brief discussion

7/28/2019 Brief Discussion

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Introduction

The Philippine Social Security Act of 1954 (or the Social Security Law) was implemented in 1957with the founding of the Social Security System (SSS). The mandate of the SSS is to providemeaningful protection to private sector workers and their families against the real life contingencies ofold age, disability, death, sickness, maternity and employment injury. (Public sector workers are

covered by the Government Service Insurance System or GSIS.) This mandate is based on Section 2 ofthe Social Security Law (Republic Act No. 1161), as amended by the Social Security Act of 1997(Republic Act No. 8282), to wit:

It is the policy of the State to establish, develop, promote, and perfect a sound and viable tax -exemptsocial security system suitable to the needs of the people throughout the Philippines which shall promote

social justice and provide meaningful protection to the members and their beneficiaries against hazards ofdisability, sickness, maternity, old age, death and other contingencies resulting in loss of income or

financial burden. Towards this end, the State shall endeavour to extend social security protection toworkers and their beneficiaries.

With the implementation of the Social Security Law, the government adopted the social insurance

approach to social security, covering the employed segment of the labor force in the private sector. (SSSPrimer) RA 7655 (1993), An Act Increasing the Minimum Wage of Househelpers extendedcompulsory social security coverage to household helpers earning at least P1,000 a month. RA 8282,

The Social Security Act of 1997 expanded compulsory coverage to include self-employed workers,agricultural workers who are not paid any regular daily wage or who do not work an uninterrupted periodof at least six months, household helpers, parents employed by children, and minors employed by parents.

They are compulsorily covered under the new Social Security Law and eligible for the benefits coveredunder various SSS programs.

Under the law, the employer is obliged to deduct from the employees their monthly contributions,pay his/her share of contributions and remit these to the SSS. Self-employed /voluntary members pay

their own monthly contributions.

The SSS has the necessary mechanisms in place. The crucial issues are how effectively it has

reached out to and served its informal sector constituent base, as well as how it has addressed compliancewith and shirking from social security obligations by members of this sector.

Benefits and Loan Privileges

The SSS administers two programs, the Social Security Program and the Employees CompensationProgram (EC). The Social Security Program provides replacement income for

workers in times of death, disability, sickness, maternity, and old age, and funeral cash benefits to

whoever shoulders the burial expenses of a deceased member or pensioner. The EmployeesCompensation Program, started in 1975, provides a second compensation to the worker when the illness,death, or accident occurs during work-related activities. EC benefits are granted only to members withemployers.

The loan privileges for all active SSS members are salary loans, house repair/ improvement loans,individual housing loans, and assumption of mortgages.

The Social Security Commission


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The SSS is directed and controlled by the Social Security Commission composed of the Secretary of

Labor, the SSS President, and seven appointive members, three of whom represent the workers group,another three represent the employers group, and one of whom represents the general public.

The President of the Philippines designates the Chairman of the Commission from among its

members and appoints the SSS President and CEO.

Credibility and transparency need to be brought to the fore, given the recent appointment of acontroversial political figure very close to the President to the SSS leadership, and the past scandalsinvolving questionable investments and expenditures which have hounded the SSS. (See Serrano, 2006).The immediate past President of the SSS, Corazon de la Paz, admitted that during her term, she had to

resist proposals to use SSS funds for pro-poor government projects which are not defined in the Charter.(Malaya)

Institutional Performance

After being in the red for five years, the SSS posted its third consecutive contribution-benefit surplus

year in 2007 attributed to the one percentage point increase in the SSS contribution rate, and improvedcollections. In the same year, the SSS posted higher returns on its investments and managed prudentcontrol of its operating expenses. Further, based on 2007 actuarial updates, the actuarial life of the SSS

fund has been extended by more than 20 years to 2036. (SSS 2007 Annual Report)

Coverage

Compulsory Coverage

Workers with compulsory coverage fall into three categories, viz., employees, employers, and self-employed persons.

1. Employees: private employees (permanent, temporary, or provisional), household helpers,Filipino seafarers, employees of foreign governments, international organizations based in thePhilippines.

2. Employers: in business, trade, industry, or any undertaking; social, civic, professional, charitable,and other non-profit organizations; foreign governments, international organizations

3. Self-employed persons: self-employed professionals; partners, single proprietors of businessesand board directors of corporations; actors, actresses, directors, scriptwriters, and news

correspondents; professional athletes, coaches, trainers, and jockeys; farmers and fisher folk;workers in the informal sector

Voluntary Coverage

Workers with voluntary coverage fall into three categories, viz. separated members, overseas Filipinoworkers (OFWs), and non-working spouses of SSS members.


