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Reforming social insurance policy to ensure social security, promote social progress and equity for sustainable development of the country
28/12/2018 9:2' Send Print
Image: Social insurance policy. Source: Zing.vn

Major achievements in implementing social insurance policy in Vietnam over the past time

During the renewal period, especially since 1995, resolutions, directives and conclusions of the Party Central Committee, the Politburo on social insurance have been institutionalized. Thus the system of social insurance regimes, policies, management mechanisms and financial mechanisms have gradually been complete.

1. The system of social insurance policy has been quite comprehensive, covering most of the social insurance regimes according to international practices, including compulsory and voluntary social insurance, for people with or without labor relations and for both formal and informal economic sectors.

2. The system of social insurance policy, the social insurance relations have been designed, adjusted and operated in a more appropriate manner. Given the leading role of the State, the participation of employees and employers, the Social Insurance Fund has become the largest social security fund, operating according to the principle of contribution-benefit, sharing among employees of the same generation and between generations participating in social insurance. The total amount spent on retirement, survivor allowances, disablement and monthly assistance allowance in 2017 from the Social Insurance Fund was VND 132,140 billion, 9 times higher than that of 1 January 2007, the first year when the Law on Social Insurance came into force. The total expenditure on retirement and survivor allowances by the end of 2017 from the state budget was VND 44,875 billion, dropping to 25.35% as compared to 56.2% at the time of 1 January 2007.

3. The coverage and scale of social insurance in accordance with law in practice have increasingly expanded. By 2017, the total number of social insurance participants was 13.9 million of which 13.6 million covered by compulsory social insurance, and 0.3 million covered by voluntary social insurance, an increase of 2.3 times compared with that on January 1, 2007 when the Law on Social Insurance No. 71/2006/QH11 came in into effect. The number of people covered by unemployment insurance was 11.7 million. To date, more than 3 million people have been covered by pension scheme. In 2017, 9.1 million were covered by sickness, maternity and health recovery insurance; 0.7 million received unemployment allowances and over 56.000 received monthly accident and occupational disease insurance.

4. The organizational model of the social insurance system is in line with international practices. The separation of state regulatory agencies from policy implementing agencies has brought into full play the role and efficiency in each stage of design, development, planning, implementation of policies, revenues and expenditures, and management of the Social Insurance Fund. Capacity, efficiency and effectiveness of state management of social insurance have been strengthened. The system of legal documents on social insurance has been regularly amended, supplemented and finalized; more attention has been given to inspection, examination and supervision of the implementation of social insurance law; foreign relations and international integration on social insurance have been promoted.

In addition to the important achievements mentioned above, there remain limitations, weaknesses in renewal, and improvement of social insurance policy. In practice, the coverage and scale of social insurance stipulated by law have still not yet been achieved to included the whole population. The social insurance system is single-layered; connectivity between social insurance policy with other social policies have not been synchronized and strict. Compulsory social insurance has not accounted for potential participants who have demands. In fact, in 2017, approximately 29% of the labor force in the working age participated in social insurance, the remaining 70% did not. Resolution No.15-NQ/TW, dated 10 June 2012 of the 5th Plenum of the 11th Tenure "On a number of social policy issues for the period 2012-2020," Resolution No.21-NQ/TW, dated 22 November 2012 of the Politburo "On strengthening Party leadership towards social insurance, health insurance for the period 2012-2020," set the objective of 50% of labor force covered by social insurance. However, this objective is not achieved. The principles of equity, contribution-benefit, sharing and sustainable finance have not been fully grasped; retirement and survivor allowance fund faces long-term imbalance; the policy on unemployment insurance tends to settle consequences of unemployment rather than prevent and minimize unemployment.

The formula of calculating pensions for men and women in public and non-state sectors is unfair; the institutionalization of this principle is slow (the 2014 Law on Social Insurance stipulates that employees in the state sector when retire are entitled to the average of their total social insurance premium payment like other employees in the non-state sector. However, this regulation only applies to those who start social insurance contributions since 2025. Thus, not until 2015 can the first employees in the state sector get their pensions equal to the average of their total premium contributions). There is constraint in implementation. (1)

There are several irrationalities in retirement insurance policy:

1. The duration of social insurance premium payment to get pension if too long (20 years) while conditions for lump-sum social insurance are quite easy, (2) the lump-sum social insurance level is high (3); 2. The formula for calculating pensions is not reasonable, weighing heavily on contribution-benefit, not paying due attention to the principle of sharing to narrow the gap of living standards among pensioners (4); 3. The number of people entitled to retirement and survivor regimes has increased rapidly; the number of new insurers has increased slowly. In 1996, one out of 217 people paying social insurance premiums was pensioner. In 2006 the proportion was 1 over 12.6 and in 2016, 1 over 8.5; the number of people entitled to lump-sum social insurance allowances is high, in the period 2012-2017, it was 628.000 people on average, thus the number of new people participating in social insurance only increased to 594.000 people; i.e., two new people participate in social insurance, another one leaves the system; pension level is high and pension duration is too long in relation to premium rates and payment period.

