1. WORKSHOP ON THE CHAPTER OF EMPLOYMENT INSURNANCE UNDER EMPLOYMENT LAW Revision of the Unemployment Insurance legislation of Vietnam – Issues for considerations Emmanuelle St-Pierre Guilbault Legal Specialist Social Security Department International Labour Office, Geneva Hanoi, 19 October 2011

2. Basis of ILO Advice  ILO social security standards  Social Security (Minimum Standards) Convention, 1952 (No. 102)  Employment Promotion and Protection against Unemployment Convention, 1988 (No. 168)  Employment Promotion and Protection against Unemployment Recommendation, 1988 (No. 176)  Findings and Recommendations of the 18-Month Review Report on the Vietnam UI Scheme, based on tripartite consultations  International experiences on the development of UI/EI 1

3. Legal review – main issues for consideration Short-term priorities 1.Extension of UI coverage to all employees with at least 3-month contract (including those working in establishments of less than 10 workers and public servants) 2.Suspension of entitlement to UI benefit when unemployment due to wilful misconduct/worker has left employment without just cause 3.Adoption of a legal definition of “suitable employment” 4.Extension of the registration period 5.Change in attribution of decision-making competence in respect of claims (UI eligibility and benefits calculation) 2

4. Legal review – main issues for consideration Medium-term priorities 6.Failure by the employer to pay contributions due in respect of a worker should not affect the worker’s entitlement to UI benefit 7.Widen the legal definition of insurable earnings to include bonuses and overtime pay 8.Termination (or reduction) of UI benefit when the contingency of unemployment comes to an end because the person has found work 9.Establish responsibilities among agencies 10.Reinforcement of prevention, investigation, monitoring and enforcement mechanisms 3

5. Legal review – main issues for consideration Other priorities 11.Extension of payment of UI support during periods of vocational training 12.Modification of appeals procedure: creation of an independent and objective board of appeals 13.Introduction of a record of employment to complement/replace SI book 14.Cross-cutting issue: ensure consistency with existing legislation (e.g. Labour law) 4

6. 1. Extension of UI coverage to all employees with at least 3-month contract and all public servants Main considerations:  Principles of fairness, equality in treatment and provision of income security of highest number of persons possible require extension  Application of the actual coverage provision is complex and burdensome  Incentive for employers to create fictitious short-term contracts to avoid payment of contributions  Consensus from all participants at stakeholders meetings ILO Standards:  R. 176: States should endeavour to extend progressively the application of their legislation on UI benefit to cover all employees International experiences:  Most countries cover all employees under UI (e.g. South Korea and Thailand elimination of the 10 employees requirements ILO Recommendation:  Revision of coverage provisions under SI Law and Decree No. 127 (as proposed) to extend coverage to enterprises with less than 10 employees and short-term (at least 3 months) contracts as well as to all public servants 5

7. 2. Suspension of entitlement to UI benefit when unemployment due to wilful misconduct/worker has left employment without just cause Main considerations:  Circular 32 and Decree 127: provide for entitlement to UI benefit for all persons whose employment terminates, irrespective of the reason -This may contribute unsound labour practices and behaviour (risk of abuse), misuse of UI scheme, rising benefits costs -Social insurance schemes are meant to provide a guarantee of support in case of occurrence of a contingency (realization of a “risk”) – it is not the same as a termination or severance payment  Consensus among stakeholders that benefits should be reduced or refused ILO Standards:  C. 102 and C. 168: Suspension of entitlement to benefit may be suspended where contingency has been caused by the wilful misconduct of the person concerned or where the person concerned has left (employment) voluntarily without just cause International experience:  Most countries refuse ( Argentina, Bahrain, Canada, France) or reduce (Japan, Thailand, some EU countries) UI benefit in such cases 6

8. 2. Suspension of entitlement to UI benefit when unemployment due to wilful misconduct/worker has left employment without just cause ILO Recommendation: Revision to Circular 32 and Decree 127 needed:  restrict entitlement to benefit – initially by reduction of the rate e.g. 30% or a month reduction  However, need to exclude  cases where worker was terminated for poor performance (unless voluntarily performed poorly to get dismissed) and  when worker has quit for a just cause (eg. harassment/unsafe working conditions/change in nature of work) or forced to resign by employer.  Establish a clear legal definition of what should be considered to be a “just” or “good” cause  Ensure that adequate legal safeguards (of workers’ rights) are established, e.g. clear and detailed determination procedure, effective appeals procedure 7

