Workers in Informal Sector Added to Social Insurance Coverage

10:12:14 AM | 3/12/2021

Workers in the informal sector are the most vulnerable, the most exposed to risks and the least beneficiary to policy entitlements. Therefore, the goal of expanding insurance coverage for informal employees is an important content of Resolution 28-NQ/TW that the social security sector is determined to achieve.

Huge potential

A lot of policy changes in insurance policies (especially voluntary social insurance) have enabled workers in the formal and informal sectors to have social insurance and the number of policyholders has therefore increased year after year. In 2012-2016, policyholders increased an average of 5.45% a year (from 10.565 million people to 13.065 million people in 2016). In 2017-2019, holders of social insurance policies grew by 6.48%, reaching 15.774 million in 2019 (accounting for 31.9% of the workforce) and to over 16 million in 2020 (accounting for 33% of the workforce).

However, in Vietnam, businesses in the informal sector are mainly non-agricultural business households and cooperatives with many different groups of workers such as business owners who employ workers, self-employed workers, wage workers (with and without labor contracts) and family workers. Thus, working in the informal sector includes both employees subject to compulsory social insurance (if they have employment contracts of one month or more) and employees subject to voluntary social insurance.

In 2020, the country had about 20.3 million workers in the informal sector, largely working in industrial, construction and services sectors. The rate of middle-aged workers, aged 35 and over, in the informal sector is much higher than that in the formal sector. In 2020, workers aged 35 and over in the informal sector accounted for about 70%. Their opportunity to get retirement benefits will increase when they retire if social insurance policies reasonably provide for years of social insurance payment. The rate of professionally certified workers in the informal sector is currently low. Workers with lower professional and technical qualifications often have narrow social relations, limited awareness and understanding of State policies and laws. Due to this reality, it is necessary to provide information about policies and laws on social insurance to these people.

Beside self-employed workers, wage workers in the informal sector also account for a significant proportion. The high ratio of wage workers in the informal sector shows that accelerating the formalization of this sector is a basic measure for expanding the coverage of compulsory social insurance and sustainable employment in Vietnam.

Consistent solutions

Resolution No. 28-NQ/TW sets the goal of "firmly expanding coverage, heading towards universal social insurance". At the same time, some reforms were proposed, including many reforms to expand opportunities and conditions to attract workers in the informal sector to buy social insurance.

Accordingly, voluntary social insurance will be paid by uncontracted employees while farmers, the poor, low-income workers and informally employed workers will be partly supported by State budget to scale up social insurance. New policies on State support for holders of voluntary social insurance in many different modes will be completed. Furthermore, retirement policies will be amended to increase benefits and reduce minimum years of social insurance payment from 20 years to 15 years and towards 10 years. Reducing the minimum number of years of insurance payment to be entitled to pensions will increase opportunities for many workers to buy social insurance, especially middle-aged workers aged 35 and over in the informal sector. In addition, compulsory social insurance will be considered for business householders, business managers, cooperative managers and operators (unpaid) and freelance workers. Flexible fees and benefits will be designed for workers in the informal sector, a step towards obliging social insurance to all paid workers.

For disadvantaged people, the State will provide assistance from the state budget for them to enjoy social insurance. These reforms will be consistent with the private economic development target of Resolution No. 10-NQ/TW dated June 3, 2017 on developing private economy into an important driving force of the socialist-oriented market economy.

Furthermore, social security agencies need to further inform laws and policies on social insurance and assign localities to develop buyers of social insurance.

The synchronous and effective implementation of the above social insurance policy reforms will help realize the goals of Resolution 28-NQ/TW: By 2025, 45% of the workforce will have social insurance policies, with socially insured farmers and workers in the informal sector accounting for 2.5% of the workforce. By 2030, voluntary social insurance will cover 60% of the workforce, with farmers and workers in the informal sector social insurance, accounting for 5%, another step towards universal social insurance.

Huong Thom (Vietnam Business Forum)