Life expectancy has increased rapidly, but the retirement age regulated in 1960 has not changed for nearly 60 years, putting pressure on the balance of the Fund.

Unemployment insurance has not really become a labor market management tool. Unemployment insurance policies have focused on overcoming consequences by providing employees with unemployment assistance, vocational training for new jobs, and job introduction. Due attention has not been given to prevention, such as assisting businesses to maintain employment, avoid layoffs, attract long-term unemployed laborers who can hardly find jobs as international practices. (5)

Pensions have not yet been adjusted separately from salaries of working people in accordance with Conclusion No. 63-KL/TW dated 27 May 2013 of the 11th Central Committee on “Some issues on renewal of policy on salaries, social insurance, preferential allowances for people with meritorious services and orientations for reforms up to 2020," and the Law on Social Insurance. Effectiveness and efficiency of state management are still limited. Violation of laws, evasion of social insurance payments and social insurance debts especially in the business sector are quite common, and slowly overcome. There are limitations in the implementation of social and unemployment insurance policies. The management, financial and human resource mechanisms for unemployment insurance are unreasonable, depending on the state budget, not in line with insurance principles and international practices and are slowly amended, thus they have not yet brought into play policy effectiveness. Awareness of a portion of employees and employers about social insurance is insufficient. The communication and dissemination of information on insurance policies and laws are not effective.

There are subjective causes to the above-mentioned limitations and weaknesses.

First, the social insurance policy of Vietnam has just been formulated and developed during the process of transforming the economic model from centrally-planned, and state-subsided to socialist-orientated market economy, while thinking, theory and awareness of social insurance need time to complete; capacity to develop social insurance system is limited. The formulation, completion of social insurance policy is a long time job, while we have just worked on the policy for more than 20 years. Therefore, the development of policies, laws, organizational structure of social insurance is still confusing, inconsistent, and incomplete.

Second, the majority of the Vietnamese employees have been working in sectors without labor relations. Income of the majority of people is low and unstable with high pressure on immediate expenditure. Family-based informal social security network is common. Therefore, many people have not shown interest in participating in social insurance.

Third, there are limitations in capacity building and implementing Party guidelines, and State law on social insurance. Social insurance has not yet been considered as a pillar in sustainable socio-economic development due to incomplete awareness. The ability to analyze, and forecast is inadequate. Reviews of implementation, inspection, supervision and handling of violations have not been well implemented.

Fourth, communication and information on social insurance have not been paid much attention. Insurers’ awareness of social insurance in the socialist-oriented market is limited, especially understanding about the rights and responsibilities of employers and employees on social insurance contribution.

Orientations for perfecting social insurance policy in the spirit of the Resolution of the 7th Plenum of the 12th Tenure (Resolution No. 28-NQ/TW)

After more than 30 years of renewal (1986-2018), Vietnam has got out of underdevelopment status; the country's potential has been greatly enhanced; the tradition of solidarity, mutual help and love have been promoted; international integration have been deepened; Vietnam has gained precious experiences from more than 20-year implementation of social insurance policy. However, the economy still faces difficulties, the state budget is limited; the income of many people remains low and unstable; the labor force in the informal sector is high; several adjustments of some social insurance policies in different stages to ensure the Social Insurance Fund’s sustainability have also created certain irrationalities; the aging population has put heavy pressure on the social insurance system; the Industrial Revolution 4.0 has rapidly changed the structure of labor and labor relations. New situation and conditions are presenting many intertwined opportunities and challenges, requiring the development of guiding viewpoints for reforming social insurance policy.

First, social insurance is a mainstay of social security system in the socialist-oriented market economy. It contributes to achieving social progress and equity, ensuring socio-political stability, people's life and sustainable development of the country.

Second, it is necessary to develop a flexible, diversified, multi-layered, modern, inclusive social insurance policy system engaging in international integration following a roadmap that is suitable to national socio-economic development, harmonizes the principle of contribution-benefit, equity, equality, share and sustainability.

Third, social insurance policy reform is both urgent and long-term. It must harmoniously combine inheritance, stability with innovation and development and must be placed in the relation with the reform and development of other social policies, especially salary, income and social assistance regimes to ensure social security for all citizens.

Fourth, it is necessary to develop a professional and modern social insurance implementation system engaging in international integration to attract and consolidate trust, and satisfaction of people as well as social insurance participants.

