Strengthen the coverage and sustainability of the social security system in the Republic of Moldova

The project aims at strengthen the coverage and sustainability of the social security system in the Republic of Moldova through the implementation of the national social protection floors and reduction of the undeclared work.

Background

In the context of the post-crisis economic downturn and in the face of aging population, the Republic of Moldova is facing a formidable task to maintain a well-functioning social protection system that ensures basic health care and income security for all members in line with the ILO Social Protection Floors Recommendation, No. 202 (2012).

Although Moldova has achieved a reasonably wide social security coverage of workers in the formal employment sector, the gaps still exist. Notably, the prevalence of undeclared work and the widespread practice of underreporting wages resulted in a considerable deterioration of social security coverage. The undeclared work and the underreporting wages not only put a significant strain on social security and tax systems but also render these workers and their families unprotected against various social risks. A large portion of informally employed persons are found in the agricultural sector. Since the enrolment of farmers has become voluntary in 2009, the number of farmers covered by the social security system has decreased significantly from 200,000 persons to only 1,544 persons by 2013.

Extending social security coverage for informally employed workers is a first step for the transition from the informal to the formal economy. All the ILO tripartite constituents in Moldova recognize that the undeclared work is one of the most serious problems in the labour market governance and therefore it is a major obstacle in establishing a comprehensive social security system for all.

The extension of coverage should be accompanied by concurrent improvement of the social security benefits and financing as well as the capacity of the government and social partners.

Although the sustainability-enhancing reforms are inevitable, social security and social assistance should continue to serve as a backbone of income and health protection. The creation of the National Social Protection Floor, combined with the international minimum standards, should constitute an effective strategy to safeguard the adequacy of the benefit levels.

Objectives

The proposed actions aim at supporting the Moldovan government, social security institutions, and social partners in their effort in reducing the undeclared work through effective advocacy and information campaign on social protection floors at the national level.

At the same time, the proposed action will also assist the process of restructuring and transformation of the existing Moldovan social protection systems to improve its coverage and performance. Specifically, the Moldovan government has requested the ILO technical assistance in the development of policies in social assistance and social insurance systems, in particular the employment injury benefits.

Expected outputs and country‐level interventions

Output 1: National campaign on the extension of social security for the informal economy


The campaign will address a wide range of population who are currently or potentially involved in the undeclared work. Particular emphasis is given on workers and employers in small and medium enterprises, as well as agricultural workers. The campaign will inform the target groups on the national actions to combat the informal economy and the negative consequences of the undeclared work, thereby leading them to an improved compliance and performance of the contribution collection as a key milestone.

Specifically, the campaign plans to conduct
  • Advocacy through media campaign and the distribution of information materials in close collaboration with social partners.
  • Knowledge sharing of good practices of collection of social security contributions and extending coverage to the informal economy

Output 2: Development of policies for reforming the existing social protection systems

This output assists the development of the policies of and further aims at the adoption of the following legislations (subject to the Parliament process).

Main activities and key milestone are the following:
  • Extension of social security coverage to farmers
    1. Policy recommendations of the introduction of mandatory contributions for farmers, including their impact analysis
    2. Amendment of the Law on State Social Insurance Pensions in line with the recommendation
  • Analysis of the adequacy of the pension benefit
    1. Policy recommendation on the minimum income security based on the analysis of the adequacy of the current pension formula and indexation method, including the feasibility of introducing a universal social pension
    2. Proposal of the amendment of the Law on State Social Insurance Pensions
  • Risk-based contribution rates for the employment injury benefits
    1. Technical assistance to develop a government regulation establishing the methodology for the implementation of the risk-based contribution rates by industry. 
    2. Analysis of the Law on Work Accidents and Occupational Diseases Insurance in line with the new regulation on methodology for the determination of the contribution rates by industry.
    3. A Government Regulation establishing the methodology for the risk-based contribution rates by industry. The proposed contribution rates will be reflected in the draft Social Insurance Budget Law for 2016, which is to be approved by the Parliament in 2015. 
    4. Improvement of the work accident data which provide basis for effective planning of OSH measures and labour inspection. 

Output 3: Tripartite workshop for policy dialogue and capacity building on the social protection system

This output aims to enhance the capacity of the tripartite constituents in more effectively addressing the extension and reform of social protection issues in Moldova. This will be done by organizing a series of tripartite workshop with an aim of increasing the capacity of social partners in conducting impact assessment of planned social policies and monitoring implemented ones and building social dialogue based on well-founded knowledge on the good practice in the region. The main findings and recommendations produced under the Output 2 above will be used as key reference.