9. 3. Adoption of a legal definition of “suitable employment” Main considerations:  LSI and Circular 32: UI benefit suspended when the person refuses two jobs to which he/she has been referred to by the (social insurance organization) job centre “without plausible reason”; Circular 32: refusing to do a job for which the person was trained, or a job which he/she was doing in the past or, where low-skilled workers are concerned, refusing a job that requires low-skilled work, constitute “implausible job refusals”.  No further guidelines for determining what would be other plausible reasons. ILO Standards:  C.168, Art. 21(2): to assess suitability of employment, take into consideration age, length of service in former occupation, acquired experience, labour market situation, impact of employment on personal and family situation  R. 176, para. 14(1): Adds abilities, qualifications, skills, involvement of a change of residence, conditions and remuneration, family responsibilities as criteria to be assessed for determination of employment in specific circumstances ILO Recommendation:  Modify existing provisions so as to make use of the concept of suitable employment, recognized and accepted in international social security standards and widely used in UI schemes around the world, instead of “plausible reasons ”. 8

10. 4.Extension of the registration period/ Reduction of waiting period Considerations:  Actual period for registering to UI benefit under Decree 127, 7 days, is too short for the worker to obtain documents required from employer and to go to the ESC to register and present all the evidence required  Consensus among stakeholders on need to extend this period to make sure that those who have contributed to the scheme and are entitled to a benefit are not deprived of their right due to employer’s inability to meet delay or delays due to travelling required  Benefit is paid on the 15 th day following unemployment: for 14 days the unemployed and his/her family is left without any income ILO Standards: - Maximum waiting period of 7 days  benefit must be paid from 8 th day of unemployment -Responsibility of the State to ensure the due provision of benefits and to take all the measures required for such purposes ILO Recommendation:  Reduce the waiting period from 14 to 7 days, thus making provision for benefit to be paid (in real time or retroactively) from 8 th day of unemployment  Increase registration period under Decree 127  New period should be long enough to allow the person to register and to obtain the benefit to which he/she is entitled but not too long to avoid that the person is left without income and cannot subsist to his/her own means and his/her family’s

11. 5. Responsibility for making decisions on claims Considerations:  Actual procedure (final decision made by DOLISA Director) is cumbersome, delays process, risk of loosing dossiers ; this may worsen with increase in number of claimants  No need for such formality as Director has no technical expertise in UI matters ILO Standards:  C.102 and C. 168: Responsibility of the State for proper/sound administration of institutions and services concerned with UI scheme and to take measures required for due and timely payment of benefits ILO Recommendation:  Once consensus is found on way forward to decide on claims expeditiously, proceed to legislative modifications required 10

12. 6.Failure by the employer to pay contributions due in respect of a worker should not affect the worker’s entitlement to UI benefit Considerations  LSI and Circular 32:entitlement of a person to UI benefit is conditional upon workers’ and employers’ contributions having been paid to the ESC  Failure by employers to remit their contributions and their workers’ to the ESC, or failure by employers to pay their own contributions prevent unemployed persons from receiving the benefit to which they would have been otherwise entitled  unfair : negative consequences of the failure of the employer to fulfil its obligations under the scheme, loss of coverage, should not be borne by workers who at present being penalized for non-payment of contributions by negligent employers either intentionally or for economic reasons  If remittances are delayed excessively and never paid by the employer, the corresponding work time will never be taken into account.  The Review report further reveals that, on the basis of the fact-finding mission undertaken by the review team, “many employers are late or delinquent with respect to their UI contributions”.  Vital to the sustainability of the UI Fund that employers pay their contributions and remit their workers’ in timely manner ; evasion  loss of revenue for UI fund 11

13. 6.Failure by the employer to pay contributions due in respect of a worker should not affect the worker’s entitlement to UI benefit ILO Standards:  C. 102 and C.168: Causes for suspension of entitlement to the benefit are limited those listed in the Conventions, mainly: either due to the insured person’s behaviour or default or because the contingency has ceased to exist.  C. 102: general responsibility of State for proper administration of the scheme and due provision of benefits; State must take all measures required for this 12

