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

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
2. RESEARCH OBJECTIVES
3. RESEARCH OBJECTS AND SCOPE OF RESEARCH
4. METHODOLOGY
5. THEORETICAL CONTRIBUTIONS AND IMPLICATIONS OF THE STUDY
6. THE CONTENTS AND STRUCTURE OF THE RESEARCH

1
2
2
2
2
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

SECURITY

VIETNAM SOCIAL
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
SOCIAL SECURITY

ORIENTATION OF FINANCIAL MANAGEMENT IN

VIETNAM
64

3.1.1 Point of view................................................................................64


3.1.2 Objectives....................................................................................64
3.2 SOLUTIONS

66

3.2.1 Macro-solutions...........................................................................66
3.2.2 Micro-solutions............................................................................70

3.3 RECOMMENDATIONS

77

3.3.1. Recommendations to National Assembly:..................................77
3.3.2. Recommendations to Government:.............................................77
3.3.3. Recommendations to competent authority..................................78
3.3.4. Recommendations to People’s Committee of Provinces and
Cities:..............................................................................................................79
CONCLUSION.......................................................................................................................................80


COMMITMENTS
I hereby commit that I clearly acknowledge and understand the
examination regulations of Paris Graduate School of Management, France and
I represent that I have conducted this thesis in true manner in compliance with
regulations of School.
Hanoi, August 20, 2014
Student

Le Thi Tuyet Minh

i


LIST ABBREVIATIONS
No. Abbreviations
Meaning
Agribank
Vietnam Bank for Agricultural and Rural Development

A
ATM
Automatic Teller Machine
BIDV
Joint Stock Commercial Bank for Investment and
B
Development of Vietnam
H
HI
Health insurance
I
ILO
International Labour Organization
IT
Information technology
L
LAN
Local Area Network
MoF
Ministry of Finance
M
MoH
Ministry of Health
MOLISA
Ministry of Labour – Invalids and Social Affairs
P
PC
Personal computer
S
SBV

The State’s Bank of Vietnam
SI
Social insurance
VI
Voluntary insurance
Vietinbank
Vietnam Joint Stock Commercial Bank for Industry
V
and Trade
VND
Dong Vietnam
VSS
Vietnam Social Security
W
WAN
Wide Area Network

ii


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 – 2014

Table 2.5

Payment situation of SI regimes in period 2010 – 2014

Table 2.6

Expenditures for VSS organizational structure management in period
2010 – 2014

Table 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 20102014

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

2010 – 2014
Appendix 2 Compulsory SI participants under enterprise form in period 2010 –
2014
Appendix 3 SI collection structure under enterprises form in period 2010 – 2014

iii


INTRODUCTION
1. The rationale of the study
Social insurance (SI) is considered as one of the most important policies of
the 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 the
cases of sickness, maternity, impaired labour skills, unemployment, or death of all
working age. The social insurance policies in our country have been carried out
since the establishment of the Government. Over the sixty-year period, during the
implementation process, social insurance policies have been improved, constantly
renewed, and supplemented to ensure its appropriateness to the current conditions
of the country. Along with the economic reform after the 6th National Congress of
the Communist Party of Vietnam, social insurance policies and institutions
responsible for operation management of social insurance have also had many
positive changes in different aspects. First, the presence of social insurance not only
makes significant contributions to promoting the life stabilization of workers, but
also encourages them to actively participate in production to create common wealth
for the society and for developing the national economy. During the implementation
process, social insurance has had the continuous development in both quality and
quantity aspects. The number of participants has been quickly increased and been
extended to different types of employees. Moreover, the mechanism of managing
social insurance has also experienced the radical shifts. Most importantly, the
organizational system is operating under the uniform structure on a national scale

with the 3-level model based on vertical sectors from the Central to local levels .
Besides these accomplishments, during its application process, Social Security
Fund has revealed several limitations which exist in the current policies and
implementation. Even though the policies and mechanisms of social insurance have
been constantly modified, supplemented, and supported by other social policies
(e.g., labour policies, employment and wage policies), there are still many issues
related 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
1


amendment and improvement of Social Insurance Law, there should be additional
rules and solutions to order to avoid the abuse or financial losses of the social
insurance 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 in
Vietnam Social Security in the recent years. From these evaluations, the study
identifies the current problems, obstacles, and their relative causes. Next, I will
propose new viewpoints and make useful recommendations to enhance financial
management 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 financial

