GIẢI PHÁP HOÀN THIỆN CÔNG tác QUẢN lý tài CHÍNH tại bảo HIỂM xã hội VIỆT NAMe

35 2.2.1 Fee collecting management of social insurance...35 2.2.2 Payment management of social insurance...42 2.2.3 Investment management for preservation and growth of social insurance

GIẢI PHÁP HOÀN THIỆN CÔNG TÁC QUẢN LÝ TÀI CHÍNH TẠI BẢO HIỂM XÃ HỘI VIỆT NAM

SOLUTIONS TO IMPROVE FINANCIAL

MANAGEMENT IN VIETNAM SOCIAL SECURITY

TABLE OF CONTENTS

INTRODUCTION 1

1 THE RATIONALE OF THE STUDY

1 2 RESEARCH OBJECTIVES

2 3 RESEARCH OBJECTS AND SCOPE OF RESEARCH

2 4 METHODOLOGY

2 5 THEORETICAL CONTRIBUTIONS AND IMPLICATIONS OF THE STUDY

2 6 THE CONTENTS AND STRUCTURE OF THE RESEARCH

3 CHAPTER 1: LITERATURE REVIEW ON SOCIAL INSURANCE AND FINANCIAL MANAGEMENT IN SOCIAL INSURANCE 4

1.1 OVERVIEW OF SOCIAL INSURANCE

4 1.1.1 The necessity of social insurance 4

1.1.2 Definitions of Social Insurance (SI) 6

1.1.3 Nature and role of social insurance 8

1.1.4 Operation principle of SI 9

1.1.5 The mechanisms of social insurance 11

1.1.6 Social Insurance Fund 13

1.2 OVERVIEW OF FINANCIAL MANAGEMENT IN SOCIAL INSURANCE

16 1.2.1 Definition of social insurance financial management 16

1.2.2 The content of financial management in social insurance 19

CHAPTER 2: THE REAL STATUS OF FINANCIAL MANAGEMENT IN VIETNAM SOCIAL SECURITY 29

2.1 INTRODUCTION TO VIETNAM SOCIAL SECURITY

29 2.1.1 Foundation and development 29

2.1.2 Organization structure of Vietnam Social Security 31

2.1.3 Staffs and employees of Social Insurance 35

2.2 THE REAL STATUS OF FINANCIAL MANAGEMENT IN VIETNAM SOCIAL SECURITY

35 2.2.1 Fee collecting management of social insurance 35

2.2.2 Payment management of social insurance 42

2.2.3 Investment management for preservation and growth of social insurance fund 45

2.2.4 Fund balance management 48

2.3 EVALUATION OF FINANCIAL MANAGEMENT IN VIETNAM SOCIAL SECURITY 49 2.3.1 The strengths and achievements: 49

2.3.3 The causes of the above limitations 57

CHAPTER 3: SOLUTIONS TO IMPROVE FINANCIAL MANAGEMENT IN VIETNAM SOCIAL SECURITY 64

3.1 THE STRATEGIC ORIENTATION OF FINANCIAL MANAGEMENT IN VIETNAM SOCIAL SECURITY

64

3.1.2 Objectives 643.2 SOLUTIONS

663.2.1 Macro-solutions 663.2.2 Micro-solutions 703.3 RECOMMENDATIONS

773.3.1 Recommendations to National Assembly: 773.3.2 Recommendations to Government: 773.3.3 Recommendations to competent authority 783.3.4 Recommendations to People’s Committee of Provinces and Cities: 79

CONCLUSION 80

MOLISA Ministry of Labour – Invalids and Social Affairs

VSS Vietnam Social Security

LIST OF TABLES AND APPENDIXES

Table 2.1 Summary of SI participants in period 2010-2014

Table 2.2 SI fee collection situation in period 2010 – 2014

Table 2.3 SI, HI and unemployment insurance debt in period 2010-2013

Table 2.4 Summary of monthly SI regimes beneficiaries in period 2010 – 2014Table 2.5 Payment situation of SI regimes in period 2010 – 2014

Table 2.6 Expenditures for VSS organizational structure management in period

2010 – 2014Table 2.7 Investment capital structure in period 2010-2013

Table 2.8 Gain allocation and use in period 2010-2013

Table 2.9 Collection-payment balance in Vietnam Social Security period

2010-2014Appendix 1 Contribution level schedule under Law on Social Insurance in period

2010 – 2014Appendix 2 Compulsory SI participants under enterprise form in period 2010 –

2014Appendix 3 SI collection structure under enterprises form in period 2010 – 2014

1 The rationale of the study

Social insurance (SI) is considered as one of the most important policies ofthe Vietnamese Communist Party and the Government for employees in the country.These policies aim to ensure quality-of-life for workers and their families in thecases of sickness, maternity, impaired labour skills, unemployment, or death of allworking age The social insurance policies in our country have been carried outsince the establishment of the Government Over the sixty-year period, during theimplementation process, social insurance policies have been improved, constantlyrenewed, and supplemented to ensure its appropriateness to the current conditions

of the country Along with the economic reform after the 6th National Congress ofthe Communist Party of Vietnam, social insurance policies and institutionsresponsible for operation management of social insurance have also had manypositive changes in different aspects First, the presence of social insurance not onlymakes significant contributions to promoting the life stabilization of workers, butalso encourages them to actively participate in production to create common wealthfor the society and for developing the national economy During the implementationprocess, social insurance has had the continuous development in both quality andquantity aspects The number of participants has been quickly increased and beenextended to different types of employees Moreover, the mechanism of managingsocial insurance has also experienced the radical shifts Most importantly, theorganizational system is operating under the uniform structure on a national scalewith the 3-level model based on vertical sectors from the Central to local levels.Besides these accomplishments, during its application process, Social SecurityFund has revealed several limitations which exist in the current policies andimplementation Even though the policies and mechanisms of social insurance havebeen constantly modified, supplemented, and supported by other social policies(e.g., labour policies, employment and wage policies), there are still many issuesrelated to abuse of the social insurance fund, which leads to imbalance of the fund

as well as "overspending" status in near future Therefore, in addition to continuous

amendment and improvement of Social Insurance Law, there should be additionalrules and solutions to order to avoid the abuse or financial losses of the socialinsurance fund Based on the above analyses on the rationale of the study, I decided

to propose the research topic “Solutions to improve financial management in Vietnam social security” for my graduation thesis The purposes of the research are

to analyze, evaluate, and examine the real status of financial management inVietnam Social Security in the recent years From these evaluations, the studyidentifies the current problems, obstacles, and their relative causes Next, I willpropose new viewpoints and make useful recommendations to enhance financialmanagement in Vietnam Social Security in the current period

2 Research objectives

The research on financial management in Vietnam Social Security aims to:

- Analyze the real status of financial management in Vietnam Social Security

in the recent years

- Identify the strengths, limitations, and their relative causes in financialmanagement in Vietnam Social Security

- Propose useful solutions to improve financial management in Vietnam SocialSecurity

3 Research objects and scope of research

- Research objects: Financial management in Vietnam Social Security

- Scope of the Study: Financial management of the Social Insurance Fund in

Vietnam Social Security during the four-year period (from 2010 to June, 2014

4 Methodology

The research employs the specific research methods such as: Statisticsmethod combine with comparison, collection and analysis method