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1. Separated members: separated from employment or ceased self-employment/OFWemployment/non-working spouse status

2. OFWs: Filipino recruited in the Philippines by a foreign-based employer for employment abroad;Filipino having a source of income in a foreign country; permanent resident in a foreign country

3. Non-working spouses of SSS members: legally married to a currently employed and activelypaying SSS member who devotes full time in the management of household and family affairs

R.A. 8282 has a penal clause for failure to comply with the provisions of the Social Security Act,failure to register employees or himself/herself, in the case of the covered self-employed. The penalclause specifies punishment of fines and imprisonment.

Actual Coverage

Table 1. Source: Nora Mercado, Head of the SSS Membership Program Management Department1

The total SSS membership of 27.38 million as of March 2008 as reflected above is close to tenmillion more than the membership in 1996, prior to the enactment of the new Social Security Law. (SSS2007 Annual Report)

SSS Coverage (19592007)

Year Number of Workers

1959 401,769

1969 2,329,315

1979 7,381,193

1989 11,775,459

Type of MemberNumber

as o f Mar. 2008

Employee 21,527

Regular 21,413

Househelper 114

Self-employed 5,159

Regular 1,270

Expanded 3,373

Farmers & Fishermen 517

Voluntary 694

Overseas Worker 688

Non-working Spouse 6

Total 27,380


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1999 21,325,966

2000 22,630,832

2001 23,532,666

2002 24,308,033

2003 25,051,234

2004 25,666,386

2005 26,227,6362006 26,739,282

2007 27,241,220

Table 2. Source: SSS 2007 Annual Report

In the years 2000-2007, membership has grown at an average rate of 3.12 per cent per annum. Therewas an 81.1 per cent jump in membership from 1989 to 1999.

Employed Persons by Class of Worker (In Per Cent)

Employed Persons (in thousands) 33,536

Total 100

Wage and Salary Workers 52.8 17,707

Private Households 4.7 1,576

Private Establishment 39.5 13,247

Government/ Government Corporation 8.0 2,682

With pay (family-owned business) 0.5 168

Own Account 34.7 11,637

Self-employed 30.1 10,094

Employer 4.6 1,543

Unpaid Family Workers 12.5 4,192

Table 3. Source: National Statistics Off ice, Apri l 2008 Labor Force Survey

An analysis of the figures in tables 1 and 3 show the predominance (79 per cent) of workers in formalprivate employment in SSS membership. They comprise 48.7 per cent of the total employed populationoutside of government. The self-employed sector, to which the informal workers belong, constitutes only

19 per cent of SSS membership despite the total share of own account workers to the total employedpopulation outside of government being 37.7 per cent.

Women as a group are also disadvantaged in terms of SSS coverage considering that majority ofemployed women are in the informal sector. They also comprise the overwhelming majority (two-thirds

to three-fourths) of newly hired Overseas FilipinoWorkers (OFWs) and domestic workers. There are less women (11,871,770) than men (17,670,345) inthe membership roster2.

Similarly, there are some disturbing membership figures: Only 680,000 of the millions of OFWs areSSS members; 114,000 out of the 1.58 million domestic workers (NSO LFS, April 2008); and only 6,000out of millions of Filipino housewives (almost half of all Filipino women) who could be classified as anon-working spouse.3


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It has been reported that only eight million of the more than 27 million SSS members are actually

continuing their payments. Paying members comprise just one-third of the total membership and one-fifth of the self-employed membership. (Mercado) This indicates a serious evasion and compliance

problem.

Non-continuation of payments has implications on benefits that may accrue, particularly retirementbenefits which require at least 10 years of continuous payment, and even maternity benefits which assumethat at least three monthly contributions during the 12-month period prior to the semester of delivery have

been paid. Again, women who are less covered, who live longer, and who face sex-specific contingenciessuch as maternity, are more disadvantaged.

