18 Month REVIEW and Evaluation of UI Program in Vietnam 19 October 2011 Celine Peyron Bista ILO Regional Office for Asia and the Pacific Report prepared by John Carter

Purpose of the 18 Month Study Objectives Analyse priority operational and design issues; Provide technical assistance to BoE for quality assessment; Assess applicability of possible solutions, learning from international practises; Enhance the understanding of MoLISA officials and other stakeholders on the proposed alternatives. Methodology Evaluation team : BoE and VSS officials, led by Mr. John Carter, consultant for the ILO. Tripartite consultations, field visits, Hao Binh workshop (18 August 2011).

Finding #1: Decision Making on UI Eligibility and Benefits Calculation Finding: UI workflow ESC / DoLISA still too complex ESC >> assesses, calculates and prepares a recommendation to allow UI benefits; ESC Director >> initials the recommendation; DoLISA Director or Deputy Director >> signs the recommendation – with no knowledge of the UI claimant’ files; Unnecessary delays: claim decisions are sent physically between offices; also issue of security of information

Finding #1: Decision Making on UI Eligibility and Benefits Calculation Proposed solutions: Signing final UI decision: Short term: send a list of approved unemployed claimants to DoLISA Director instead of actual claim dossier; Long Term: allow ESC Director to sign final decision of UI payment replacing DoLISA Director; Long Term: Delegate final decision on UI payment to competent ESC senior staff.

Finding #2: UI Benefits Payment Finding: Inconveniency for the unemployed to register in ESC and receive benefits from PSI office; ESC has no access to payment information. PSI offices >> process payment - extensive network down to the commune level; In Ho Chi Minh City ESC: -Payments via bank accounts; -Assistance from a bank representative (free of charge): close collaboration ESC/ PSI/ bank >>> simultaneously the unemployed worker receives the UI decision, HI card and ATM card in the ESC; In other ESCs, lack of services/assistance to guide unemployed workers among the different offices responsible for UI registration/ payments. unnecessary travels between PSI and ESC.

Finding #2: UI Benefits Payment Proposed Solutions: Short Term: 1) PSI allocate one representative to the front end of ESC; 2) feasibility study to determine: -staffing, financial, administrative implications of ESC in charge of UI payments, & -linkages between two agencies databases (national transfer of UI claims).

Finding #3: UI Coverage and Collection of Contributions A) Finding: coverage still excludes some groups Only employers with a minimum of 10 employees before employment are considered insurable; Only workers who have contracts for at least 12 months are covered; Coverage of public servants v.s. public officials is still unclear; Only wage earnings are insurable which does not include overtime, bonus, etc.

Finding #3: UI Coverage and Collection of Contributions Proposed Solutions: Eliminate the 10 employees size requirement; Include workers with 3 to 12 month term contracts; Include all public servants (except for elected); Consider full salary including bonuses and overtime pay as insured earnings.

Finding #3: UI Coverage and Collection of Contributions (Continued) B) Finding: Need to strengthen collection activities, and to protect employees against non paying employers. 80% of employers pay on time; 20% are mainly smaller to medium sized businesses (30% in Da Nang); many unemployed workers can not apply for UI benefits; workers are penalized for employers failing to remit payments.

Finding #3: UI Coverage and Collection of Contributions Proposed Solutions: If employers’ failure, immediate investigation to be conducted by DoLISA Inspection and Control; If contract termination and premiums not paid, the unemployed worker should be allowed to file his/her UI application: employment should be deemed insurable; Increasing substantially penalties to employers.

Finding #4: Inspection and Control Directorates Finding: lack of initiative and capacity to deal with delinquent employers Insufficient staff in DoLISA Inspection and Control Unit (ICU); ICU needs approval of Provincial People’s Committee to proceed with investigations of employers and imposition of administrative penalties; No procedures in place for ESC staff to refer suspected cases of fraud and abuse of UI fund to ICU;

Finding #4: Inspection and Control Directorates Proposed Solutions: Short Term: -Develop manual procedures for ESC to refer cases of suspected fraud and abuse of UI fund to ICU; -keep statistics on results of investigations; Long Term: Possible establishment of ICU within ESC.