5 Theoretical contributions and implications of the study

- In terms of theoretical contributions, the study proposes the theoreticalfoundation for financial management of social insurance

- With regard to practical aspects, the research demonstrates the real status offinancial management during from 2010 to June 2014 Based on these evaluations, I

will propose the useful and appropriate solutions to improve financial management

in Vietnam Social Security

6 The contents and structure of the research

In addition to the introduction, conclusion and list of references, this thesis ispresented in 3 chapters as follows:

Chapter 1: Literature review on social insurance and financial management insocial insurance

Chapter 2: The real status of financial management in Vietnam Social Security.Chapter 3: Solutions to improve financial management in Vietnam SocialSecurity

CHAPTER 1: LITERATURE REVIEW ON SOCIAL INSURANCE AND FINANCIAL MANAGEMENT IN SOCIAL INSURANCE 1.1 Overview of social insurance

1.1.1 The necessity of social insurance

Before living and development, human must eat, wear, live, etc In order tomeet such minimum demand, human must work to produce necessary products Thebulky wealth the society is, the higher the satisfaction level is However in order toobtain many wealth, human must work and work more; it means that the demandsatisfaction shall depend on work skill of human In actual life, not all people haveenough health and capacity as well as other conditions to fulfill their job, work ormake a happy and wealthy life In contrast, many people face with difficulties,misfortunes or risks that they shall reduce, loose their income or other livingconditions, such as sickness, accident, loss of bringing person, senior citizen, death,etc Moreover, life of humankind majorly depends on many natural conditions andliving environment Unfavorable natural conditions or social conditions (accidents,disaster, acts of god, etc.,) have made some people to fall in bad conditions thatneed some help to ensure their normal life

In such case, essential demands of human shall not reduce for such reason

In contrast, the demands shall be increased, evenly new demands shall appear Incase of sickness, people must buy medicine; when giving birth, mothers shall buynapkin and supplies for new born; and mothers shall be provided with morenutrients, etc Therefore, people and mankind shall find and actually have foundmany other solutions In order to handle such risks and misfortune to minimizeburdens for family, in ancient time, people can remedy by themselves byreservation; at the same time, employees also receive sharing, protection and help ofcommunity and protection of society The help shall be gradually enlarged anddeveloped in different forms Such solidarity and union have positive impacts onawareness and social work of State under different social regimes This is the firstappearance of Social security and social insurance afterward

During social development, especially after the industrial revolution, social

(economic and social bases) for establishment and development Industrializationshall make day-staffs and employees increased; their life mainly depends on incomefrom outsourcing work A part from salary (income from work), they can not haveother incomes, especially in market economy Therefore if unfortunately they sufferfrom sickness, accident, risks, unemployment or aging, etc, the employees shall bereduced or lost income from labour because they are unemployed Salary imbalance

in such case shall pose daily threats to normal life of people who do not have anyincome a part from salary The daily necessity make collar employees to find othermeasures by mutual affection and mutual love (establishment of mutual assistance,associations, etc.,); at the same time, they shall struggle to request the employer andState to provide some certain helps to ensure their life

In 1850, In Germany, many Country’s States have established the sicknessfund and request the employees to contribute for prevention in case of incomereduction for disease Accordingly, compulsory insurance has appeared bydeducting one part of salary to general fund (sickness fund) and at the first timeonly creditors join in such funds Time by time, insurance forms shall be applicable

to employment risk, aging and disability At the end of 1980s, social insurance haschanged to new direction The insurance participation is compulsory andemployees, employer as well State must contribute in such insurance fund (Threeparties mechanism) Insurance participation of employer both result from strugglingprocess of worker class and reflect the objective law of social development (mutualdependence on economic benefit between creditor and employer) Employer shallhave a stable employee and staff to product the outcomes, create income and benefitfor enterprise If enterprise’s employees are healthy without sickness andoccupational accidents, etc, enterprises shall not pay for such expenses In contrast,enterprises shall not bear such bulky expenses In contrast, enterprises shall bearhuge expenses that increase production costs and affect product actual cost andaffect general profit of enterprise In order to minimize such consequence,enterprise shall improve the safety conditions, labour hygiene for employee; andthey shall “share risks” among employers by paying the social insurance For

employees, the solidarity and mutual division shall be prevailed: all employees, inspite of male or female; direct production employees – managers; healthy employee– weak employee, employee in different sectors must contribute social insurance forgeneral purpose – ensure income for themselves.

This model of Germany has dispersed to European, then to Latin America, toNorth America and Canada in the 1930s of XXth century After the second worldwar, social insurance has dispersed to independent countries in Asia, Africa andCaribbean area Social insurance shall become the basic factor of social security andcountries all accept social insurance to be one of basic rights of human It is saidthat after many periods, in line with disputes between employers and employmentand social – economic development, technology development, professional skill andawareness on SI of employee are more and more improved, they are active inhandling “social incidences” or unfortunately face with risks in daily life Howeveronly until social insurance has been established in social regime, difficulties anddisputes above are handled completely and efficiently Such solutions are the mostgeneral and applicable for humankind during their development: Share (or called

“share out, risks division”) Appearance of social insurance is an objective certaintywhen all members in society find it necessary to participate into SI system andprotected by SI In economic point of view, participation in and protection of SIreflect the objective law: need – demand law Therefore, SI shall become thedemand and rights of employees and it is accepted to be an objective demand, one

of human rights as stated in Human Rights Declaration of The United Nations(UN)

1.1.2 Definitions of Social Insurance (SI)

Term “Social insurance” was firstly used for titling a legal document in 1935(Law on social insurance 1935 of The United States of America) This term was re-used in code approved in New Zealand in 1938 In 1941, during the Second WorldWar, this term was used in The Atlantic Charter of 1941

International Labour Organization (ILO) has rapidly accepted the term “Socialinsurance”, this is an important milestone of this term, one simple term but reflectthe most expectation of workers class all over the world.

Term “Social insurance” is understood differently among countries on its

scale However, basically this term means the social security insurance for its

members by public system procedures in order to remove economic and social concerns for its participants In other hand, it shall contribute social members and family to handle matter of reducing and loosing actual income due to sickness, maternity, labour accident, unemployment, retirement and death; as well as provide the health service and allowance for families bringing up infant

According to D Pieters, social insurance shall be understood to be anorganization that is established to support people to cope with income deficiencies(such as income from their job) or other loss

Sinfield requests to define social insurance as a system to provide thecomprehensive safety for people against physical loss Berghman proposes the samepoint of view, Berghman thinks that SI is a comprehensive protection regime forpeople against physical loss and damages

According to Giancarlo Perone, social insurance is a system that includebenefits and services rendered to workers in case of necessary no matter what suchworker does

In term of legal point of view, Social Insurance (SI) is a system to protect

workers that use amount contributed by employees, employees under protection of State to give physical allowance to insured person in case of their income loss or damages due to sickness, labour accident, occupational disease, out of working age

of death.

