Effective measures to improve the efficiency of mobilizing social insurance financial resources in Vietnam.
On the policy of using social insurance financial resources:
Some regulations are still unreasonable and complicated in implementation, such as the level of sick leave benefits in case of illness requiring long-term treatment within 180 days is 75% of the salary and wages paid for social insurance in the month immediately preceding the leave, then if treatment continues, the benefit is at a lower level. The current Law on Social Insurance only stipulates the level of sick leave benefits per month, there is no regulation on the level of sick leave benefits per day...
The Law on Social Insurance has stipulated the conditions for receiving benefits for occupational accidents, however, in some cases it is still not clear whether they are considered occupational accidents or not, such as self-harm, use of drugs, other addictive substances contrary to the provisions of the law, etc.
The current retirement age is low compared to the trend of increasing life expectancy and the risk of losing the ability to balance pension and death funds. The regulation that the retirement age of female workers is 5 years lower than that of male workers does not ensure gender issues, and is not reasonable in the context of increasingly developing socio-economic conditions and the pressure of population aging. This regulation is not consistent with the United Nations Convention on the Elimination of All Forms of Discrimination Against Women (CEDAW), which identifies national responsibilities in amending and supplementing legal documents to ensure the elimination of discrimination against women. Regarding the conditions for receiving pensions, it is necessary to review the regulations on retirement age for female workers to ensure greater equality and fairness as well as create conditions for female workers to continue working and increase their income; more specifically, to ensure the balance of pension and death funds.
Some cases of early retirement are resolved due to the integration of social insurance policies with other policies such as labor policies, business arrangements, etc., which directly affects the revenue and long-term balance of the Social Insurance Fund.
There is also a large difference in the level of benefits between the lump sum benefit and the monthly benefit, creating unfairness among beneficiaries of this regime. This inadequacy often occurs for relatives of monthly benefit recipients with a very short benefit period (children about to reach the age of receiving benefits, parents are too old, weak, etc.); meanwhile, if they receive a lump sum benefit, their benefit level is much larger.
Compared with the provisions of Convention 102 of the International Labor Organization, the level of social insurance benefits in our country is still high.
Table 3.20: Comparison of provisions in Convention 102 with the Vietnam Social Insurance regime
Regime
Convention 102 | Vietnam | |
Sick | 45% | 75% salary, benefit period from 30-50 days/year |
Maternity | 45% | 100% salary, benefit period from 4-6 months |
Retirement | 40% | 75% of average salary, 30 years of social insurance contributions for male workers, 25 years for female workers. |
Death | 40% | 50%-70% of base salary/per portion, no more than 4 portions |
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Source: Convention 102, International Labor Organization, Social Insurance Law 2006, 2014
In some countries, in general, the level of social insurance benefits is around the level stipulated in Convention 102 and is lower than in our country. For example: the sick leave benefit in Thailand is 50% of salary; the maternity benefit is 50% of salary for 90 days; in France: the retirement benefit is 50% of salary; for maternity benefits, some countries apply a subsidy of 90-100% of salary such as: France 90% of salary, Germany 100% of salary,... This is a big problem affecting the balance of the social insurance fund and affecting the fund's investment capital. Therefore, Vietnam Social Insurance needs to soon study and propose to adjust the level of benefits of some regimes to correspond to the level of social insurance contributions.
Compared with the standards in Convention No. 102 (1952) of the International Labor Organization, our country is applying 7/9 social insurance regimes according to the standards. There are 2 regimes that have not been implemented: family allowance and permanent disability allowance.
In short, besides the results achieved in social insurance payment
However, this activity still has certain limitations in both policy mechanisms and implementation, requiring the social insurance industry to research, improve and find effective measures to make social insurance payments more and more effective.
On the policy of investment to increase the social insurance fund:
- In 2016, the amended Law on Social Insurance came into effect, however, the guiding documents as well as the coordination regulations in providing a list of well-performing banks between the State Bank and Vietnam Social Insurance have not been issued yet, which has somewhat affected the investment activities of Vietnam Social Insurance in 2016.