Finding #5: Voluntary Quitters Finding: Many workers voluntarily terminate their contract to collect the lump sum payment ILO Conv. No.168 : protection is against involuntary unemployment such as lack of work or restructuring by employer; Create incentive to terminate job and receive full UI while voluntary changing job (unskilled workers); Sustainability of fund put in jeopardy; Viet Nam Labour Code distinguish quitters, involuntary job loss and misconduct (provision governing severance payments); Virtually consensus that reduction or suspension of UI benefits should be imposed for voluntary quitters and those fired for misconduct;

Finding #5: Voluntary Quitters Proposed Solutions: Short Term:  BoE should capture data on the reason for separation; Medium Term: New provision in UI act to reduce/deny benefits to those who quit their position without good cause or are fired because of their own misconduct; Develop policies and mechanisms (sufficient human and financial resources) to conduct fact-finding.

Finding #6: Lump Sum Provisions Finding: Lump sum payments could be a drain on UI funds in future; From January 2012, the duration of UI increased to 6 months (36 to 71 months of insurable employment); Such a provision might create an incentive to voluntary quit to eventually receive lump sum;

Finding #6: Lump Sum Provisions Possible Solutions: Eliminate the lump sum provisions in the UI act; Implement new activation measures to facilitate quick return to employment: -Ex from Korea: additional allowance if return to work within the first month after contract termination; -Replace the lump sum by some subsidies for commencing self- employment business.

Finding #7: Social Insurance Book Finding: Since June 2010 review, improvements have been made to eliminate delays in issuing SI Book. Noticeable improvements in issuing SI Book; Some ESCs use a temporary report to speed up the process of applying for UI benefits; Yet, incompatibility PSI/ESC databases.

Finding #7: Social Insurance Book Proposed Solutions: Agreement VSS and BoE to connect the two systems as early as possible; Need to conduct a feasibility study; This would allow electronic sharing of premium information and eliminate need for SI book; If no agreement, utilizing some form of Record of Employment to be completed by employer in future; Concern regarding mistakes by employers.

Finding #8: Monthly Reporting for Job Seeking Activities Finding: Larger ESCs staff overwhelmed with monthly reporting For examples, HCMC: average 1,800 unemployed workers reporting monthly (concentrated on the first half of the month); In 2012 due, significant increase due to application of those contributing 36 to 71 months of insurable employment (6 month entitlements);

Finding #8: Monthly Reporting for Job Seeking Activities Proposed Solutions: Short Term: Unemployed workers to report on specific days (e.g. alphabetical); Extend period for unemployed workers to report to ESC; Streamline interview process; Exempt workers reporting in last month of entitlement; Medium Term: Create UI computer program to capture results of monthly interviews; Establish a telephone unit to deal with rural workers who travel long distances to ESCs.

Finding #9: Filing/Archiving UI Dossiers Finding: problems with constantly locating files due to number of dossiers and number of required documents Need to locate UI dossier several times during processing of UI claims; Multiplication of forms; No procedures (no unification) for archiving UI dossiers;

Finding #9: Filing/Archiving UI Dossiers Proposed solutions: Short Term: Draft national procedures for UI dossiers filing and archiving; Develop computer system to identify dormant claims (after 2 years from start date of UI claim); Long Term: Develop national identifier; Rely fully on electronic file with scanning capabilities for paper documents; Identify dormant claims (over 12 years) for destruction.

Finding #10: Vocational Training Finding: Minimal numbers of unemployed workers approved for UI payment attend vocational training courses. First 2011 semester, only 534 unemployed workers attended vocational training (0.2% of unemployed workers approved to receive UI); Reasons from one year BoE report: -Still a high demand for lower skilled workers in the labour market (no demand for training); -Vocational training and courses not attractive (too short, low quality);

Finding #10: Vocational Training Proposed Solutions: Long Term: Extend UI to cover full length of training (irrespective of receiving monthly UI allowance prior to the training start date); Extend duration of trainings to 12 months, when relevant; Consider additional funding for higher level of trainings.

Finding #11: Other Issues Insufficient appeal mechanisms; Need to reinforce Quality Control Program; Training of Newly Hired ESC Staff; Enhancements to ESC computer system for administration of UI claims; Difficulties in retaining ESC staff (larger ESCs); Need to pursue awareness and information campaigns.

Way forward There is still some room to improve the UI operations and extend UI coverage; Need to reinforce employment promotion and employability programs of the UI scheme (towards an EI scheme?) Need to look at the legal implications of the proposed solutions (reference to the ILO standards).