It is necessary to distinct social insurance from similar definitions:Commercial insurance, social security, social aids, etc Social security has broaderscope than social insurance, basic systems of social security system include: socialinsurance, social aids, family allowance, allowances financed by community’sfunds, provision fund and protection provided by employer and socialorganizations The commercial insurance operates under voluntary manner,insurance relation appears on insurance coverage contract, State’s insurance has

more participants than social insurance (including all individuals andorganizations), insurance allowance level shall base on insurance contribution andconsequences respectively.

According to the Social insurance Law: “Social insurance is the substitute

security or partially offset a laborer’s income that is lost or reduced due to his/her sickness, maternity, labor accident, occupational disease, unemployment, retirement

or death, on the basis of his/her contributions to the SI fund”.

1.1.3 Nature and role of social insurance

SI is an objective, various and complicated demand of society, especially insociety that goods production complies with market mechanism, employmentrelation develops in a steady level The more developed economy is, the morediversified and complete the social insurance is Therefore, it may say that economy

is foundation of SI or SI does not exceed the economic situation of each country.Relations between SI parties originate relating to labour relation among 3parties: SI participant, SI party and SI beneficiaries SI participant is employee orboth employee and employer; employer is organizations, enterprises and individualswho employ labour force; SI party is normally specialized agency of State

Income deficiency of employee upon coping with accidents or risks shall beoffset partially from accumulated monastery fund

SI is to satisfy the crucial demands of employees in case of incomedeficiencies or unemployment ILO has clarifies such objective as follows:Compensate employees with lost income to ensure their necessary demand; providehealth care and disease treatment service; Establishing the conditions to meetresidential demand and special demand of senior citizens, disable person andchildren; SI is one of human rights recognized and accepted by Human rightsDeclaration of UN on December 10, 1948: “All people in role of society membershave rights to enjoy SI, such rights base on satisfaction of economic, social andcultural rights, characteristic and human development demand”

In our country, SI is an important section in social welfare and securitypolicies in combination with social aids and social preferences, although it has

different points on object, scope and implementation method, they however alwayssupplement each other to ensure the social security.

Operations of SI is an career one for common benefit of the whole societyapplicable to all members of society, profit is not an objective of SI activities.Therefore, SI plays a crucial role in economic – social life of human in followingaspects:

Firstly: SI stabilizes physical life of SI participants, contributing to socialsecurity policies of country

Secondly: SI contributes to implement the social affairs SI payment is socialincome movement, the re-allocation of income among high income people and lowincome people, movement of income of lucky, healthy, stable job people to sick,weak or risk bearing people in production and their daily life

Thirdly: SI contributes to prevent and minimize loss, ensure safety forproduction and social life of people

Fourthly: SI creates closer relation among employees, employer and State:Employees shall be more responsible for their job, they work harder and providehigher productivity; Employer are responsible for paying SI to create the belief ofemployees to employer, that encourage employees to work harder and serveemployer for a long-term For State, via SI activities organization, State ensure thatall employees, all organization and units are fair and equal in production andbusiness and social life that help to stabilize production, economy, politics andsociety in developed and safe manner

The fifth: SI also contributes to economic development, handle job ofcountry Idle SI fund shall be invested into other sectors, this is an important capitalsource in modernization and industrialization process of our country

1.1.4 Operation principle of SI

In order to effectively implement its mission, SI shall comply with basicprinciples and such compliance makes SI developed strongly with great concern ofemployees

“Indemnity” principle of SI

Indemnity is general principle of insurance however it is the most basicprinciple of SI

SI participant shall firmly obtain the indemnities Because SI operates underguideline of compensating income for employees when they suffer from temporary

or permanent unemployment While no employees can work forever to create theirincome under “Birth, Old, Disease, Death” law, temporary or permanentunemployment ability is a certainty for each person When employee suffers fromthe job unemployment or income, SI shall indemnify the amounts contributed bythem to obtain the income to make their life stable

This explains why employees joins in SI, they can feel secured for their life It

is certainly true in developed countries, while habit and lifestyle of each individual

in family develop more independently, relations of family’s members in familydevelops in looser manner, especially in economic relation, SI participation is acertainty, especially for old people As in Vietnam, although SI has just beenestablished, many people can see its necessity and value In the last, the livingprinciple has been established and recognized for a long-term named Young peoplerelay on their parents, old people shall rely on their children, many peoplenowadays accept that Young people shall rely on their parents but old people do notrely on their children but also SI

Principle of “Taking majority to offset the minority” of SI:

If SI is only for indemnity, it shall be very precious, it shall not efficient andsatisfies the expectation of participants, because SI at that time is not different fromtheir savings! Since then, another important principle of SI that create its difference,that is principle of “Taking majority to offset the minority” It is widely acceptablethat unemployment to employees is certain, indeed the risks of them are not thesame, evenly, many people must not face with many risks This is base for SI toimplement the principle of “Taking majority to offset minority”

Due to this principle, when employee faces with risks, they can enjoy theindemnity to overcome their dilemma that is values much more than their actualcontribution This principle shall make social property of SI to be clearer thatsociety and community has shared to care unfortunate individuals

By understanding this principle, if SI expects success, it is required to attractthe participation of all people classes The more people participate into SI, the less

SI fee people shall be paid In contrast, when employees face up with risks, theindemnity amount shall increase respectively.

In conclusion, there are many principles to organize operations of SI.

However, two principles of SI named “Indemnity” and “Taking majority to offsetminority” have created the difference and strong vitality of SI for complete beliefand rely of employees

1.1.5 The mechanisms of social insurance

Each country shall have difference economic, political and social situations, SIshall be organized and implemented under specific regulations of each country TheConvention 102 issued by ILO on June 04, 1952 has specified the minimumservices on social safety and given 9 following regimes:

- Health care: Ensure to provide supports to protected people when they needprevention or treatment, including sickness due to any reasons and maternity, birth-giving and consequences

- Sickness allowance: The protection cases include the unemployed people due

to sickness and cause their income interruption to provide stable income for SIparticipant who suffer from sickness The allowance period shall be 26 weeks This

is short-term regime that is characterized by community, transfer risks from sickpeople to lucky and healthy ones

- Unemployment allowance: The protection cases include the incomeinterruption and objective events without faults of participants and they have notfound the proper jobs when employees can work and are ready to work Themaximum allowance period is 13 weeks for collar employees Minimum allowancelevel is equal to 45% compared to previous income

- Labour accident-occupational disease allowance: The protection cases shallinclude the people suffering from labour accident-occupational disease that causeincome interruption or loose the complete income Allowance level (including themedical care) can be paid in installments or one installment subject to labourreduction level and number of years participating into SI

- Retirement allowance: This is one of earliest regimes in development period

of SI Retirement is long-term regime that is paid monthly to retired employees.This regime shall be characterized by return regime and separate allowance

payment level and enjoyment level (It means that employees shall pay fee duringthe labour period and they only enjoy allowance when they have retired).Employees shall be paid the insurance provided that they pay social insurance in 30years, the retirement age does not exceed 65 Minimum allowance level is 40% theirprevious income (for employees whose wife is in retirement age).