14. 6.Failure by the employer to pay contributions due in respect of a worker should not affect the worker’s entitlement to UI benefit International experiences: -It is general practice worldwide to penalize the employer and not the worker for a default of the employer to pay its contributions and to remit its workers’ contributions ILO Recommendations: -Amendment to Decree 127 under provisions on insurable earnings, or under provisions on obligations to pay/remit contributions so as to ensure that workers’ entitlements to UI benefits is not jeopardized by the failure of employers to fulfil their obligations. -Include those work periods for which contributions were not remitted to the ESC by employers or remitted late, or for which employers have failed to pay their contributions to still be considered as insurable employment under the law and taken into account in the determination of the duration and level of the UI benefit, provided that they fulfil the other legal criteria for being considered insured work -Revision needed, in parallel, of other related laws establishing penalties for evasion of Ui contributions. -Strengthening inspection and enforcement mechanisms in the law (SI Law, Decree 127, Inspection law) 13

15. 7. Widen the legal definition of insurable earnings to include bonuses and overtime pay Considerations: -The base salary on which contributions and benefits are calculated is quite low and the total salary of workers is often much increased by bonuses and overtime pay -The use of the statutory base salary for the calculation of the contribution encourages employers to formally (according to contract of employment) remunerate workers at a low base salary while topping up their earnings, informally, by bonuses and overtime pay -This constitutes partial evasion from contributions and results in less money in the UI Fund, and in benefits much lower than if calculated as a percentage of the real earnings of workers  the benefit may not, in some cases, provide sufficient protection ILO Standards: - C. 102: benefit should be a percentage of the total of the previous earnings of the beneficiary or total of the wage of an ordinary male labourer ILO Recommendation: -Subject to tripartite consensus, modify legal definition of insurable earnings to include other earnings beyond the “base wage”, for the payment of contributions and the calculation of the benefit 14

16. 8. Termination of payment of UI benefit when contingency of unemployment comes to an end because the person has found a new job (elimination of lump sum payment) Considerations -Circular 132 and LSI: provide that when an unemployed person who is receiving UI benefit finds employment before the period of entitlement to the benefit ends, he/she will be paid the remaining amount as a lump sum. -Not compatible with the principles of social security which require that a benefit is paid only in case the prescribed contingency occurs, i.e. suspension of earnings and inability to find suitable employment, and the worker fulfils the required entitlement conditions -Risk of abuse, experience in other countries which shows notably that such payments are not likely to reduce unemployment duration appreciably and that there were no savings for the UI fund unless the lump sum payment was less than the remaining UI benefits ILO Standards:  C.102: Contingency covered includes suspension of earnings, due to inability to obtain suitable employment in the case of a person capable of working and available for work  C.168: Same as C. 102 + person must be actually seeking work; benefit may be refused, withdrawn, suspended, reduced when the person refuses to accept suitable employment  R. 176, 26(1)a): provides further guidance 15

17. 8. Termination of payment of UI benefit when contingency of unemployment comes to an end because the person has found a new job (elimination of lump sum payment) ILO Recommendation:  Revision to Circular 132 and LSI needed: instead of lump sum payment, workers should be able to carry over the portion of the benefit which was not paid because the worker has found employment before the end of the duration of the benefit, either to the next period on unemployment for which he qualifies for a UI benefit, or to the next period of unemployment for which he does not qualify for a benefit.  This is common practice is most UI schemes around the world and would not jeopardize the financial equilibrium of the UI fund as the lump sum does. 16

18. 9. Responsibility for payment of UI benefit Considerations:  VSS (through PSI offices) has responsibility for issuing and handing out UI benefit payments to beneficiaries as well as new health card, while BoE has responsibility for registration of claimants and employment services  This means 2 stops for the unemployed and is a source of inconveniency and burdens (lengthy, involves additional traveling and expenses, etc.)  This is increased by the fact that there is little information exchange between PSI and ESC ILO Standards:  C.102 and C. 168: Responsibility of the State for proper/sound administration of institutions and services concerned with UI scheme and the due (and timely) provision of benefits and must take all measures required for this purpose, notably actuarial studies and calculations concerning equilibrium of the Fund 17

19. 9. Responsibility for payment of UI benefit ILO Recommendation: 1) In short term  one stop shop: PSI continues payment of benefits but allocate one PSI representative for each ESC (part or full time) 2) Conduct feasibility study for BoE to assume responsibility for UI Fund management and UI payment, including costing assessment to determine staffing, managerial, financial and institutional implications of the different possible scenarios, including creating a separate UI Fund under the responsibility of MoLISA 18

