a transport service provider rather than a technology company, the nature of Vietnam’s treatment of these services changed. They are considered as giving a service and if they are the ones giving the service, then those who actually provide the service could easily be categorized as employees rather than freelancers. The courts in the United States have made some initial forays into this area and deemed ride-hailing service providers as employees. Perhaps it is time that Vietnam look at taking a similar step to protect the interests of the ride-hailing freelancers and require social security payments by Grab, Gojek, and others on behalf of their employees.