- Maternity allowance: Protection cases are pregnant, abortion, birth-givingand people who apply for adopted child less than 4 months The allowance period is

12 weeks Minimum allowance level is 45% compared to previous income(formerly)

- Disability allowance: The protection cases are people who can not conduct ajob earning income at specified level, when situation becomes regular or still existafter ceasing the sickness allowance The minimum allowance is 40% of previousincome

- Death allowance: The protection cases are widowed wife or their childrenwho loose the means of support because the key person of family is dead Theallowance shall discontinued when beneficiary obtains the job that its incomeexceeds the limit This regime shall support relatives of dead person to obtain theallowance equal to income gap of family This regime is characterized by socialfactor with regard to contribution of SI participant and inherit factor of relatives ofdead person

- Family allowance: This regime shall support the crowded childrenemployees to obtain the minimum physical allowance to take care and bring uptheir children Family allowance regime relates to job, therefore, allowancebeneficiaries only include the crowded children employees that face up with manydifficulties Subject to specific social – economic conditions of each country, it isrequired to specify in laws

Each regime in SI system shall be established basing on economic, incomeand salary conditions, etc., as well as taken consideration to ecological factors,average life span, nutrition demand, etc., in order to specify the social insurancepayment level, enjoy level, time of obtainment and beneficiary

In Vietnam, Law on Social Insurance specifies that there are 6 regimes named:

allowance; Unemployment allowance Moreover, it is required to make payment forexamination and treatment of disease for monthly SI beneficiaries

1.1.6 Social Insurance Fund

SI Fund is an independent financial fund out of State’s budget that has beenestablished from contributions of parties and other resources that is used tocompensate or replace income for insurance participants when they copes with risksthat reduce their health, labour ability, job removal or death to stabilize life forthemselves and their family in order to ensure social security and economicdevelopment

After comparing the State’s budget and SI Fund, we can see that such twofunds have the same nature, functions and organic relation during establishment andusage State’s budget and SI fund operate for non-profit purposes Theirestablishment and use shall be featured by value form Its collection – payment shall

be specified by laws and management regime shall comply with collection –payment principle, etc

However, There are following basic differences between State’s budget and SIfund as follows: State’s budget appear at the time of State and it performs economic– social functions of State The more strong State, the larger functions are, the morethe more payment and collection activities are This distribution relation is mainlyre-distribution without return and defects the social and national benefit, it controlsthe individual relations and benefits and sector rights to ensure stable economicdevelopment While SI fund appears and develops in line with development ofgoods economy, the employment relation has therefore established Although Stateall specifies the payment and collection by legal documents, they mainly rely oneconomic relations, benefit relation among parties relating to parties concerned to

SI Legality of distribution relation of SI fund is not as high as State’s Budget, theybases on return properties basing on payment level or risk level in labour ofemployees

SI fund has following features:

- SI fund appears, exist and develop in line with purpose of stabilizing life foremployee and their family when facing with accidents, risks that reduce or loosetheir income during employment SI fund operates for non-profit purpose

- Distribution of SI fund is both return or non-return purposes The returnmeans that employee is participant and payer of SI and they are beneficiaries of SIfund although regime, time and allowance level of each person is different subject

to accidents or risks hat they face up with as well as distributions level anddistribution time into SI Non-return means that when participants join in the same

SI regime, some persons can enjoy many allowances in different regimes, somepersons enjoy less allowance, sometime do not enjoy For this property, objectsenjoying allowances from SI fund is much higher than their contributions and viceversa This reflects the social property of the whole SI activities

- Accumulation for preservation of value and financial safety for SI fund is forprinciple purpose This feature originates from the most basic function of SI thatensure income safety for employees Therefore, SI itself shall protect in risk offinancial in-safety Many economists say that: SI fund is “Savings” of employees incase of sickness, old age, etc

- SI fund is core and physical content of SI finance It is sector of intermediatefinance and State’s budget, enterprise finance and household’s finance to form thenational financial system

- Appearance, existence and development of SI fund shall depend on social –economic development level of each country and historical conditions in eachperiod of such country The more developed economy and society are, the more SIregimes are performed sufficiently When economy and society develop, employeeand employer shall have higher income, they therefore shall have more conditions

to join in and participate into SI

Moreover, SI fund has other features as follows:

- Entity of SI fund, State is the only entity that makes decision onestablishment and use of SI fund, in order to ensure social security By laws, Stateshall regulate the distribution level of parties to establish fund as well as specifiesthe conditions for enjoy, level of enjoy for each allowance regime

- Combination of compulsoriness and voluntariness, between return and return, majority of SI fund is characterized by compulsoriness and return Stateissues the Laws that force everyone to participate into SI compulsorily in order toensure social safety and meet basic living demand when SI participant copes withrisks and accidents in life

non SI fund is highly social monetary fund Money contributed by employer into

SI fund shall be accounted to production costs and form the products and servicesprice Such products and services shall be consumed by local and foreign users andthey certainly must pay respective expenses to number of products and servicesused by them Therefore, people in society and community have indirectlycontributed into SI fund by paying the price of products and services

- SI fund has wide operation scope, huge objects, SI fund is established tomeet and satisfy demands of human, therefore SI shall exist where have demand.Therefore, SI fund has wide operation scope in the whole nation, evenly in theinternational scope to ensure the social safety

- One monetary fund is collected with huge amount in long-term in active stateand long-time idle period, SI fund shall be established by contributions for manyparticipants and employer in such nation Therefore, financial resource shall befocuses with huge amount Moreover, SI fund is designed according toaccumulation model that shall be collected after many years, from this generation toanother, the balances shall therefore increased after years

SI fund always suffer from impacts of many social – economic factors, eacheconomic – social movement shall affect SI fund Some factors directly affect SIfund, such factors often directly relate to social – economic life of human such as:Job, income, health status, etc Abundant job shall attract many labour forces, thecontributions into SI fund shall increased respectively When health is improved,people shall be more healthy, their productivity shall be better; in other hand, SIfund shall reduce costs of examining, treating disease and insurance fee in stead oftheir salary Factors indirectly affects the SI fund named: Economic growth, socialfairs and innovations, etc Economic growth is resulted from the increaseddevelopment and investment, accordingly labour force shall obtain more job

chances and their income is improved Fair and social advances are enhanced thatmake people more prosperous, especially in social matters Therefore, life quality isimproved, human health is better.

