>>Social insurance under Vietnamese law
>>Major principles of the law on social security
Pham Diem
State and Law Institute of Vietnam
As Vietnam is developing a market economy in general and a labor market in particular, unemployment insurance has become an important form of social insurance, directly contributing to the cause of economic and social-security development.
Together with other forms of social insurance, it has contributed to creating a “safety net”, assisting and protecting employees whenever they face difficulties in labor relations. Unemployment insurance not only helps them stabilize their lives but also create opportunities for them to continue participating in the labor market. It, on the one hand, functions as a measure to address unemployment and, on the other hand, is a social policy aiming to ensure social security.
For employers, thanks to the unemployment insurance regime, they do not have to spend large amounts of money on settling regimes for laborers who lose their jobs. Hence, the financial burdens of enterprises will be shared, especially in the period of economic woes when their production scales down and many employees are laid off. Moreover, when participating in unemployment insurance and knowing clearly their right to enjoy allowances upon unemployment, employees will work for higher productivity, contributing to increasing profits and employment efficiency of enterprises.
Since unemployment exists in any country, the settlement of unemployment always constitutes an important issue in social policies of the State. With unemployment insurance, state budget expenditures on unemployment allowances, particularly in the period of economic recession with increasing numbers of unemployed laborers, will shrink, thus helping the State ensure the financial balance in its activities. With unemployment allowances, the ties between employees and employers as well as the State become less tense, labor strikes are limited and socio-political stability is ensured.
For such a developing country like Vietnam, the unemployment insurance regime plays an important role in maintaining economic stability, thus contributing to limiting negative impacts of the market economy.
In Vietnam, the unemployment insurance law appeared very early. Immediately after the victorious August 1945 Revolution, the Democratic Republic of Vietnam state promulgated a number of regulations on allowances for laborers who lose their jobs. Decree No. 1 of October 1, 1945, issued by the then Ministry of Labor was the first legal document dwelling on allowances for sacked laborers. Later, on March 12, 1947, the President promulgated a decree providing that employers had to pay seniority allowances to workers upon their dismissal. On May 20, 1950, the President signed a decree providing that public servants were entitled to allowances when they left their jobs. On October 1, 1964, the Premier issued a circular prescribing the job discontinuation allowance for workers and public servants. This was considered a legal document fully and comprehensively prescribing the allowance regime applicable to unemployed laborers
Panoramically, in the pre-“doi moi” (renewal) period, the unemployment rate was very low due to the facts that most Vietnamese worked as peasants and lived in rural areas, the country was in prolonged wars and the national economy was composed mainly of the state sector and the collective sector. Therefore, legal documents on unemployment insurance remained very few and lacked adequate and comprehensive provisions on unemployment insurance.
Yet, since Vietnam shifted to a market economy with the emergence of a labor market, unemployment and unemployment insurance have constituted an important domain in social policies.
Upon the practice of new mechanisms of a market economy, state-run enterprises had to reorganize their production and business activities, resulting in large numbers of laborers losing their jobs or transferred to other economic sectors. The unstability of the labor market at its initial stage also caused big changes in employment, thus prompting the State to adopt appropriate policies to assist laborers. As a result, a series of legal documents on this matter were promulgated, of which the most noteworthy were Decision No. 227 of December 29, 1987, of the Council of Ministers (now the Government), on payment of job discontinuation allowances to laborers who voluntarily leave their jobs; Decision No. 176 of October 9, 1989, of the Council of Ministers, providing for job discontinuation allowances for redundant laborers in state-run enterprises after their production reorganization and labor re-arrangement and Decision No. 315 of June 2, 1990, of the Council of Ministers, prescribing the unemployment allowance regime applicable to laborers in dissolved state-run enterprises. These documents helped mitigate difficulties for unemployed laborers and spelt out a number of measures to create jobs for them, protecting their interests and confirming many basic theoretical issues for subsequent formulation of the unemployment insurance regime.
Especially since the Vietnamese State promulgated the Labor Code, then the Social Insurance Law, unemployment insurance institutions have been formed and more comprehensive, covering such key contents of unemployment insurance as job-loss allowance, job discontinuation allowance, allowance applicable to redundant laborers in reorganized state-run enterprises, subjects and scope of unemployment insurance application, conditions for enjoyment of unemployment insurance and unemployment insurance fund.
The current law on unemployment insurance regime in Vietnam is characterized by the following basic principles:
First, the unemployment insurance regime is the combination between the temporary allowance regime and the job-creation regime for laborers aiming to compensate for laborers’ incomes when they lose their jobs and to engage unemployed laborers in the labor market through different measures. So, unemployment insurance has two functions, that is to pay unemployment allowances and to promote employment for laborers. The harmonious combination of these two functions is considered a basic principle as and a guideline for all unemployment insurance activities.
In order to effect this principle, apart from prescribing unemployment allowance levels, conditions and periods for enjoyment of unemployment allowances, the unemployment insurance must apply measures to create opportunities for laborers to return to the labor market (provision of information on the labor market, vocational re-training, employment brokerage, support for enterprises which admit unemployed laborers). In the protection of interests of unemployed laborers, it is more significant to assist them in finding new jobs than to provide them with unemployment allowances. Therefore, preferential policies towards enterprises which create jobs for unemployed people are needed. Unemployment allowance only constitutes a temporary solution while job finding and creation with stable incomes for laborers constitute a sustainable solution.
Second, unemployment insurance must, one the one hand, compensate for unemployed laborers’ incomes, and, on the other hand, create a positive motive for them to return to work. Moreover, unemployment allowance levels should not be too low but at least can ensure minimum daily-life expenditures for unemployed persons when they cannot find new jobs yet.
Unemployment allowance levels must also encourage laborers to actively seek new jobs in order to get themselves out of unemployment. This is the difference between unemployment allowances and common social insurance allowances. If unemployment allowance levels are high and the unemployment allowance enjoyment duration prolongs, a psychology of relying on unemployment allowances will be created among unemployed laborers, making them easily accept the state of unemployment to enjoy social allowances. To address this situation, the unemployment allowance duration should be rationally prescribed to be long enough for the unemployed to find new jobs or take vocational re-training and unemployment allowance amounts should be enough for them to temporarily cover their minimum living costs, compelling them to actively find new jobs with incomes higher and more stable than unemployment allowance amounts.
Third, the unemployment insurance fund is created on the principle of tripartite liability, involving the employee, the employer and the State.
For employees and employers, unemployment insurance contributions are their duty, stemming from its importance and great significance to the involved parties. This is the concretization of the principle of risk sharing in the implementation of the unemployment insurance regime. Such contributions constitute a basic and stable source of revenue and a financial source to support unemployed laborers.
In addition to compulsory contributions of parties to labor relations, the State provides necessary supports for the unemployment insurance fund, which can be fixed amounts periodically transferred from the state budget into the unemployment insurance fund or transient amounts supplied when the unemployment insurance fund sees a financial imbalance (usually in the period of economic recession or inflation).
So, the guideline on the formation of the unemployment insurance fund is maintenance of regular compulsory contributions of parties to labor relations in combination with state budget supports, aiming to create a stable financial source for unemployment insurance.-