- The fields in which the Social Insurance Fund is allowed to invest are not diverse, and the structure is not reasonable (the proportion of lending to the State Budget and purchasing Government Bonds accounts for a large proportion), so the investment efficiency is not high;
- Although the rate of return from social insurance fund investment activities has improved, the efficiency of social insurance fund investment is not high. There are years when the rate of return is lower than or equal to the inflation rate, making it more difficult to preserve and develop the social insurance fund sustainably.
- Implementing the direction of the Management Board, the Social Insurance Fund mainly focuses on lending to the State Budget and purchasing Government Bonds. However, due to the long loan term (10 years) and not expanding to other forms of investment with higher profits, the fund's profitability has not been fully utilized, and at the same time, it affects the fund's ability to balance in the long term;
On social insurance fund balancing policy:
The retirement age is relatively low, especially the retirement age for special groups such as the armed forces, leading to low insurance payment time but long pension period.
Although legal regulations have expanded the number of people participating in social insurance, in reality, the coverage rate is only about 80% compared to the number of people eligible for social insurance.
participating in compulsory social insurance and over 20% of the workforce, the rate of increase in participants is slowing down, the sustainability of the Fund - viewed from the balance of revenue and expenditure in the long term - is also posing many issues that need to continue to be concerned and resolved on both the policy and law enforcement levels. Up to now and forecast in the near future, the Vietnam Social Security Fund continues to balance revenue and expenditure and has a surplus. However, the current surplus of the Social Security Fund is not sustainable because the increase in revenue in the past period is mainly due to policy factors. Since the promulgation of the Social Insurance Law in 2006, the subjects participating in compulsory social insurance have been expanded and have high legality, at the same time the birth of the voluntary social insurance system has contributed significantly to the rapid increase in the number of social insurance participants and social insurance revenue. In addition, in the period 2007 - 2014, the Social Insurance Law has specifically stipulated a roadmap for increasing the social insurance contribution rate, contributing to increasing the revenue of the Social Insurance Fund. Meanwhile, the number of people receiving social insurance benefits has not changed much because the cycle of the social insurance policy is relatively long.
3.3.4. Causes of limitations
3.3.4.1. Objective causes
- Awareness of employees and employers in our country about social insurance is still limited, they do not know or do not fully understand the nature and role of social insurance policies in the lives of employees and society. Meanwhile, the work of propaganda and dissemination of social insurance policies and laws has not received due attention and is not very effective.
- Employers' awareness of complying with the law on social insurance is still low, and they do not care about the obligations and rights of employees. Meanwhile, employees are afraid of losing their jobs so they do not dare to make demands.
- The labor force working in the informal sector is relatively large. Most cooperatives, individual business households, etc. operate production and business activities in the form of households, self-employed, self-accounting, and using labor by day labor, without signing labor contracts and not paying attention to social insurance obligations and benefits for employees.
- The financial investment environment in our country is not favorable because the stock market is still young. Financial market instruments are limited in quantity, maturity and type. The real estate and lending markets have high potential risks.
3.3.4.2. Subjective causes
- Some regulations of the Social Insurance Law are not strict, systematic, and have been amended and supplemented many times, creating complex loopholes that lead to abuse. In the current social insurance policy system, some regulations are not reasonable, do not strictly ensure the principle of benefit level based on contribution level, social insurance contribution period and sharing among social insurance participants, the fund has to pay more than the possible collection level.
- The current social insurance financial mechanism has the potential to be unbalanced in the long term. The characteristic of this mechanism is that when employees participating in social insurance reach retirement age, they will receive a subsidy paid by the pension fund. However, this fund uses the contributions of current insurance participants to pay off debts for the above-mentioned subjects who have passed the working age. On the positive side, this mechanism has created a close connection between successive generations of workers, clearly defining the responsibility of the next generation to the previous generation through the use of pension payment funds. On the other hand, this mechanism causes psychological instability for employees currently participating in the labor market, because their contributions are being used to pay subsidies for subjects who have passed the working age, while the number of people who have reached the working age and will participate in the hybrid labor market tends to decrease gradually (due to the impact of population decline). Thus, in the future, the number of people past working age is likely to be much larger than the number of people currently working. The increasingly rapid aging of the population will certainly put financial pressure on the social insurance fund in general and the pension insurance fund in particular.
- The basis for collecting social insurance premiums and the level of social insurance premiums are not yet suitable to reality.