-

management in Vietnam Social Security.
Propose useful solutions to improve financial management in Vietnam Social
Security.
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: Statistics
method combine with comparison, collection and analysis method.
5. Theoretical contributions and implications of the study
- In terms of theoretical contributions, the study proposes the theoretical
foundation for financial management of social insurance.
- With regard to practical aspects, the research demonstrates the real status of
financial management during from 2010 to June 2014. Based on these evaluations, I

2


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 is
presented in 3 chapters as follows:
Chapter 1: Literature review on social insurance and financial management in

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

3


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 to
meet such minimum demand, human must work to produce necessary products. The
bulky wealth the society is, the higher the satisfaction level is. However in order to
obtain many wealth, human must work and work more; it means that the demand
satisfaction shall depend on work skill of human. In actual life, not all people have
enough health and capacity as well as other conditions to fulfill their job, work or
make a happy and wealthy life. In contrast, many people face with difficulties,
misfortunes or risks that they shall reduce, loose their income or other living
conditions, such as sickness, accident, loss of bringing person, senior citizen, death,
etc. Moreover, life of humankind majorly depends on many natural conditions and
living environment. Unfavorable natural conditions or social conditions (accidents,
disaster, acts of god, etc.,) have made some people to fall in bad conditions that
need 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. In
case of sickness, people must buy medicine; when giving birth, mothers shall buy
napkin and supplies for new born; and mothers shall be provided with more
nutrients, etc. Therefore, people and mankind shall find and actually have found

many other solutions. In order to handle such risks and misfortune to minimize
burdens for family, in ancient time, people can remedy by themselves by
reservation; at the same time, employees also receive sharing, protection and help of
community and protection of society. The help shall be gradually enlarged and
developed in different forms. Such solidarity and union have positive impacts on
awareness and social work of State under different social regimes. This is the first
appearance of Social security and social insurance afterward.
During social development, especially after the industrial revolution, social
security system in general and social insurance in particular have the bases
4


(economic and social bases) for establishment and development. Industrialization
shall make day-staffs and employees increased; their life mainly depends on income
from outsourcing work. A part from salary (income from work), they can not have
other incomes, especially in market economy. Therefore if unfortunately they suffer
from sickness, accident, risks, unemployment or aging, etc, the employees shall be
reduced 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 any
income a part from salary. The daily necessity make collar employees to find other
measures by mutual affection and mutual love (establishment of mutual assistance,
associations, etc.,); at the same time, they shall struggle to request the employer and
State to provide some certain helps to ensure their life.
In 1850, In Germany, many Country’s States have established the sickness
fund and request the employees to contribute for prevention in case of income
reduction for disease. Accordingly, compulsory insurance has appeared by
deducting one part of salary to general fund (sickness fund) and at the first time
only 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 has
changed to new direction. The insurance participation is compulsory and

employees, employer as well State must contribute in such insurance fund (Three
parties mechanism). Insurance participation of employer both result from struggling
process of worker class and reflect the objective law of social development (mutual
dependence on economic benefit between creditor and employer). Employer shall
have a stable employee and staff to product the outcomes, create income and benefit
for enterprise. If enterprise’s employees are healthy without sickness and
occupational accidents, etc, enterprises shall not pay for such expenses. In contrast,
enterprises shall not bear such bulky expenses. In contrast, enterprises shall bear
huge expenses that increase production costs and affect product actual cost and
affect general profit of enterprise. In order to minimize such consequence,
enterprise shall improve the safety conditions, labour hygiene for employee; and
they shall “share risks” among employers by paying the social insurance. For

