Why Workers Want Unemployment Benefits More Than Pensions?

In May 2023, just a few months before reaching retirement age, Mr. Tran Hoang Thong (Binh Phuoc province) applied for early retirement. At that time, Mr. Thong had contributed to social insurance for 41 years and 2 months and unemployment insurance for 14 years and 4 months. According to Mr. Thong’s calculation, in addition to the severance allowance, he would receive the maximum number of unemployment benefits (12 months) before completing the procedures to receive a pension. 

The reason why Mr. Thong chose to do so was because although the time of participating in social insurance exceeded the maximum (35 years of contribution, corresponding to a benefit level of 75%), due to the low level of salary contributing to social insurance (the highest contribution level was only 6,006,000 VND/month), the pension (calculated on the average salary level of the entire process) could be lower than the level of unemployment benefit (based on the average salary level of 6 consecutive months before leaving work). However, after quitting his job, he calculated that the pension and unemployment benefits were equivalent, about 3.6 million VND/month, so he decided to cancel his unemployment insurance and apply for a pension.

Mr. Nguyen Tuan Huan (Binh Chanh District, Ho Chi Minh City) had a different experience. He worked until he received the retirement decision. However, when he received the decision, he regretted not doing enough research, ignoring unemployment insurance to receive a pension. Mr. Huan contributed to social insurance for 42 years and 2 months, received his first pension in January 2024 with a salary of more than 3.3 million VND/month. The pension level is far from the predicted level (about 4.5 million VND/month), which shocked Mr. Huan deeply. “If I had known that my pension would be so low, I would have applied for unemployment benefits (about 3.9 million VND/month) instead. It’s a shame because I have been contributing to unemployment insurance for 15 years and have not received anything,” Mr. Huan said.

Both Mr. Thong and Mr. Huan argue that it is not an act of exploiting the unemployment insurance fund to claim unemployment benefits before receiving a pension because pensions and unemployment benefits are paid from 2 separate funds, both of which are contributed by workers. However, according to regulations, when receiving a pension, workers are not entitled to unemployment benefits, while the pension is too low, so workers have to calculate to receive a more favorable benefit. 

“The state always encourages the implementation of policies that are more beneficial to workers. That is clearly demonstrated in the fact that when implementing social benefit policies, if a person belongs to many subjects, they will receive the benefit of the subject with the highest benefit level. Moreover, only when workers meet the conditions prescribed by regulations will the competent authority settle the regime. Therefore, it is impossible to apply the act of “exploiting” to workers,” said Mr. Thong.

Sharing the same view, at the recent dialogue between HCMC Social Insurance and businesses, Ms. Nguyen Thi Ai Nuong, personnel officer of Foren Co., Ltd. Branch in HCMC, also raised the question of why when workers are eligible for retirement, they are not allowed to receive both pension and unemployment insurance benefits. The fact that they are only entitled to one of the two regimes forces workers to make a choice, and many of them choose to quit their jobs before being eligible for a pension for one year to receive unemployment benefits for 12 months, and then retire because they feel disadvantaged for the long period of contribution but no benefit. 

According to Ms. Nuong, this is also the reason why workers choose to withdraw social insurance once instead of participating in social insurance for a long time to receive a pension. “Therefore, the policy needs to be changed, designed so that workers can see the benefits of pensions, of participating in social insurance, and unemployment insurance in the long term, instead of seeing that retirement brings many disadvantages, loss of benefits (in terms of severance allowance, unemployment insurance) as it is now,” said Ms. Nuong.