By John Carter, Evaluation Team Leader Hoa Binh August 18, 2011

    Identify and refine analysis of selected priority operational and design issues; Provide technical assistance to BoE for quality assessment; Propose and assess feasibility and applicability of possible solutions, learning from international practises; Enhance the understanding of MoLISA officials and other stakeholders on the proposed alternatives to improve the UI scheme management model.

       Meetings: with BoE, VSS , UI Office, VCCI and VGCL in Hanoi; Field visit to: Hanoi, Ho Chi Minh City and DaNang; Visited 4 ESCs: Hanoi, DaNang and Ho Chi Minh City (including Thu Duc); Joint stakeholder meetings in all 3 cities with DoLISA, ESCs, PSIs , Vocational Training Centres (HCMC), PGCL (DaNang and Hanoi) and employers (Hanoi -2, DaNang – 1); Individual meetings:  Vocational Training Centres (HCMC and DaNang); Worker Survey: questionnaire on client service at ESCs; Quality Monitoring: random files selected for quality review.

  National Statistics: Registrations:  June - Dec 2010: 109,692  Jan - June 2011: 182,122 (+66%)  UI Applications:   June - Dec 2010: 108,929 Jan - June 2011: 151,256 (+39%)  Decisions:   June - Dec 2010: 115,623 Jan – June 2011: 138,303 (+20%)

  HCMC: has computerized system Registrations:  June - Dec 2010: 34,094  Jan – June 2011: 58,812 (+72%)  UI Applications:   June – Dec 2010: 34,915 Jan – June 2011: 43,573 (+25%)  Decisions:   June – Dec 2010: 39,308 Jan – June 2011: 42,150 (+7%)

  DaNang: manual process Registrations:  June – Dec 2010: 3,071  Jan – June 2011: 4,382 (+42%)  UI Applications:   June – Dec 2010: 2,476 Jan – June 2011: 2,956 (+19%)  Decisions:   June – Dec 2010: 2,433 Jan – June 2011: 2,636 (+8%)

  Hanoi ESC: manual process Registrations:  June – Dec 2010: 2,940  Jan – June 2011: 6,482 (+120%)  UI Applications:   June – Dec 2010: 2,873 Jan – June 2011: 5,660 (97%)  Decisions:   June – Dec 2010: 2,810 Jan – June 2011: 5,468 (+94%)

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Finding: ESC should be allowed to finalize decisions involving UI claims for benefit;

Currently, the ESC is responsible for assessing, calculating and preparing a recommendation to allow UI benefits; the ESC Director also initials the recommendation; this recommendation is then sent to the Director or Deputy Director of DoLISA for signing; the (Deputy) Director has no knowledge of the UI process but essentially signs the decision in order to expedite payment to the unemployed worker; This creates unnecessary delays in the processing of UI claims; claim dockets or decisions are sent physically between offices which is cumbersome and ineffective; there is also the issue of security of information as the chances for losing files or decisions increases when transferred between offices.

 Proposed solutions:  ESC should be identified as primary department for the processing of UI claim from the time of registration of employment to final decision;  ESC staff should be allowed to finalize UI claim for benefit except in complicated situations where the signature of the Director ESC is required; law could be written where the ESC Director has responsibility for the final decision but this responsibility could be delegated to ESC staff where it is warranted (e.g. in larger ESCs).

       Finding: Inconveniency and burden (e.g. financial cost to travel from one office to the other) for the unemployed to register in ESC and receive benefits from PSI office; also ESC has no access to information concerning when and if the payment has been made.

Many countries have one department processing UI claims from the time of registration of employment to UI payment in order to ensure timely and effective processing and payment of benefit; Currently, PSI offices are responsible for the payment as they have an extensive network developed overtime with other social insurance benefits down to the commune level especially for the manual payment of benefits; However, as evidenced by the Ho Chi Minh City ESC, most payments will be made in the future via bank accounts (direct deposit); In HCMC ESC, there is a bank representative to assist unemployed workers acquire a bank account free of charge; there is close collaboration between ESC, PSI and the bank to ensure the unemployed worker receives their UI decision, HI card and ATM card at the same time in the ESC; In other ESCs, unemployed workers visit the PSI for payment but are told that they should visit the ESC for payment information; unfortunately, ESC has no information to provide and becomes a frustrating experience for the unemployed worker; in some cases, unemployed workers do not come to pick up decision or the payment possibly because of the high costs of travelling between the two agencies; These procedures could be implemented in all ESCs once the computer system is rolled out nationally;