5


employees, the solidarity and mutual division shall be prevailed: all employees, in
spite of male or female; direct production employees – managers; healthy employee
– weak employee, employee in different sectors must contribute social insurance for
general purpose – ensure income for themselves.
This model of Germany has dispersed to European, then to Latin America, to
North America and Canada in the 1930s of XX th century. After the second world
war, social insurance has dispersed to independent countries in Asia, Africa and
Caribbean area. Social insurance shall become the basic factor of social security and
countries all accept social insurance to be one of basic rights of human. It is said
that after many periods, in line with disputes between employers and employment
and social – economic development, technology development, professional skill and
awareness on SI of employee are more and more improved, they are active in
handling “social incidences” or unfortunately face with risks in daily life. However
only until social insurance has been established in social regime, difficulties and

disputes above are handled completely and efficiently. Such solutions are the most
general and applicable for humankind during their development: Share (or called
“share out, risks division”). Appearance of social insurance is an objective certainty
when all members in society find it necessary to participate into SI system and
protected by SI. In economic point of view, participation in and protection of SI
reflect the objective law: need – demand law. Therefore, SI shall become the
demand 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 reused in code approved in New Zealand in 1938. In 1941, during the Second World
War, this term was used in The Atlantic Charter of 1941.

6


International Labour Organization (ILO) has rapidly accepted the term “Social
insurance”, this is an important milestone of this term, one simple term but reflect
the 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 an
organization 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 the
comprehensive safety for people against physical loss. Berghman proposes the same
point of view, Berghman thinks that SI is a comprehensive protection regime for
people against physical loss and damages.
According to Giancarlo Perone, social insurance is a system that include
benefits and services rendered to workers in case of necessary no matter what such
worker 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 broader
scope than social insurance, basic systems of social security system include: social
insurance, social aids, family allowance, allowances financed by community’s
funds, provision fund and protection provided by employer and social
organizations. The commercial insurance operates under voluntary manner,
insurance relation appears on insurance coverage contract, State’s insurance has
7


more

participants

than

social

insurance

(including

all

individuals

and

organizations), insurance allowance level shall base on insurance contribution and
consequences 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 in
society that goods production complies with market mechanism, employment
relation develops in a steady level. The more developed economy is, the more
diversified 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 3
parties: SI participant, SI party and SI beneficiaries. SI participant is employee or
both employee and employer; employer is organizations, enterprises and individuals
who employ labour force; SI party is normally specialized agency of State.
Income deficiency of employee upon coping with accidents or risks shall be
offset partially from accumulated monastery fund.
SI is to satisfy the crucial demands of employees in case of income
deficiencies or unemployment. ILO has clarifies such objective as follows:

Compensate employees with lost income to ensure their necessary demand; provide
health care and disease treatment service; Establishing the conditions to meet
residential demand and special demand of senior citizens, disable person and
children; SI is one of human rights recognized and accepted by Human rights
Declaration of UN on December 10, 1948: “All people in role of society members
have rights to enjoy SI, such rights base on satisfaction of economic, social and
cultural rights, characteristic and human development demand”.
In our country, SI is an important section in social welfare and security
policies in combination with social aids and social preferences, although it has

8


different points on object, scope and implementation method, they however always
supplement each other to ensure the social security.
Operations of SI is an career one for common benefit of the whole society
applicable 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 following
aspects:
Firstly: SI stabilizes physical life of SI participants, contributing to social
security policies of country.
Secondly: SI contributes to implement the social affairs. SI payment is social
income movement, the re-allocation of income among high income people and low
income 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 for
production 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 provide
higher productivity; Employer are responsible for paying SI to create the belief of

employees to employer, that encourage employees to work harder and serve
employer for a long-term. For State, via SI activities organization, State ensure that
all employees, all organization and units are fair and equal in production and
business and social life that help to stabilize production, economy, politics and
society in developed and safe manner.
The fifth: SI also contributes to economic development, handle job of
country. Idle SI fund shall be invested into other sectors, this is an important capital
source 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 basic
principles and such compliance makes SI developed strongly with great concern of
employees.
“Indemnity” principle of SI
Indemnity is general principle of insurance however it is the most basic
principle of SI.