Fifth, the implementation of social insurance policy is the task of the entire political system, the responsibility of the party committees, administrations, mass organizations, social organizations, businesses and each and every people.

Based on the guiding principles mentioned above, the overall objective of the social insurance policy reform of our country in the coming time is to make social insurance the main pillar of the social security system, gradually and firmly expand social insurance coverage to all people, develop a flexible, diversified, multi-layered, modern system engaging in international integration in the principle of contribution-benefit, equality, equity, sharing and sustainability, improve management effectiveness and efficiency and implement streamlined, professional, modern, effective, efficient, reliable and transparent social insurance policy.

This overall objective must be concretized into concrete objectives with a implementation roadmap: 1. By 2021, 35% of the labor force in the working age participate in social insurance; by 2025, about 45% and by 2030 about 60%. 2. By 2021, about 45% of the retired people are entitled to monthly, social insurance pension and social assistance (social pension); by 2025 about 55% and by 2030 about 60%. 3. By 2021, the e-transaction rate reaches 100%; online public services stand at level 4. Transaction time between the social insurance agencies and businesses is reduced to the level of ASEAN 4. 4. By 2021, social insurance participants’ satisfaction indicator stands at 80%; by 2025 85% and by 2030 90%.

Theoretical and practical reviews of social insurance development in Vietnam from 1995 to present and results of researches and surveys in Vietnam and other countries as well as comments and opinions of agencies, units, organizations, experts, domestic and foreign scientists have clarified the basic contents of the reform of social insurance policy of Vietnam in the coming time. 1. To building a multi-layered social insurance system. 2. To amend the regulations on the period of minimum social insurance payment for flexible retirement pension entitlement and at the same time adjust the pension calculation formula in the principle of contribution-benefit, equity, equality, sharing. and sustainability; expand compulsory social insurance to other target groups. 3. To strengthen the linkage and support between social insurance policies as well as the flexibility of policies to achieve the goal of expanding coverage. 4. To reform policy formulation and implementation to strengthen trust and satisfaction of participants in the social insurance system. 5. To increase the number of social insurance participants in the informal sector. 6. To modify and correct the irrationalities in the current pension insurance regime towards more flexible pension eligibility, tighter regulations on lump-sum insurance allowances, and increase of the actual average retirement age. 7. To make adjustments to raise the retirement age according to the roadmap. 8. To amend the regulations on the level of contribution and bases for social insurance payments to achieve the goal of expanding social insurance coverage. 9- To adjust the accumulative rate to reach the maximum pension rate in line with international practices. 10. To diversify the investment list and structure of the Social Insurance Fund in the principles of safety, sustainability and efficiency. 11. To adjust pensions relatively independently from salaries of working employees, changing the way pension adjustment towards sharing mode.

Improving social insurance policies’ effectiveness in Vietnam in new conditions

Based on the basic contents of the social insurance policy reform and to achieve the above objectives, in the coming years, following key tasks and solutions should be implemented:

First, strengthen the leadership, direction to communication and information to raising awareness about social insurance policy.

Enhance the role and responsibility of party committees and authorities in communicating and disseminating social insurance policies and law so that cadres, party members and people fully understand the role and significance of social insurance policy in stabilizing people's lives, socio-economic development and ensuring social security, the necessity and basic contents of social insurance policy reform for social consensus.

Second, perfect the legal system on labor, employment and social insurance.

Institutionalization of policies and completion of social insurance policies and laws must be combined with the improvement of policies and laws on salary, employment regimes, policies towards people with meritorious services to the revolution and policies, and law in other related fields.

Revise and supplement the law on social insurance towards social insurance for all people, design a multi-layered social insurance system, improve the regulations on contribution-benefit, ensure the principles of equity, equality, sharing and sustainability. Review and amend regulations on Vietnamese employees working abroad and foreigners working in Vietnam to enforce compulsory social insurance in association with accelerating negotiation and signing of bilateral agreements on social insurance.

Amend and supplement unemployment insurance polices and employment policies to assist businesses and employees to maintain jobs, ensure their legitimate interests, prevent fraud and profiteering from unemployment insurance, develop specific regulation and strict mechanisms to manage the investment in the Social Insurance Fund, ensuring the safe, sustainable and efficient investment in the Social Insurance Fund.

Improve sanctions against violations of the law on social insurance, especially evasion of payment, payment debts, profiteering of social insurance so that the state management agencies of social insurance and management agencies of the Social Insurance Fund have the authority to punish businesses that commit payment social insurance payment evasion, debts, fraud, profiteering. At the same time, employers and employees have the rights to lodge complaints or take legal actions against State management agencies and management agencies of the Social Insurance Fund if there is any error in the implementation of the social insurance policy.