1.2 Overview of financial management in social insurance

1.2.1 Definition of social insurance financial management

Management is oriented and organizational impact of management unit toobject managed to obtain the objectives proposed

By applying this concept into SI finance, we can identify the SI financialmanagement concept as follows:

“SI Financial management is the impact of SI management organization to SIfinancial sector to obtain objectives in fixed period”

Management organization (management entity) of SI financial management is

SI organizations from central to local level According to Decree No 19/CP datedFebruary 16, 1995 of Government on establishing Vietnam Social Security At Atlocality, SI management units include social insurance agencies of social insurance

of provinces and cities centrally governed, social insurance agencies of districts,towns and cities under provinces

Objects managed are SI finance, including five following sectors: Firstly, thewhole movement of SI fund in general; secondly, financial activities relating toreceivables and collection of SI regimes; Thirdly, financial activities relate topayment of SI regimes; Fourthly, financial activities relate to value conservation, SIfund growth and profit use generated from such activities; the fifth, financialactivities in Social insurance agency

SI fund shall be managed in the whole system, accounted independently withState’s budget and protected by State All SI receivables and some other receivablessuch as receivables from investment activities, etc shall be used to established thecentral SI fund In such case, payments demand, all payments (including SIpayment, payments for structure management, training payment, investmentpayment, programs payment) shall be distributed and managed from SI fundprovided that receivables are more than payment and SI fund must exist In general,

SI systems shall obtain contributions of both SI participants and their employers

Income may also be deducted from special taxes to support the SI systems SIsystem may receive the same contribution or different contribution subject to theirsalary and wage Other income is penalties applicable to employers who do notcomply with regulations of SI In addition to above receivables, it is required to addthe SI fund because of financial investments result, then SI can afford the financialresource to make payment to participants in context of inflation.

According to Law on Social Insurance, SI fund have three component funds:

- Compulsory SI fund

- Voluntary SI fund

- Unemployment insurance fund

Financial management under SI regimes payment includes management ofregime beneficiaries and management of cash flow during payment of SI regimesprovided that money must be paid directly to beneficiaries

When reviewing SI finance, in addition to collection and paymentmanagement, it is important to determine the contribution rate and enjoy rate.Contribution of employees to SI shall make their income reduced and the regularpaid incomes shall at least replace one part of such income Income reduction cancause consumption reduction and reduce demand on luxury and semi-luxury goods.Decreased demand can cool down the inflation In some countries, government hasincreased the SI contribution amount to obtain this purpose Income compensated

by regular welfares shall allow employees and their belongings to cope with suddendifficulties (such as sickness, retirement) to obtain the welfare In other hand,regular welfare payment shall allow them to remain their consumption, although atlimited level (if such welfare is paid in one installment, it shall be used – at leastone part – for increased one time consumption) Regular payment shall stabilize inthe whole life (via sickness and retirement periods) the consumption level ofemployee and their belongings SI program shall base on financial system so thatthe amount received is equal to the amount paid, the income bearing SI shall beregulated by transferring it to households where low income of household iscancelled due to sudden event that insurance system must bear Such system shallremain demand and general consumption level, even if unemployment is insured

and economic analysis for its impacts must consider two factors: Contribution andenjoy, so it is required to determine correctly the payment level and enjoy level.However, in role of central financial fund, non-profit financial intermediary,

SI does not only rely on balance between contribution of SI participants and enjoy

of beneficiaries SI finance should include the financial activities relating to valueconservation and SI fund growth and use profit generated from such activities Theinvestment measures shall be conducted to conserve value, value fund growth andsocial – economic efficiency Potential monetary and fiscal year impacts of SIinvestment mean that investments shall be regulated without conflicting withGovernment’s policies By this way, SI reserve fund may be best used for economicgrowth Here, it is required there are no disagreements between investment demand

of SI system and local capital resourcing purposes of one country One investmentpolicy may be establish to apply both conditions Reserves shall be accumulated tocreate the investment income that allows to reduce the contributions and they must

be invested into project that speed up the economic growth and increaseproductivity For example, investment shall be conducted according to directinterest increase method of enterprise or indirect interest due to facilitiesimprovement (such as telecommunication, road or health care facilities) However,

if reserve fund is used directly or indirectly to meet current expenditures ofGovernment as in our country at present, it is certain that there is not a positiveinterest rate to SI fund Government’s control on SI investment fund does not mean

to use them in logic way to compensate the budget deficiency of Government Insuch case, SI system must be paid interest according to market interest It is the bestthat fund shall be used for long-term facility projects with high social efficiencycontributing to long-term economic growth

SI financial management objects analyzed above are management objects of

SI agency at Central level At local level, SI management objects only includefinancial activities on SI collection, financial activities on SI payment and paymentactivities of SI agencies

1.2.2 The content of financial management in social insurance

1.2.2.1.Fee collecting management of social insurance

• Establishing the plan of collecting social insurance

SI receivables shall be basic sources to form SI fund, it is required to set up

an clear, specific plan of collecting SI fee in close consideration to actual labourcondition and SI salary fund and economic – social development situation of eachlocality; the receivable amount shall be determined basing on total employees, totalsalary fund participated into SI and social – economic development situation ofeach locality Total receivables of collection plan shall base on total employees, totalsalary fund participating into SI and social – economic development situation Aftersetting up SI collection plan, SI agency shall submit SI collection estimation tocompetent authority for approval Basing on estimation assigned by The PrimeMinister, SI agency shall allocate to lower units for implementation under annualplan

For collecting and monitoring the SI participants, according to Law on SocialInsurance, all objects shall buy the compulsory SI and must pay the SI includingboth employer and employee (including employees who are assigned to study,exercise, business and provide health care service domestically and internationallythat still receive salary or wage of his/her organization or unit) who work infollowing social – economic organizations and units:

- Enterprises are incorporated under Law on Enterprises, including the armyforce enterprises;

- State’s own enterprise, career units of State, army units;

- Political, political – social organization, social – occupation organization andother social associations;

- Organizations and units operate under legal regulations

- Cooperatives, inter-cooperatives are incorporated under Law onCooperatives;

- Individual business household, cooperation team, other organization andindividuals employing, using and paying salary to employees

- Foreign organization, companies and individuals, international organizationoperate within Vietnam that employ the Vietnamese employee, unless theinternational treaty or convention otherwise specifies that Vietnam is a member;

Moreover, voluntary SI participant is Vietnamese citizen within working age.Employees buying compulsory SI, employees buying unemployment SI,employees buying the voluntary SI shall be called employees.

According to regulations at Law on Social Insurance No 71/2006/QH11dated June 29, 2006 of The National Assembly of The Socialist Republic ofVietnam, the compulsory payment amount of employee and employer buying SI isspecified as follows:

- For employer: From 2007 to 2010, employers shall pay 15% total monthlysalary fund of employees in such companies who join SI From 2010 and then, onceper two years, employer shall pay more 1% until they pay 18% From 2009,employers shall pay 1% monthly salary fund buying unemployment insurance ofemployees who buy unemployment insurance

- Employees shall pay amount equal to 5% monthly salary From 2010 andthen, once per two years, employees shall pay 1% of each month intounemployment insurance fund

SI participants are employees and employer In market mechanism,employers often do not automatically buy SI for employees They vest to measures

to avoid and trick Strict management shall force employers to provide fully data ofemployees and salary fund It is important to make full SI payment because this isbase for SI fund to have financial resource to make regime payment to employeesand ensure social security For convenient management and monitor of SIparticipation, pursuant to properties, characters and operation form of employers,people often classify into sectors for easy management There are manyclassification methods, however there are following sectors:

+ State’s own enterprises sector;

+ Private enterprises sector;

+ Foreign capital enterprises sector;

+ Administration and career sector;

+ Sector of Communist Party, organizations, political and social organizations;

+ Commune, ward and small town sector;

+ Cooperatives and individual households sector;

Moreover, SI agency shall regular make statistic, monitor and check thefluctuation of employers and employees during operation period of each company;

closely contact with local competent authorities to best exploit companies and SIparticipants.