9


SI participant shall firmly obtain the indemnities. Because SI operates under
guideline of compensating income for employees when they suffer from temporary
or permanent unemployment. While no employees can work forever to create their
income under “Birth, Old, Disease, Death” law, temporary or permanent
unemployment ability is a certainty for each person. When employee suffers from
the job unemployment or income, SI shall indemnify the amounts contributed by
them 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 family
develops in looser manner, especially in economic relation, SI participation is a

certainty, especially for old people. As in Vietnam, although SI has just been
established, many people can see its necessity and value. In the last, the living
principle has been established and recognized for a long-term named Young people
relay on their parents, old people shall rely on their children, many people
nowadays accept that Young people shall rely on their parents but old people do not
rely 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 and
satisfies the expectation of participants, because SI at that time is not different from
their 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 acceptable
that unemployment to employees is certain, indeed the risks of them are not the
same, evenly, many people must not face with many risks. This is base for SI to
implement the principle of “Taking majority to offset minority”.
Due to this principle, when employee faces with risks, they can enjoy the
indemnity to overcome their dilemma that is values much more than their actual
contribution. This principle shall make social property of SI to be clearer that
society and community has shared to care unfortunate individuals.
By understanding this principle, if SI expects success, it is required to attract
the participation of all people classes. The more people participate into SI, the less

10


SI fee people shall be paid. In contrast, when employees face up with risks, the
indemnity 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 offset
minority” have created the difference and strong vitality of SI for complete belief
and rely of employees.

1.1.5 The mechanisms of social insurance
Each country shall have difference economic, political and social situations, SI
shall be organized and implemented under specific regulations of each country. The
Convention 102 issued by ILO on June 04, 1952 has specified the minimum
services on social safety and given 9 following regimes:
- Health care: Ensure to provide supports to protected people when they need
prevention or treatment, including sickness due to any reasons and maternity, birthgiving and consequences.
- Sickness allowance: The protection cases include the unemployed people due
to sickness and cause their income interruption to provide stable income for SI
participant who suffer from sickness. The allowance period shall be 26 weeks. This
is short-term regime that is characterized by community, transfer risks from sick
people to lucky and healthy ones.
- Unemployment allowance: The protection cases include the income
interruption and objective events without faults of participants and they have not
found the proper jobs when employees can work and are ready to work. The
maximum allowance period is 13 weeks for collar employees. Minimum allowance
level is equal to 45% compared to previous income.
- Labour accident-occupational disease allowance: The protection cases shall
include the people suffering from labour accident-occupational disease that cause
income interruption or loose the complete income. Allowance level (including the
medical care) can be paid in installments or one installment subject to labour
reduction 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
11


payment level and enjoyment level (It means that employees shall pay fee during
the labour period and they only enjoy allowance when they have retired).

Employees shall be paid the insurance provided that they pay social insurance in 30
years, the retirement age does not exceed 65. Minimum allowance level is 40% their
previous income (for employees whose wife is in retirement age).
- Maternity allowance: Protection cases are pregnant, abortion, birth-giving
and 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 a
job earning income at specified level, when situation becomes regular or still exist
after ceasing the sickness allowance. The minimum allowance is 40% of previous
income.
- Death allowance: The protection cases are widowed wife or their children
who loose the means of support because the key person of family is dead. The
allowance shall discontinued when beneficiary obtains the job that its income
exceeds the limit. This regime shall support relatives of dead person to obtain the
allowance equal to income gap of family. This regime is characterized by social
factor with regard to contribution of SI participant and inherit factor of relatives of
dead person.
- Family allowance: This regime shall support the crowded children
employees to obtain the minimum physical allowance to take care and bring up
their children. Family allowance regime relates to job, therefore, allowance
beneficiaries only include the crowded children employees that face up with many
difficulties. Subject to specific social – economic conditions of each country, it is
required to specify in laws.
Each regime in SI system shall be established basing on economic, income
and salary conditions, etc., as well as taken consideration to ecological factors,
average life span, nutrition demand, etc., in order to specify the social insurance
payment level, enjoy level, time of obtainment and beneficiary.
In Vietnam, Law on Social Insurance specifies that there are 6 regimes named:
Maternity allowance; Labour accident – occupational disease allowance; Retirement

12


allowance; Unemployment allowance. Moreover, it is required to make payment for
examination 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 been
established from contributions of parties and other resources that is used to
compensate or replace income for insurance participants when they copes with risks
that reduce their health, labour ability, job removal or death to stabilize life for
themselves and their family in order to ensure social security and economic
development.
After comparing the State’s budget and SI Fund, we can see that such two
funds have the same nature, functions and organic relation during establishment and
usage. State’s budget and SI fund operate for non-profit purposes. Their
establishment 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 SI
fund 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 more
the more payment and collection activities are. This distribution relation is mainly
re-distribution without return and defects the social and national benefit, it controls
the individual relations and benefits and sector rights to ensure stable economic
development. While SI fund appears and develops in line with development of
goods economy, the employment relation has therefore established. Although State
all specifies the payment and collection by legal documents, they mainly rely on
economic 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, they
bases on return properties basing on payment level or risk level in labour of

employees.
SI fund has following features:

13


- SI fund appears, exist and develop in line with purpose of stabilizing life for
employee and their family when facing with accidents, risks that reduce or loose
their income during employment. SI fund operates for non-profit purpose.
- Distribution of SI fund is both return or non-return purposes. The return
means that employee is participant and payer of SI and they are beneficiaries of SI
fund 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 and
distribution time into SI. Non-return means that when participants join in the same
SI regime, some persons can enjoy many allowances in different regimes, some
persons enjoy less allowance, sometime do not enjoy. For this property, objects
enjoying allowances from SI fund is much higher than their contributions and vice
versa. This reflects the social property of the whole SI activities.
- Accumulation for preservation of value and financial safety for SI fund is for
principle purpose. This feature originates from the most basic function of SI that
ensure income safety for employees. Therefore, SI itself shall protect in risk of
financial in-safety. Many economists say that: SI fund is “Savings” of employees in
case of sickness, old age, etc.
- SI fund is core and physical content of SI finance. It is sector of intermediate
finance and State’s budget, enterprise finance and household’s finance to form the
national financial system.
- Appearance, existence and development of SI fund shall depend on social –
economic development level of each country and historical conditions in each
period of such country. The more developed economy and society are, the more SI
regimes are performed sufficiently. When economy and society develop, employee

and 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 on
establishment and use of SI fund, in order to ensure social security. By laws, State
shall regulate the distribution level of parties to establish fund as well as specifies
the conditions for enjoy, level of enjoy for each allowance regime.

14


- Combination of compulsoriness and voluntariness, between return and nonreturn, majority of SI fund is characterized by compulsoriness and return. State
issues the Laws that force everyone to participate into SI compulsorily in order to
ensure social safety and meet basic living demand when SI participant copes with
risks and accidents in life.
- 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 services
price. Such products and services shall be consumed by local and foreign users and
they certainly must pay respective expenses to number of products and services
used by them. Therefore, people in society and community have indirectly
contributed into SI fund by paying the price of products and services.
- SI fund has wide operation scope, huge objects, SI fund is established to
meet 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 the
international scope to ensure the social safety.
- One monetary fund is collected with huge amount in long-term in active state
and long-time idle period, SI fund shall be established by contributions for many
participants and employer in such nation. Therefore, financial resource shall be
focuses with huge amount. Moreover, SI fund is designed according to
accumulation model that shall be collected after many years, from this generation to

another, the balances shall therefore increased after years.
SI fund always suffer from impacts of many social – economic factors, each
economic – social movement shall affect SI fund. Some factors directly affect SI
fund, 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, the
contributions into SI fund shall increased respectively. When health is improved,
people shall be more healthy, their productivity shall be better; in other hand, SI
fund shall reduce costs of examining, treating disease and insurance fee in stead of
their salary. Factors indirectly affects the SI fund named: Economic growth, social
fairs and innovations, etc.

Economic growth is resulted from the increased

development and investment, accordingly labour force shall obtain more job

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chances and their income is improved. Fair and social advances are enhanced that
make people more prosperous, especially in social matters. Therefore, life quality is
improved, 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 to
object managed to obtain the objectives proposed.
By applying this concept into SI finance, we can identify the SI financial
management concept as follows:
“SI Financial management is the impact of SI management organization to SI
financial 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 dated
February 16, 1995 of Government on establishing Vietnam Social Security. At At
locality, 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, the
whole movement of SI fund in general; secondly, financial activities relating to
receivables and collection of SI regimes; Thirdly, financial activities relate to
payment of SI regimes; Fourthly, financial activities relate to value conservation, SI
fund growth and profit use generated from such activities; the fifth, financial
activities in Social insurance agency.
SI fund shall be managed in the whole system, accounted independently with
State’s budget and protected by State. All SI receivables and some other receivables
such as receivables from investment activities, etc shall be used to established the
central SI fund. In such case, payments demand, all payments (including SI
payment, payments for structure management, training payment, investment
payment, programs payment) shall be distributed and managed from SI fund
provided 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.