 Proposed Solutions:    PSI to continue collecting premiums from employers; Prior to Decree 127 amendments to change responsibilities: PSI to continue payment of UI benefits but allocate one representative of PSI to front end of ESC; At the same time, conduct feasibility study for one agency to assume responsibility for UI payment and costing assessment to determine staffing, financial, administrating requirements as well as linkages with databases of the two agencies on a national basis;     Long Term: Establish separate national UI account for MoLISA (BoE); PSI (via VSS) to collect and transfer premiums to separate UI account; Continue to pay administrative costs for collection of premiums to VSS; Administrative costs for ESCs and payment to unemployed workers to be paid from separate national UI account;

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Finding: Need to strengthen collection activities, deem employment insurable in those cases where the employer has not submitted his premiums and substantially increase the amount of penalties to employers who fail to pay premiums.

VSS indicates 80% of employers pay on time; 20% do not and many are smaller to medium sized businesses; DaNang ESC indicated 30% not paying premiums on time and many unemployed workers are unable to apply for UI benefits as a result; Workers who have lost their jobs where the employer has not remitted premiums are in a vulnerable position; they are being penalized for the failure of employers to remit payments;

 Proposed Solutions:    When an employer fails to submit premiums, DoLISA Inspection and Control unit will initiate an investigation as soon as possible; If a contract with an unemployed worker is terminated, and the premiums not paid and delays the issuance of the SI Book, the unemployed worker should be allowed to file his/her UI application and receive UI allowances; in these situations where the employer fails to remit premiums, the employment should be considered insurable; Penalties to employers should be increased substantially to deter those employers who would rather pay the penalty than the actual premiums; continued non payment of premiums should result in increased levels of penalties.

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Finding: Many unemployed workers voluntarily quit their job in order to collect UI benefits.

Principle of UI is that risk is against involuntary unemployment such as lack of work or restructuring by employer; Many unskilled workers will terminate job and receive full UI and return to another employer; This leads to abuse of UI fund and sustainability of fund put in jeopardy;

    Should distinguish between quitters and involuntary job loss; grounds for differentiating between the types of job losers were already present in the present Vietnamese Labour Code, under the provision governing severance payments; Treat those who are fired because of their own misconduct the same as those who voluntarily quit; Virtually all stakeholders agree that some type of penalty should be imposed for voluntary quitters and those who are fired; Penalties can range from benefits being denied fully or partially; suggest partial penalty of a percentage of UI benefit rate.

 Proposed Solution:      New provision in UI act to penalize those who quit their position without good cause or are fired because of their own misconduct; Suggest include a penalty of a reduction in the UI benefit rate from 60% to 30%; Clearly define what is considered “good cause”; Develop policies to deal with additional factfinding required from both employers and unemployed workers in these situations; BoE should commence capturing data on the reason for separation distinguishing between those who involuntarily lost their job and others who voluntarily quit their position or are fired because of their own misconduct.

    Finding: ESC Directors and BoE need to manage work effectively because of rising levels of work; As mentioned, number of registrations, UI Applications and allowed claims are increasing nationally; Also, number of unemployed workers reporting monthly on job seeking activities has been increasing as well especially in larger ESCs and will continue to do so in 2012 due to increase in duration from 3 to 6 months (for those with 36 to 71 months of insured employment); BoE will be increasing staffing levels at end of year for rising levels of work;

 Excel sheet

  The monthly report on Job Seeking Activities is only one task performed by the ESC; need to consider all tasks when taking into account staffing needs and managing workload; HCMC are having difficulties in keeping and hiring new staff because of low wages; they would like to have more autonomy in managing the budget (e.g. If dongs are saved through more efficient management of the budget, savings could be used to keep more experienced and highly trained workers).

 Possible solutions:  Develop a resource determination model for all ESCs for next fiscal year; do a time study of individual tasks of ESC staff;    Analyze the impact of duration increasing to 6 months for many new UI workers filing in 2012; Consider proposal from HCMC to allow ESC Director to manage surplus funds to keep and attract new hires in the future; Consider upgrading satellite offices in HCMC to keep dossiers instead of transferring dossiers to main office.