Third, improve the effectiveness and efficiency of state management of social insurance.

Improve the capacity, effectiveness and efficiency of state management of social insurance, especially in planning the development strategy, building and perfecting social insurance law system. Strengthen the coordination among levels, branches and localities in leading and directing the implementation of social insurance policies, promptly handling difficulties and problems.

Improve compliance with social insurance law through implementing synchronously administrative, economic and judicial measures to increase the number of social insurance participants, and the number of beneficiaries of social insurance, especially the retirement regime. Intensify inspection, control and supervision of social insurance legislation observance, promptly detect and strictly handle violations, especially acts of evasion, debts, fraud, profiteering social insurance.

Amend, supplement and perfect legal documents to promote the decentralization of social insurance agencies; assign targets to increase the number of social insurance participants to localities; clearly differentiate the state management with the administration of agencies in charge of implementing social insurance policies.

Strengthen coordination, sharing and connection of information and data among the State management agencies in charge of investment, finance, taxation and labor in order to raise the efficiency of the management of social insurance participants and the implementation of social insurance policy. Build capacity and effectiveness of theoretical research and practical review on social insurance. Develop database on social insurance, indicators for assessment of performance and service quality of social insurance agencies.

Fourth, Enhance the management capacity and effective implementation of social and unemployment policies.

Perfect the organizational structure to implement social insurance and unemployment insurance policies in the spirit of Resolution No. 18-NQ/TW, dated 25 October 2017 of the 12th Central Committee on "Some issues on continuing renovating and rearranging the apparatus of the political system in a streamlined, effective and efficient manner." Complete and raise the operational capacity of the Council for Social Insurance Management. Implement financial, accounting, auditing and reporting on social insurance in accordance with law.

Step up reform of administrative procedures, provide public services on line at level 4 in all areas of social insurance, unemployment insurance, link national insurance database with related database systems to better implement policies and research and policy making. Continue to modernize the social insurance management, invest in technology development and advanced management of social insurance, and unemployment insurance. Prevent fraud, and profiteering of social and unemployment insurance.

Effectively implement unemployment insurance policies, fully promote unemployment insurance, ensuring that it is really a tool for managing labor market. Expenditure for implementing unemployment insurance policies comes from the Unemployment Insurance Fund, not from the state budget. Adopt mechanisms for recruitment, training and retraining of human resources who meet requirements and tasks, especially when labor market changes rapidly and the fourth industrial revolution has transformed the structure of the labor market.

Fifth, strengthen the leadership of the Party, the role of people, the Vietnam Fatherland Front and socio-political organizations.

Strengthen the Party's leadership in policy making and implementation of social insurance policies in line with socialist orientation, especially in increasing the number of social insurance participants and compliance with the social insurance law. Bring into play the role of the Vietnam Fatherland Front, socio-political organizations and people in supervising, criticizing, communication and mobilization of people to implement social insurance policies and laws.

Social insurance is a major policy of the Party and State, the reform of social insurance policy is an important issue, relating directly to people's life. In order to achieve the objectives set out, it is necessary to synchronously carry out the above-mentioned solutions with high political will of the political system in order to make an important contribution to achieving social progress and equity, ensuring political stability and social order and safety for national construction and defense.

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(1) Article 60, Clause 2 of Article 56 and Clause 2 of Article 74 of the 2014 Law on Social Insurance
(2) According to current regulations, employees, after one year's leave, are entitled to lump-sum social insurance.
(3) The lump-sum social insurance allowance in Vietnam is calculated based on contributions of both employees and employer, while in other countries it is calculated only on contributions of employees.
(4) Pensions in Vietnam depend entirely on the past salaries of individual employees. So those having high salaries while working will receive high pensions when they retire, and vice versa. By the end of 2017, the highest monthly pension in our country was over VND100 million and the lowest monthly pension is VND 1.3 million . Pensions in some countries, such as South Korea and China, are calculated based on employees’ salaries and salaries of people of the same generation. This helps those people getting low salaries during their working time have a better pensions when they retire.
(5) Other countries’ unemployment policies support businesses to maintain jobs, avoid layoffs, recruit unemployed people who can hardly find jobs for a long time, recruit new employees in areas with high unemployment rate to reduce unemployment; and policies support the unemployed to receive unemployment allowances, vocational training, job conversion. Combining prevention, mitigation and settlement of unemployment consequences is the common goal of unemployment insurance policies of other countries. The problem of unemployment can not be solved without the participation of businesses.

This article was published in the Communist Review No.912 (October 2018)

Prof. Vuong Dinh Hue, PhDMember of Politburo, Deputy Prime Minister