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Income may also be deducted from special taxes to support the SI systems. SI
system may receive the same contribution or different contribution subject to their
salary and wage. Other income is penalties applicable to employers who do not
comply with regulations of SI. In addition to above receivables, it is required to add
the SI fund because of financial investments result, then SI can afford the financial
resource 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 of
regime beneficiaries and management of cash flow during payment of SI regimes
provided that money must be paid directly to beneficiaries.
When reviewing SI finance, in addition to collection and payment
management, it is important to determine the contribution rate and enjoy rate.
Contribution of employees to SI shall make their income reduced and the regular
paid incomes shall at least replace one part of such income. Income reduction can
cause consumption reduction and reduce demand on luxury and semi-luxury goods.
Decreased demand can cool down the inflation. In some countries, government has
increased the SI contribution amount to obtain this purpose. Income compensated
by regular welfares shall allow employees and their belongings to cope with sudden
difficulties (such as sickness, retirement) to obtain the welfare. In other hand,
regular welfare payment shall allow them to remain their consumption, although at
limited level (if such welfare is paid in one installment, it shall be used – at least
one part – for increased one time consumption). Regular payment shall stabilize in
the whole life (via sickness and retirement periods) the consumption level of
employee and their belongings. SI program shall base on financial system so that
the amount received is equal to the amount paid, the income bearing SI shall be
regulated by transferring it to households where low income of household is
cancelled due to sudden event that insurance system must bear. Such system shall
remain demand and general consumption level, even if unemployment is insured

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and economic analysis for its impacts must consider two factors: Contribution and
enjoy, 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 value
conservation and SI fund growth and use profit generated from such activities. The
investment measures shall be conducted to conserve value, value fund growth and
social – economic efficiency. Potential monetary and fiscal year impacts of SI
investment mean that investments shall be regulated without conflicting with
Government’s policies. By this way, SI reserve fund may be best used for economic
growth. Here, it is required there are no disagreements between investment demand
of SI system and local capital resourcing purposes of one country. One investment
policy may be establish to apply both conditions. Reserves shall be accumulated to
create the investment income that allows to reduce the contributions and they must
be invested into project that speed up the economic growth and increase
productivity. For example, investment shall be conducted according to direct
interest increase method of enterprise or indirect interest due to facilities
improvement (such as telecommunication, road or health care facilities). However,
if reserve fund is used directly or indirectly to meet current expenditures of
Government as in our country at present, it is certain that there is not a positive
interest 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. In
such case, SI system must be paid interest according to market interest. It is the best
that fund shall be used for long-term facility projects with high social efficiency
contributing 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 include
financial activities on SI collection, financial activities on SI payment and payment
activities of SI agencies.

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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 labour
condition and SI salary fund and economic – social development situation of each
locality; the receivable amount shall be determined basing on total employees, total
salary fund participated into SI and social – economic development situation of
each locality. Total receivables of collection plan shall base on total employees, total
salary fund participating into SI and social – economic development situation. After
setting up SI collection plan, SI agency shall submit SI collection estimation to
competent authority for approval. Basing on estimation assigned by The Prime
Minister, SI agency shall allocate to lower units for implementation under annual
plan.
For collecting and monitoring the SI participants, according to Law on Social
Insurance, all objects shall buy the compulsory SI and must pay the SI including
both employer and employee (including employees who are assigned to study,
exercise, business and provide health care service domestically and internationally
that still receive salary or wage of his/her organization or unit) who work in
following social – economic organizations and units:
- Enterprises are incorporated under Law on Enterprises, including the army
force enterprises;
- State’s own enterprise, career units of State, army units;
- Political, political – social organization, social – occupation organization and
other social associations;
- Organizations and units operate under legal regulations.
- Cooperatives, inter-cooperatives are incorporated

under

Law

on

Cooperatives;
- Individual business household, cooperation team, other organization and
individuals employing, using and paying salary to employees.
- Foreign organization, companies and individuals, international organization
operate within Vietnam that employ the Vietnamese employee, unless the
international treaty or convention otherwise specifies that Vietnam is a member;
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