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Finding: many stakeholders feel coverage should now be expanded to include other groups;

SI Law defines those who should be covered, that is:  Those who are working under contracts of indefinite term or those who have contracts of a term of full 3 months or more;

    A number of stakeholders wanted the elimination of the rule that employers must have minimum of 10 employees before employment can be considered insurable; To eliminate this rule would be to create a level playing field for all employers in terms of costs and creates more fairness among workers who can access the fund; Some stakeholders also feel that those who have contracts less than 12 months should also be covered thereby providing universal access to UI benefits in Vietnam; Issue of public servants v.s. public officials should be resolved as quickly as possible;

    Also, need to look at what amount of salary is considered insurable; Currently, the insurable amount is the salary stated in the contract; However, this amount does not include full salary, bonuses and overtime pay; Therefore, the worker is not provided 60% of full salary and is actually less than 60% of their full earnings.

 Possible Solutions:  Eliminate requirement that an employer must have at least 10 employees for employment to be insurable;    Include in insurable employment those workers with 3 to 12 month term contracts; Include all public servants under UI scheme except for those who are elected; Consider full salary including bonuses and overtime pay as insured earnings.

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Finding: Some ESCs are having problems with constantly locating files due to number of documents as well as receiving a significant number of claim dossiers;

Need to locate UI dossier several times during processing of UI claims for benefit and there are many forms; Every office has different procedures for filing claim dossiers; No procedures for archiving UI dossiers;

 Possible solutions:  Form a working group to look at the issue of matching documents to UI dossiers throughout the processing of a claim for benefit; Suggest to following for archiving purposes:  Active dossiers – up to one year;    Dormant dossiers – one year to two years; Archive dossiers – off site – two years to ten years – possibly scan documents; After 10 years: destroy documents

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Finding: Number of lump sum payments could be a drain on UI funds in future;

Number of actual lump sum payments has actually reduced over the last 6 months; National Statistics:   June – Dec 2010: 1,316 Jan – June 2011: 583 (-44%)  Many ESCs are ignoring requirement to complete lump sum application due to lengthy delays in processing; consider reported for third month as example;

  In January 2012, the duration of UI benefits will increase to 6 months for those who have between 36 to 71 months of insurable employment; Many workers could potentially quit to eventually receive lump sum after receiving one month of UI allowance and return to work full time shortly thereafter;

    Possible Solutions: Eliminate the lump sum provisions in the UI act; Use UI funds as a lump sum for commencing self-employment; conduct actuarial study to determine feasibility continuing to use lump sum in the future.

    Some ESCs using a temporary report to speed up the process of applying for UI benefits; employer submits SI book to PSI who provides temporary report to employer within two days and then given to unemployed worker to submit to ESC with UI application; Other PSIs are giving priority to UI applicants over other SI premiums; Ultimately, would like to see linkages between databases between ESC staff and VSS (must be national linkage to deal with transfer of UI dossiers); However, connection of databases not compatible according to VSS; they would like to see compatibility first with their own departments before ESC;

 Possible Solutions:  Agreement between VSS and BoE to proceed with study in connecting two systems as early as possible;  This would allow electronic sharing of premium information and eliminate need for SI book;  If no agreement, could look at utilizing some form of Record of Employment to be completed by employer in future;  concern that employers will make too many mistakes for this system to work.

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1)

need for establishment of an Investigation and Control Unit for protection of UI fund;  Can use preventative and investigative measures;

2)

need for a full quality monitoring program to ensure credibility of UI system;  Could report on payment as well as processing monitoring;

3)

only 50% of staff trained- newly hired staff have not received formalized training reducing effectiveness of staff;

4)

need to develop procedures for those who do not pick up UI allowance or other UI benefits;

 5) Many unemployed workers have low basic skills and do not require vocational training (70% ); the remaining 30% have higher skills but the funds available for vocational training are not sufficient to provide higher skill training.

 Many employers in garment/shoe industry train their own employees and is another reason for lack of interest in vocational training;

     Number of surveys conducted: Hanoi – 32 DaNang – 31 HCMC – 34 Total 97    Looking for a specific job or self-employment: 55% Not looking or no answer: 45%

   Base Salary v.s. Total Income: Equivalent to total income: 32% Equivalent to 80% of income: 58%     How did you know about registration requirements?

Employer Friends Mass media 89% 6% 3%

    Dossiers were selected randomly from lists of UI unemployed workers; Checked assessment of each dossier re. rate, duration, timely registration, timely application and final decision; Unable to obtain payment date from PSI for those dossiers monitored; Overall, required documentation was in dossier and claim processing was timely and met 20 day requirement.

     Claims monitored: Hanoi – 35 dossiers DaNang – 24 dossiers HCMC – 44 dossiers Total 103 dossiers   Total errors – 4 dossiers Types of errors –   start date of claim (not affecting pay) lack of proper documentation (minor)