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Official Gazette

Tuesday, June 6, 2023

Problems in introducing unemployment insurance

Updated: 09:48’ - 11/02/2010

Mai Thi Huong, MA
Insurance Department
Labor and Social Affairs University

In a market economy, especially in the context of the global recession, nobody can feel too shocked at news of the increasing unemployment rates worldwide. How to implement unemployment insurance is not an easy aspect of realizing social security policy and seeking solutions to the emerging problems in the implementation of unemployment insurance in Vietnam is of concern to businesses, laborers and the State.

Unemployment insurance is a measure to provide financial support for the unemployed and create opportunities for them to quickly re-enter the labor market through training, retraining and employment placement centers. Unemployment insurance aims at sharing risks and easing the burden on the state budget and businesses through sharing contributions between laborers and employers and the State’s financial support.

Under Clause 3, Article 2 of the Law on Social Insurance, unemployment insurance is compulsory for laborers who are Vietnamese nationals working under labor or working contracts of a term of 12-36 months or an indefinite term, including those recruited to work in state non-business units before the effective date of Government Decree No. 116/2003/ND-CP of October 10, 2003, providing for the recruitment, use and management of cadres and civil servants in state non-business units (Decree 116).

Employers required to participate in unemployment insurance include state agencies, foreign agencies and organizations and international organizations operating within Vietnamese territory; businesses, cooperatives, private business households, cooperative groups and other entities and individuals employing 10 or more workers.

Workers pay unemployment insurance premiums equal to 1% of their monthly salary. Employers contribute 1% of the monthly salary. In addition, the State also provides budget support equal to 1% of the monthly salary fund, paid into an unemployment insurance fund.

The Law’s provisions on unemployment insurance took effect on January 1, 2009. So far, a number of guiding documents have been issued, including Government Decree No. 127/2008/ND-CP of December 12, 2008, detailing and guiding a number of articles of the Law on Social Insurance concerning unemployment insurance (Decree 127); Ministry of Labor, War Invalids and Social Affairs Circular No. 04/2009/TT-BLDTBXH of January 22, 2009 (Circular 04), and Circular No. 07/2009/TT-BLDTBXH of October 16, 2009 (Circular 05) guiding a number of articles of Decree No. 127/2008/ND-CP; Ministry of Finance Circular No. 96/2009/TT-BTC of May 20, 2009 (Circular 96) guiding the financial regime applicable to unemployment insurance funds; and Vietnam Social Security Official Letter No. 1615/BHXH-CSXH and Official Letter No. 2035/BHXH-CSXH of June 26, 2009, guiding the collection and payment of unemployment insurance.

According to Vietnam Social Security (VSS) figures, as of January 14, 2010, the number of workers joining in unemployment insurance was over 5.4 million. Corresponding to this number of workers, collected unemployment insurance premiums reached about VND 3 trillion (including state budget funding of 1%).

Under Article 15 of Decree 127, the conditions for enjoying unemployment insurance benefits include having paid insurance contributions for full 12 months or more within 24 months before losing jobs or terminating labor contracts under the labor law or terminating working contracts under the law on cadres and civil servants; having registered job loss or contract termination with the labor agency; and finding no job after 15 days from the date of registering with the labor agency.

After one year’s implementation of unemployment insurance, several problems have emerged.

First, according to reports from the employment placement centers, from January 4 to January 14, 2010, 3,515 workers had registered themselves as unemployed. Of 592 workers who had submitted complete dossiers for a claim of unemployment insurance payments, 298 had been identified as eligible. The levels of unemployment insurance payments have been proposed to the directors of provincial-level Departments of Labor, War Invalids and Social Affairs for decision.

The problem here is that, before Decree 116 took effect, a relatively large number of civil servants were recruited under decisions of competent state authorities without signing any working contracts. As a result, these persons have insufficient grounds for contributing to unemployment insurance.

Second, under the Law on Social Insurance, within seven days after losing their jobs or terminating their labor contracts, workers are required to register their unemployment. No later than 15 days afterwards, they must submit complete documents to claim unemployment insurance payments. As such, they have a total of 22 days for completing their records. Failing to make registration within this time limit would mean a refusal of unemployment insurance. Making registration in time is not easy because in order to prove their unemployment, they must produce a sacking decision. In large labor-intensive companies, sacked workers  sometimes have to wait for up to one month to receive their sacking decisions. In not a few cases, when laborers gave up their jobs or had their labor contracts unilaterally terminated or were sacked, their employers did not issue any decisions or give notes on their employment in their social insurance books. Workers have the right to lodge a complaint requesting their employers to issue such decisions, but would take more than seven days to have any such complaint settled.

Third, no unemployed workers have received unemployment insurance payments so far. Apart from the problems mentioned above, eligible persons must come to receive insurance payments at a place designated by the social insurance agency. As regulated, workers who work and pay insurance premiums in a province or city must register their unemployment at the employment placement center under the Department of Labor, War Invalids and Social Affairs of this province or city. Only after so doing can they register to receive unemployment payments in the locality where they live. This would pose a difficulty to workers who want to seek jobs in one locality while still receiving unemployment allowances in another.

Another problem is that, under regulations, workers who twice refuse to take jobs recommended by an employment placement center without a plausible reason are not allowed to receive unemployment payments. Nonetheless, Decree 127 and Circular 04 do not yet provide a definition of a plausible reason for declining jobs recommended by employment placement centers.

Fourth, Government Decree No. 94/2008/ND-CP of August 22, 2008, defining the functions, tasks, powers and organizational structure of Vietnam Social Security, provides that unemployment insurance is jointly implemented by two agencies. The Ministry of Labor, War Invalids and Social Affairs is responsible for performing state administration of unemployment insurance and also in charge of employment placement and vocational training for the unemployed. Vietnam Social Insurance has the tasks of collecting, paying and managing the social insurance funds and implementing unemployment insurance policies. This provision has caused a problem in coordination work, especially in the sharing of information on re-employment and payment of insurance allowances which is separately managed by the Ministry and Vietnam Social Security respectively.

Finally, it is not only workers who receive practical benefits from unemployment insurance. Employers also enjoy indirect benefits from this policy. However, the obligation of both workers and employers to pay insurance contributions is not yet closely linked with their interests. This is a reason why businesses tend to delay payment of social insurance premiums. For workers, apart from receiving unemployment payments, the policy also makes clear that they are also entitled to vocational training and support for seeking appropriate jobs. Yet, the criterion ‘appropriate’ has hindered the effectiveness of the policy. Can workers, after having become unemployed, recognize the differences between jobs they want to do and jobs suitable to their skills? what are their rights to receive job counseling, or to apply for and register their aspirations for future jobs? and what role do functional agencies play in planning and arranging human resources to prevent their relapse into unemployment? These questions are still not answered.

Employers realize other benefits from this policy, including a lighter burden of paying severance allowances. What is their role in coordinating with employment placement centers? Enterprises are likely to find good employees through this method, but no mechanism exists for such coordination.

To be perfected, any policy needs to have a period of implementation and revision to suit the practical situation. The unemployment insurance policy is in this period. Unemployment and sacking are undesirable for both workers and employers. Therefore, there should be a positive view on the issue of unemployment insurance in the best interests of all parties concerned.-


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