There is the issue of whether informal sector workers, in particular, are willing to be covered in thefirst place. If they are, there are additional concerns of whether the irregularity of their income flows will

allow them to meet the qualifying conditions for membership and sustain their monthly contributions. (dela Paz, 2006)

Acknowledging the dismal membership figures of the informal sector, in 2009, the SSS will embark

on an intensive information and recruitment campaign for workers in this sector. The value of benefitsfor SSS members and the importance of saving will be further emphasized. (Lagaste)

SSS Servicing

In response to pressure from informal workers and other groups, and to enhance its own viability, the

SSS in recent years has expanded its payment channels in order to provide more access to informalworkers, overseas workers, and other underserved groups. Monthly contributions are based on the

compensation of SSS members and may now be remitted, together with loan payments, through variousmodes, viz.:

1. Over-the-counter with SSS (88 branches nationwide with tellering facilities), 117 accreditedbanks, non-bank collection agents

2. For self-employed and voluntary members, farmers, fishermen, and other informalsector workers, non-working spouses, and OFWs only: SM Payment Centers (26nationwide)

3. For OFWs: PNB overseas bills payment system4. For employers: Electronic data interchange (EDI)5. Automatic Debit Arrangement (ADA) with eight accredited banks6. BancNet Online with 18 banks in its network7. Collection is also done by account officers and cluster legal units.

There are 49 self-service information terminals (SS IT) nationwide and one in Hongkong, for checking

SSS records such as contribution payments and status of applications for benefits and loans. The SSS

website also provides the aforementioned information though the website has been down for months.

Despite its efforts to expand its payment channels, the SSS still has a long way to go in terms ofreaching out to informal workers and other vulnerable groups. The ADA program, a

payments facilitation scheme conceptualized to serve this segment, and under which workers can maketheir monthly SSS contributions through accredited banks via automatic debit from their savings accounts


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(opened with a minimum deposit of P100) or over-the-counter transactions, has not been that successfulon the ground. SSS leaders report that just over a thousand ADA members remain active.4

There have been reports that some banks no longer accept SSS payments under the ADA scheme.There were also reported difficulties in transacting with an ADA-accredited bank:

payments were accepted only on Fridays, deposit slips for SSS payments were sometimes not available,

the teller in charge of processing payments was sometimes not present, other depositors in line were givenpriority. It appeared that the ADA participants were being discriminated against.5

An ADA implementation reviewed was marked by irregularity in monthly contributions and a highdefault rate. There was a generalized admission that it was difficult for self-employed workers to maketheir monthly contributions or to fund their savings accounts. From the combination of irregular monthly

payments and insufficient account balances, the ADA program seems ineffective, given the expectationthat these payments were to be debited from the accounts.

There were contrary views expressed with respect to continuing the ADA program. On the one hand,

some said that with the now relative ease of enrolling in the SSS as self-employed workers, as well as theease of payment, the ADA program is unnecessary. On the other hand, it was averred that it is still

difficult for the self-employed to enrol in the SSS their ability to make monthly contributions isquestioned, they must have a viable business, and front-line workers of the SSS are intimidating and notcustomer-oriented. The ADA program can still be of help because the processing of the membership

applications is facilitated by the Department of Labor and Employment (DOLE).

Ways Forward

The SSS must exert maximum effort to ensure that informal sector workers are effectively covered

and efficiently served with respect to their social security needs. Their vulnerability and marginalizationmake these imperative. The following are recommendations:

1. NGO-PO consultations highlighted the need for the SSS to be more inclusive, to reach out tounderserved sectors of the working poor such as tricycle drivers, fisher folk, vendors, domesticworkers, seasonal workers, and housewives/ spouses, and to devise more programs that ensureequality of access to benefits among people of different socio-economic classes.

2. There must be an intensification of enforcement and monitoring efforts by the SSS with respect tomembership and monthly contributions compliance .

3. Unemployment insurance must be provided and the youth included in the scope of coverage.4. Sponsorships and subsidies from the national and local governments should be extended to those

who cannot afford to pay the full SSS premiums particularly for those who enroll as self-

employed and therefore pay both the employer and the

employees share.5


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Local government units where various organizations are registered for accreditation as well aspermits to operate can also provide subsidies to fully or partially cover SSS payments of their

constituents.

5. Informal workers, in addition to formal labor, should be represented in the SSS Commission.Since SSS contributions come from workers, workers representatives should decide how best to

use them based on the principles of democratic control, transparency, and accountability. 6

6. In order to facilitate universal membership, cooperatives, womens and peoples organizationsshould be accredited as collecting agents of premiums.

7. Other collection mechanisms (through cellphones, couriers, etc.) should also be developed.8. Funds should be set aside to meet the immediate needs of SSS pensioners.9. Monitoring of compliance by employers, especially in the provinces, needs to be improved and if

possible be conducted by an independent body.

brief discussion

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