For salary fund management for SI payment bases, SI payment amount andsalary fund shall be bases for calculating SI fee If the payment amount is notcorrect, the collection amount shall not correct and efficiently accordingly Paymentamount of employer and employee shall base on the fixed deduction rate from totalsalary fund In order to determine the SI payment amount, SI agency must monitor,check closely the wage and salary situation of each employee in enterprises, thencompare total monthly salary fund to calculate the SI payment amount

According to applicable regulations, salary of employees and salary fund oforganization and companies shall be determined basing on each employee inworking place, according to different payment levels as follows:

- For administration units, Communist Party organizations, Associations,public teams, monthly salary of employee and salary fund of companies shall bedetermined under regulations specified in Resolution No 730/2004/NQ-UBTVQHK11, dated September 30, 2004 of The Standing Committee of TheNational Assembly on approving the position salary table, position allowance tablefor leaders of State; professional salary table of The Court, Procuracy; Decision No.128-QĐ/TW dated December 14, 2004 of The Central Committee of TheCommunity Party of Vietnam on salary regime applicable to staffs, civil servantsand employees of The Communist Party agencies, fatherland front and associations;Decree No 204/CP dated December 14, 2004 of Government on salary regimeapplicable to staffs, civil servant, employees and army force; Decree No 204/CPdated December 14, 2004 of Government on salary scale, salary table and salaryallowance regime in State’s own enterprises

- Employers entering into labour contract shall pay SI basing on total monthlysalary fund, including contractual salary signed with employee who participates into

SI under regulation and salary of position holders that does not apply the labourcontract regime

- For employees who conduct term job overseas, if such employee hasparticipated into local SI, from January 2007 to December 2009, the insurance

payment amount shall be equal to 16% salary amount, wage of month paying SI ofemployee before working oversea Increase by 2% after two years From January

2014 and then the payment amount shall be equal to 22% salary amount and wage

of month paying SI of employee before working abroad

• Collecting SI fee

SI fee collection is characterized by huge amount from many differentobjects by many methods named by cash, transfer, cheque, payment order.Therefore, SI system must account, book-keep, report and check the whole SI feecollected under legal regulations, manage closely under financial principles SIagencies must cooperate with banks, State’s treasury to collect SI fee Whenemployers pay SI fee into banks and State’s treasury at district, district’s SI agencymust transfer the whole amount into specialized SI fee collection account ofprovincial Banks and State’s treasury Monthly, banks, State’s treasury and central

SI agency SI agencies at province and district level are not allowed to use SI feeinto other purposes

• Inspection of SI fee collection

It is required to inspect SI fee collection to check, remind and correct theerrors, speed up SI fee collection and detect the shortcomings in management.According to legal regulations, SI agency shall have rights to check the SI feecollection compliance at employers and lower SI agencies in collecting SI fee Afterthat, SI agency shall propose recommendations so that employers and lower SIagencies comply with regulations on SI fee collection and give proper measures tohandle shortcomings during SI fee collection process In case of major error,competent authority shall be consulted for settlement under legal regulations

Inspection methods of SI operation include: Inspection of State’s competentauthorities, specialized inspection (including the people’s inspection, monitor ofThe Communist Party organizations, associations, etc) The proper inspection formshall be proposed subject to purpose, requirement, content and time of inspection:According to time form, there are two types named regular or fixed inspection;before or after inspection, ad-hoc inspection; according to responsibility violation

there are internal inspection, inspection out of system under legal regulations(State’s inspection organization, People’s inspection, labour inspection, etc.)

SI inspection shall include two contents as follows:

- Inspect the compliance of SI payment at employers in which contain: List of

SI participants; salary fund for SI participation; salary level of employeeparticipating into SI; transfer SI fee collected to SI agency

- Inspect the collection of SI fee of SI agencies at levels, including theemployee management and salary fund participating into SI of employers;compliance with management and SI fee collection accounting

1.2.2.2 Payment management of social insurance

• Making SI payment plan

SI payment plan must be close with payment demand of each locality(province, district) to ensure sufficient capital sources for payment of SI regimes tobeneficiaries without huge outstanding in SI agencies at province and district leveland cause capital misspend Annual payment plan of SI agency at all levels shall bemade basing on:

+ Objects of enjoying retirement salary and SI allowance

+ Increase and decrease forecast of SI beneficiaries because State increases ordecreases the minimum salary or change the salary policy applicable to SIallowance beneficiary

+ Organizational structure payment plan shall base on number of civil servantsassigned, salary fund of staffs, civil servants; operation expenses for collecting andpaying SI; payments for procuring the facilities and equipment; need of repairingand improving the head office for working requirements of SI agencies Estimationbases are regulations of Government, MoF guiding the financial managementapplicable to VSS

According to estimation assigned by Prime Minister, Vietnam SI shall allocateand assign the payment plan for provincial SI to implement

•Management of SI payment

SI payment organization includes following content:

Firstly, manage the SI regime beneficiaries According to current regulations,

SI regime includes: Sickness allowance regime; maternity allowance regime,

Labour accident and occupational allowance regime; retirement regime and deathallowance regime.

SI beneficiaries may be beneficiaries themselves or their blood relatives(father, mother, wife, husband, children) that they shall directly bring up.Beneficiaries may enjoy allowance in one installment or monthly allowance, subject

to their contribution level (contribution time and salary for contribution bases);labour conditions and risks potential to employees It is extremely important that SIagency must manage exactly each object according to type of SI and enjoy level;time of enjoy respectively

Secondly, management of SI regimes payment Payment of SI regimes mustcomply with each object and allowance type provided that payments are made forcorrect object in sufficient, accurate and safe manner

SI regime shall be paid to beneficiaries in cash The monthly cash amount ishuge with large payment area in the whole country and regular payees are huge,payment time shall be made from the 1st and 5th day of each month

There are two payment methods named direct payment and indirect payment.The direct payment method shall be paid to SI beneficiaries who are staffs, civilservants and employees of SI system Indirect payment method shall be paid to SIbeneficiaries by authorization of SI organization at all levels to employers or vialegal representatives under People’s Committees of wards, communes to makepayment via respective agents

Thirdly, SI payment management In order to obtain the timely and sufficientpayment to SI beneficiaries, it is required to provide sufficient financial source tomake payment to SI beneficiaries, meet the SI regime payment requirements tobeneficiaries; without huge outstanding in cash upon making payment In order tomanage, operate and control the payment capital sources, SI agencies at district,towns and cities shall open specialized SI payment account at bank system Unitsare only allowed to use such capital sources to make payment for any otherexpenditure requirements SI can then inspect and control the budget used andbudget outstanding at accounts of lower units conveniently and easily

The forth, management of organizational structure payment: This is salary

expenditure for equipment procurement and fixed assets to remain the operation of

SI organization In some countries, such expenditures shall be paid by State’sbudget but in some countries they shall be paid by SI fund Organizational structureexpenditure should be managed to prevent unnecessary misspend as well as ensuresufficient capital sources for easy management of SI fund

• Inspect the SI expenditure implementation

SI expenditure implementation shall be inspected as follows:

- Inspect the handling process, payment and settlement of SI regimes tobeneficiaries This procedure shall directly relate to beneficiaries, SI agency andother units concerned such as employer and health examination authority

- Inspect regularly the management of retirement salary and SI allowancebeneficiaries as well as increase and decrease of such participants

- Inspect the compliance with final settlement as well accounting – statisticsactivities

1.2.2.3 Investment management for preservation and growth of the social insurance fund

SI investment is idle fund investment Because SI fund must be managed instrict and close manner for proper purposes, especially ensure sufficient resources tomeet all payment demand of SI regimes to beneficiaries It is required to complywith following crucial principle upon managing the investment activities of idle SIfund:

Capital preservation principle: SI fund shall be preserved and remained theactual value of such investments

Efficiency principle: Investment efficiency is extremely important because itrelates to preservation fund investment collecting the SI fee in long-term period.Net profit of such investments is at least equal to interest amount calculated bystatistics specialists when completing the SI payment rate

Solvency principle: It means that although idle SI amount is invested, it alsomust ensure the solvency for beneficiaries of SI regimes in case of necessary

Principle of “Economic – social benefit”: Economic benefit is presented in theprofit obtained and new economic relations resulted from investments Fundinvestment must also obtain the high social results, contributing to the healthimprovement and education or living standard enhancement of SI beneficiaries

Therefore, in the idle SI fund investment management, State often nominatesthe sectors and items that SI fund is invested into provided that investment activitiesstrictly comply with the material aspect of idle SI fund investment.

1.2.2.4 Fund balance management

SI fund is not a self-balance financial fund although operation principle of thisfund is to self-balance the collection and payment for non-profit purpose Payments

of this fund is often higher than SI fund receivable source collected from employeesand employers Therefore in order to balance the collection – payment of the SIfund, State shall finance this fund and fund must obtain the external collectionsources

Equation “Total collection equal to total payment” is explained as follows:Total collection includes: Collection from contribution of employer;Collection from contribution of employee; Collection from interest of idle SI fundinvestment; Collection from support of State; other collection

Total payment, includes: Payment for SI regimes; Payment for contributing HIfor retirement salary beneficiaries or labour accident allowance and monthlyoccupational disease, Organizational structure management expenditure;Expenditure for investment activities; Other expenditure

Due to above collection – payment balance method as above, SI fund shallbelong to State’s financial sector We can say that SI fund is social fund and non-profit financial intermediary that is established to overcome the defects of marketeconomy to employees

Management of SI fund payment – collection requires to monitor the financialcollection activities, fund finance to detect the fund imbalance or any changes incollection and payment promptly to propose proper solutions provided that SI fundshows its characteristics for more efficient operation

1.2.2.5 The influential factors of financial management in social insurance

In order to consider the influential factors to SI fund, we shall consider thesources establishing them In general, SI establish sources include the participation

of State, contribution of employees, employers, income originated from idle SI fundinvestment and other incomes Among of them, contributions of employees and

employer are the main sources In some countries, SI fund are established mostlyfrom tax receivables, special taxes named wine, beer, tobacco used to spare healthservices and health care for people SI fund established by tax often applies for thewhole SI system, for both labour and non-labour force Most countries have themarket economy, SI fund is established by contributions of employees andemployer SI participants must contribute one amount basing on their income orsalary

In terms of State’s management function, SI fund is affected by two followingfactors:

- Regime, establishment policy and use of SI fund, in which the main contentsare regulations on participants, contribution level of each object into SI fund andbeneficiaries as well as enjoy level of each object because SI fund must makepayment as well as manage to prevent loss and misspend

- Organize to implement the SI fund management operation such as: SIcollection – payment, investment activities for fund growth, payment fororganizational structure operation

In term of movement of financial sources, SI fund bears impacts of twofollowing factors:

- Movement of financial sources that increase SI fund scale Little ornumerous financial sources shall depends on mobilization policy of each country toform SI fund In general, SI fund shall be formed by following sources:

+ Contribution of employee and employer This is the main source to form SIfund, all countries in the world stipulate that all SI participants must contribute onepart of their income into SI fund Countries all specify that all employer mustcontribute to establish the SI fund to ensure daily life of employees and their familywhen employees enjoy rights and benefits of SI specified by laws Generally,contribution of employer and employee into fund shall be determined according topercent (%) per monthly income of employee Therefore, total contribution ofemployer and employer into SI fund shall be determined by four following funds:Number of SI participants, monthly income of employee, SI payment time andpercent (%) of SI contribution Total contribution into SI fund shall be proportional

to such factors

+ Interest sources from idle SI fund investment SI fund is designed according

to accumulation model, this is huge monetary fund If SI fund investment obtainshigh performance, without risks and loss, interest amount taken from investmentactivities is a huge amount that shall supplement to increase SI fund

+ State shall play the role of agency that is responsible for organization,ensure the whole social life of the country When State adjusts the contributionregime or too huge payment level that make fund unbalance, collection is notenough for payment, State’s budget must support to ensure payment demand toobjects

+ Other financial sources named sponsor or finance of local or foreignorganizations and units

- Movement of financial sources shall reduce SI fund scale There are twomain sources as follows in term of using purpose:

+ Financial sources used to make payment to SI regimes This is the mainfinancial source in using the SI fund Each country shall specify the SI policies inlaws the SI regimes applicable to each employee, low or high enjoy level

+ Financial sources are used to make payment for SI management: Arepayments for operation of departments and divisions that are responsible formanaging the SI management and expenses for SI investment operation Suchexpenses account for little percent in total payments from SI fund

CHAPTER 2: THE REAL STATUS OF FINANCIAL MANAGEMENT

IN VIETNAM SOCIAL SECURITY 2.1 Introduction to Vietnam Social Security

2.1.1 Foundation and development

From the first stage of evolution, although our country copes with manydifficulties and must handle many important tasks, our Government took care toimplementation of SI First of all, the revolution government has applied the formerretirement regime of French to handle benefits for some civil servants under Frenchera then they follows revolution and they have become old and weak

In 1950, President Ho Chi Minh signed the Decree No 76/SL dated May 20,

1950 to issued the civil servants regulation and Decree No 77/SL dated May 22,

1950 to issue the workers regulation Accordingly, civil servants and workers haveretirement benefits Revising the SI policies in this period, such policies areestablished and performed immediately after getting the independence although ourcountry was in extremely dilemma situation Moreover, the implementation policieswere not sufficient, only one regime was implemented with low allowance level toensure the minimum life for State’s workers and civil servants Payment sourceswere 100% taken from State’s budget without contribution of parties

In order to meet the living improvement requirements of staffs, civil servants,social allowance regimes must be added and amended in consistence with thesocialist republic regime in the North and the struggling and liberalization of theSouth On December 27, 1961 the Ministers Council issued the Decree No.218/HĐBT detailing the temporary Charter on SI regimes applicable to State’sstaffs and civil servants Then Decree No 161/CP dated October 30, 1964 issuingthe temporary Charter applicable to army force and soldiers Therefore SIparticipants are enlarged with 6 regimes: Retirement, labour health loss, death,sickness, maternity, labour accidents-occupational disease SI regimes are deployedsufficiently At the same time, state also specifies the partial contributions ofenterprises, State’s budget shall finance the remaining amount As of 1985, in linewith salary regime reform, Ministers Council issued the Decree No 236/HĐBT toamend and supplement the important matters such as contribution increase of

production and business units However, in this period, the production and businessunits copes with many difficulties that suffered from loss and inefficient subsidymanagement regime, SI fund did not collect any fee, State’s budget therefore mainlyfinanced this fund SI was managed and organized unstably in this period because itwas managed by many different Ministries and Departments (Ministry of HomeAffairs, MOLISA, MoF and Vietnam General Confederation of Vietnam) MOLISAand Vietnam General Confederation of Vietnam were mainly responsible formanaging the SI system.