20. 10. Reinforcement of prevention, investigation, monitoring and enforcement mechanisms Considerations:  Need for inspection and control units to investigate cases of late and delinquent employers and fraudulent claims and other abuses of UI Fund and for increase in penalties  vital for sustainability of UI Fund and for fairness  Currently cases of delinquent employers evading contributions are referred to DoLISA and People’s Committee (SI Law and Decree 127) but no procedure in place for ESC to refer suspected cases of fraud or abuse of the fund to the inspection and control inspectorate  From a legal perspective, enforcement is of utmost importance to ensure the application in practice of the law and to guarantee that workers are not deprived of their rights/entitlements due to the fault of a third party (i.e. Employers)  Vital also to bring back confidence in the scheme and trust in the administration, seemingly shaken as witness press articles

21. 10. Reinforcement of prevention, investigation, monitoring and enforcement mechanisms ILO Standards:  C.102 and C. 168: Responsibility of the State for proper/sound administration of institutions and services concerned with UI scheme and the due provision of benefits and must take all measures required for this purpose ILO Recommendations:  The content and modalities of any legal revision still to be agreed upon by stakeholders – measures could include increase fines/prescribe a percentage rather than flat rate, creation of investigation and control unit in ESC (subject to analysis of existing provisions under SI Law and Decree 127, inspection law)

22. 11. Extension of payment of UI support during periods of vocational training Considerations  Availability of vocational training to unemployed persons who qualify for UI benefit (SI Law, Decree 127 and Circular 32)  These provisions are very little used by UI beneficiaries due to length of procedures for processing request before start of the course; income support (UI benefit) too short to complete a course; quality of training lower than expectations, etc. ILO Standards:  R. 176, para. 4b): States should endeavour to grant periodical allowances during vocational training/retraining ILO Recommendation - Subject to validation by actuarial study:  In line with proposed revision of Decree 127, provision should be made to allow unemployed workers to receive UI allowance while in vocational training, in addition to their entitlement based on insured employment, up to a maximum of six months in training  In addition, revision of SI Law and Vocational Training Law to increase payments to vocational training centres for higher skilled workers 21

23. 12. Modification of appeals procedure: creation of an independent and objective board of appeals Considerations  Complaints and appeals procedures as set out in SI Law and Decree 12 provide that:  In case of appeal of a first decision issued by DoLISA or ESC, the re-examination is either made by DoLISA (which is not an independent body) or by the court, where the complainant has to file a lawsuit (expensive and lengthy process)  No appeals received up to now  Workers have no confidence in existing procedures (perceived as not efficient; fairness and transparency are questioned) ILO Standards:  C.102 (Art.70(1)): Every claimant must have a right of appeal in case of refusal of the benefit or complaint as to its quality or quantity  C. 168, Art. 27: In the event of refusal, withdrawal, suspension or reduction of benefit or dispute as to its amount, claimants must have a right of complaint to the UI administration and to appeal to an independent body; claimants must be informed in writing of the procedures available which must be simple and rapid 22

24. 12. Modification of appeals procedure: creation of an independent and objective board of appeals ILO Recommendation:  Give effect, in practice, to the legal right of appeal by establishing, through appropriate legal provisions, an appeals system that is effective, accessible to workers, transparent and fair.  Examine proposal of 18-month review report on the establishment of an independent and objective board of appeals to receive and decide on appeals filed by claimants who disagree with the first decision rendered by BoE or DoLISA  If consensus is reached on the need to establish such specialised quasi-judicial entity, legal provisions should be drafted reflecting agreement on its powers and functions, competence, composition, etc., as well as its rules of procedure (e.g. Delays, notification, etc).  Whether this is done by amending existing legislation (eg Decree 127) or in a new legal text will need to be considered 23

25. 13. Introduction of a record of employment to complement/replace SI book Considerations:  Delays in obtaining SI book prevents may workers from qualifying for UI benefits  Introduction of flexibility in procedure, e.g. temporary document certified by Psi within short delays can now be used  Reflecting the actual practice that has started to emerge due to need for pragmatic solutions, amendments to Decree 127 are proposed International experiences:  Argentina, Bahrain, Canada, France and Denmark have automated and/or linked electronic systems. ILO Recommendations:  Feasibility study would be required, along the lines proposed in 18 month review report on the advantages/disadvantages of developing a RoE versus adoption of current proposals for revision of Decree 127  Legislative amendments to follow what makes the object of consensus among stakeholders 24

26. Legal review – main issues for consideration Discussion 25