- The pension benefits are designed to be differentiated by gender and economic sector.
- The pension rate for early retirees is calculated at only 45% of the average monthly salary for social insurance contributions as prescribed in Article 62 (Social Insurance Law 2014) corresponding to 15 years of social insurance contributions, then 2% is added for each additional year, the maximum level is 75%, which encourages workers to retire early. This situation leads to the actual retirement age being lower than prescribed, the social insurance contribution period being short while life expectancy tends to increase and the pension period is prolonged.
Setting the lowest pension level equal to the general minimum wage is also unreasonable for those with low contributions and short participation periods.
The Social Insurance Fund is also responsible for paying for a number of other social policies such as for some early retirees due to staff reduction and surplus labor due to business restructuring, creating great pressure on the Social Insurance Fund's payments.
- The penalty level is still low for some acts of appropriation, delay, and evasion of social insurance payment. On the other hand, the fine level for violations of social insurance law according to regulations is still low. Therefore, many enterprises intentionally owe, delay social insurance payment and accept the penalty to appropriate social insurance payment money. In addition, compliance with social insurance regulations is still low, reflected in the fact that the social insurance payment salary of employees in the non-state sector is often much lower than the actual salary and there is currently no sanction for this violation.
- The backwardness of wage and income policies has not created favorable conditions for the official sector's social insurance policy. The current income policy is still backward and has not been innovated to suit the new mechanism. Current real wages are not enough to pay for the value of labor, and are still low, making the lives of wage earners difficult. The complex design of salary scales, tables, ranks, and allowances and allowance regimes does not ensure fairness and is heavily egalitarian, creating inequality between occupations and regions. If wages are used as the basis for social insurance contributions, fairness among participants will not be ensured.
- Fund investment activities are still unprofessional and slow to innovate, investment capacity is still limited. An investment strategy with reasonable asset allocation in the long term has not been developed. There is no professional investment management system, no in-depth investment management experience and no system to monitor the investment efficiency evaluation process.
- Lack of financial risk management infrastructure (database, risk assessment tools for each form, investment portfolio including equipment used) and lack of staff knowledgeable in this field.
- Internal inspection, supervision and audit work has not met management requirements; there is no mechanism for people to participate in supervising social insurance management activities.
The management of social insurance revenue and expenditure by the social insurance implementation apparatus still has many limitations and weaknesses. The management of labor, salary, wages, income, household registration and residence registration of employees and their relatives by some agencies, units and local authorities is not strict. The social insurance sector has not been able to manage a centralized database. Information technology has not met the requirements of social insurance management and has not served the purpose of comparison and control before settlement. Regarding the subjects currently receiving monthly social insurance benefits, due to the low security of management software, there is a potential for abuse and no measures have been taken to prevent it.
CONCLUSION OF CHAPTER 3
In chapter 3, the researcher presented an overview of the formation and development of Vietnam Social Security, the position, functions, organizational structure and management of Vietnam Social Security. In addition, in this chapter, the researcher focused on analyzing the financial policy of Vietnam Social Security in the period of 2011-2016 in 4 aspects: Social Security financial resource mobilization policy, Social Security financial resource use policy, Social Security fund growth investment policy and Social Security fund balancing policy.
The assessments drawn in this chapter are as follows: Basically, the legal regulations on the above 4 policies are all specified in legal documents and are relatively appropriate. Only a few provisions are not yet reasonable when implemented in practice. The policy of mobilizing social insurance financial resources has ensured an increase in annual revenue, but the situation of outstanding debts and the target number of participants have not yet been achieved compared to the target. The policy of using social insurance financial resources has solved the problem for many subjects, although the cost of social insurance management has increased, it has contributed to resolving procedures for beneficiaries more quickly than before. Although the policy of investing in fund growth has been improved, the investment efficiency is still relatively low. The current policy of balancing social insurance funds is still good, but in the long term, solutions are needed to ensure the balance of funds such as pensions, sickness, and maternity.
Although the social insurance financial policy has had many positive changes, in reality there are still certain shortcomings. Comprehensive assessments of the achievements as well as the limitations of the Vietnam Social Insurance financial policy in the period 2011-2017 are the basis for the researcher to propose solutions in chapter 4.