The VIth nationwide Communist Party meeting (December 1986)proposed the comprehensive reform direction, removed the subsidy regime toestablish new regime in compliance with objective rules and development level ofour economy In line with general reform of our country, SI policies also had themovements As of June 22, 1993, Government issued the Decree No 43/CPdetailing the temporary regulations on SI regime In which, the clear change is thatEmployee must pay SI Operation regime of SI was regulated in Labour Codeapproved by The National Assembly on June 23, 1994 In 1995, Government issuedthe Decree No 12/CP detailing the SI Articles of Associations, Decree No 45/CPdetailing the SI articles of associations of SI applicable to military force and publicsecurity

In order to implement the policies, SI regime, Government issued the Decree

No 19/CP dated January 01, 1995 to establish the Vietnam Social Security (VSS)

On September 26, 1995, Government issued the Decision No 606/TTg issuing theregulations on organizations and operation of VSS

VSS was established by integrating SI organizations at Central and Local levelmanaged by system of Labour – Invalids and Social Affairs and Vietnam GeneralConfederation of Vietnam to support Prime Minister to direct, manage the SI fundand implement the SI regimes and policies under legal documents

After many years of operation, in consistence with revisions of policies on SI,

HI and VI of State, Government amended and supplemented regularly functions andpowers of VSS On January 17, 2014 Government issued the Decree No

05/2014/NĐ-CP specifying the functions, tasks and powers and organizationalstructure of VSS.

2.1.2 Organization structure of Vietnam Social Security

Vietnam Social Security (VSS) is agency under Government that isresponsible for organizing and implementing regimes and policies of compulsory

SI, voluntary SI, HI; collecting and paying the unemployment SI regime; managingand using the funds: Compulsory SI, voluntary SI, unemployment insurance(hereinafter called SI), Health insurance (hereinafter called HI) under legalregulations

VSS is managed by MOLISA on Social Insurance, Ministry of Health (MoH)

on health insurance, Ministry of Finance on financial regimes of SI and HI funds

VSS logo:

Organizational structure of VSS as follows:

- VSS Governing body is the supreme management agency of VSS

- VSS is organized and managed according to vertical system from Central toLocal level, including:

Organizational structure of Vietnam Social Security

Inspection Division

Reward and comment division

Reward and comment division

Drug and Medical supplies Division

Internal control board

Internal control board

Northern

HI Appraisal Center

Southern

HI Appraisal Center

Southern

HI Appraisal Center

Accounting Division

Accounting Division

Finance- Card Division

Card Division

Number-Propaganda Division

Propaganda Division

Planning – Investment Division

Planning – Investment Division

Personnel organization Division

Personnel organization Division

Legal Division

Legal Division

Office SI Science SI Science InstituteInstitute IT Center

SI Staff Training School

SI Staff Training School

SI newspaper

SI newspaper MagazineMagazineSI SI

The Prime Minister

Director General Governing body

Some main functions and tasks of VSS:

- Submitting the Government to regulate functions, tasks, powers andorganizational structure of VSS

- Submitting Prime Minister the Vietnam Social Security development strategy;long-term, five-years and annual plan on VSS activities; project of preserving andgrowing the SI and HI funds after having approved by Governing body of VSS;implement the strategies, plans and projects after having approved

- Accountabilities and relations of VSS with Ministries on SI, HI and financialregimes applicable to SI and HI funds:

+ For Ministry of labour – Invalids and Social Affairs: Proposing MOLISA toestablish, amend and supplement the SI policies; request to inspect and check theorganizations and individuals in SI implementation under legal regulations; Bearinspection and check of MOLISA on implementing legal regulations on SI; Making

6 months regular reports and ad-hoc report to MOLISA on implementation ofregime, SI policies; collection, payment and management as well as use of SI funds.+ For MoH: Proposing the MoH to establish, amend and supplement theregime, policies on HI; Participating with MoH in determining payment level,benefit scope, enjoy level of person examined health under HI regime and regimepaying the health examination and treatment expenses; health service price, list ofdrugs, medical supplies, technical service applicable to HI participants; RequestingMoH to inspect, check the organizations, individuals in implementing HI underlegal regulations; Bear inspection and check of MoH on implementing the legalregulations on HI; Making 6 months regular reports and ad-hoc report to MoH onregime implementation process, HI policies; collection, payment and use situation

of HI fund

+ For Ministry of Finance (MoF): Propose MoF to establish, amend andsupplement the financial regimes to SI, HI funds and financial regimes applicable toVSS; Bear inspection and check of MoF on implementing legal regulations onfinancial regimes for SI and HI funds; Making 6 months regular reports and ad-hocreport with MoF on collection, payment as well as management and use of socialinsurance and health insurance funds

- Issuing the guidelines on procedures, profession in settling the social andhealth insurance regime and policies and payment as well as collection of socialinsurance and health insurance under legal regulations; issuing the specializeddocuments and internal management document of VSS.

- Organizing and performing the information, propaganda and dissemination

of regimes and policies and laws on SI, HI and exploiting, registering and managingthe SI and HI participants under legal regulations

- Organizing to collect the SI, HI, VI fees of companies, units, organizations,employer and individuals under legal regulations Receiving the expendituresoriginated from State’s budget to make payment to SI, HI and VI regimes underlegal regulations

- Receiving documents, handling regimes of sickness, maternity; labouraccidents-occupational disease; retirement; death; health rehabilitation aftersickness, maternity and after treating labour accidents-occupational disease underlegal regulations Organizing to pay retirement salary and SI allowance, HIallowance; making payment for full health examination and treatment under HIregime

- Managing and using SI and HI funds in public, transparent manner for properpurpose under legal regulation; organizing the book-keeping of SI funds, healthinsurance under legal regulations

- Managing the organizational structure of staffs, civil servants, job position,employees structure under professional title and number of workers in publicenterprises Managing finance, assets of VSS and organizing the implementation ofstatistics, accounting on social insurance, health insurance under legal regulations

- One per 6 months, making report to VSS Governing body on socialinsurance and health insurance implementation Annually, making report toGovernment on management and use of SI and HI funds

- Performing inspection and check of contract signing, payment and return thesocial insurance, health insurance for organizations, units and companies in usinglabour force, individuals, health examination and treatment facilities; refusing thecontribution and payment of SI and HI regimes without complying with legalregulations Cooperating with State’s competent authority in specialized inspection