Contribution collection and compliance plays a fundamental role in social security as it helps to ensure the sustainability of social security systems and promotes a higher level of coverage among workers. As the ISSA Guidelines on Contribution Collection and Compliance (ISSA, 2019) put it, “The timely and full payment of contributions by and on behalf of insured persons is necessary if they are to achieve the benefits to which they are legally entitled”.
Contribution collection comprises a set of processes that can be divided into those linked to voluntary compliance and those that enable compliance control (Table 1). The first group comprises those processes linked to contributor registration, the determination of contribution amounts, contribution validation, the collection and recording of contributions, and debt management and negotiation. The second group involves the identification of debts, the management of prosecutions when voluntary compliance is not achieved, and fraud control based on risk management with a view to ensuring compliance.
Voluntary compliance Operational processes |
Registration |
---|---|
Determination of contribution amounts | |
Validation of contributions | |
Collection and recording of contributions | |
Debt management and negotiation | |
Compliance control | Identification of debts |
Management of prosecutions | |
Fraud control |
In response to the challenges faced when implementing such a system, the International Social Security Association (ISSA) drew up its ISSA Guidelines on Contribution Collection and Compliance. These cover aspects of governance and management, strategy, operational processes, fraud control, coordination with external organizations, fostering awareness and a culture of compliance, and evaluation and continuous improvement (ISSA, 2019).
Experiences of implementing contribution collection and compliance processes
This article presents relevant experiences from social security institutions in the Americas that have implemented recommendations from the guidelines with the aim of improving levels of voluntary compliance. The developments undertaken are set out together with the guidelines that correspond to the measures put in place. Please note that the list is not exhaustive, as only those guidelines linked to the good practice showcased or drawn from the available material are described.
Argentina
Argentina’s Federal Administration of Public Resources (Administración Federal de Ingresos Públicos – AFIP) set itself the goal of simplifying employer obligations and reducing its internal administrative burden while ensuring the quality and consistency of the information (Federal Administration of Public Resources, 2021).
To achieve this, the AFIP developed a model along the lines of a one-stop shop, through which contributors could fulfil all of their obligations by submitting a single monthly file (Federal Administration of Public Resources, 2016). This single digital submission, with security guarantees that ensure the uniqueness and unalterability of the record, eliminates the need to provide the same data to multiple state bodies or to provide it in hard-copy. With a focus on simplicity, the new system is supported by a web application that enables files to be uploaded and provides a receipt, thereby facilitating voluntary compliance and giving workers access to the information they have declared.
This development was underpinned by a record simplification system (Simplificación Registral) (Federal Administration of Public Resources, 2012), which was developed jointly with the Ministry of Labour, Employment and Social Security with input from all social security stakeholders and permits the exchange of data with contributors and other agencies. The system serves as a vital interinstitutional link for the development of new applications that draw on the data collected. It also provides an authentication mechanism that uses the “fiscal password” and secure communication channels.
The simplification of all the procedures relating to data submission and updates reduced the administrative costs to both the contributor and the State, since the new procedures were quicker, online and available 24/7.
Strategy | Guideline 3 | Establishing a strategic plan |
---|---|---|
Guideline 4 | Establishing a strategy to ensure consistency between contributions and expected benefits | |
Guideline 5 | Developing systematic compliance risk management and a proactive compliance-oriented strategy | |
Guideline 6 | Supporting the effective extension of contributory social security coverage | |
Operational processes | Guideline 9 | Registering contributors |
Fraud control | Guideline 15 | Fraud and error risk management strategy |
Guideline 16 | Automated system for guiding audit and fraud control | |
Coordination with external organizations | Guideline 18 | Implementing systematic data exchange with formally mandated institutions |
Guideline 19 | Data exchange with other external organizations |
Also in Argentina, in 2011, the province of Córdoba’s retirement and pension fund (Caja de Jubilaciones, Pensiones y Retiros), a member of the Federal Social Insurance Council (Consejo Federal de Previsión Social – COFEPRES), developed a new contribution collection system that replaced the manual methods used by employers to declare their payroll and determine contribution levels, which were very inefficient. Information also came in late, causing delays in collection and difficulties in enforcing controls, making the information unreliable.
Córdoba’s new integrated pensions system (Sistema Integral de Jubilaciones de Córdoba – SIJCOR) incorporates monitoring and validation controls, offers employers a range of communication channels and links up with the institution’s management system, thereby ensuring the completeness and accuracy of the data (Federal Social Insurance Council, 2020).
The roll-out of the new system made the collection of pension contributions more effective and efficient. Technological innovations removed the need for hard-copy documents and put the focus on data quality, the monitoring of arrears and the generation of proactive measures to avoid those arrears.
COFEPRES set itself the goal of receiving 100 per cent of contributors’ declarations in electronic format and on time. All declarations are now submitted electronically and, in 2020, 95 per cent of them arrived on time.
Strategy | Guideline 3 | Establishing a strategic plan |
---|---|---|
Guideline 4 | Establishing a strategy to ensure consistency between contributions and expected benefits | |
Guideline 5 | Developing systematic compliance risk management and a proactive compliance-oriented strategy | |
Guideline 6 | Supporting the effective extension of contributory social security coverage | |
Operational processes | Guideline 9 | Registering contributors |
Guideline 13 | Managing debts owed by contributors and employers |
Guatemala
The Social Security Institute of Guatemala (Instituto Guatemalteco de Seguridad Social – IGSS) has driven forward an innovation programme to modernize and automate collection processes that previously were essentially paper-based, were executed with tools relying on legacy technologies, and only allowed for a very limited tracking of late payments owing to an absence of adequate tools. This not only resulted in poor-quality information due to a lack of validation and incomplete data, but it was also more conducive to fraud (Social Security Institute of Guatemala, 2009).
The innovation programme proposed establishing an integrated collection and management system (Sistema Integrado de Recaudación y Gestión – SIRG) to improve contribution control, a single database of members and employers (Registro Único de Afiliados y Patronos – RUAP) with more efficient and more cost-effective collection methods, as well as more effective control of the member database. They also implemented a digital-channel-based system to record wage history and generate a contribution account for each worker. All these new systems drew on modern technologies and asynchronous integration techniques that allowed them to be integrated with collection agencies and other bodies involved in the process.
A pilot project was launched involving 48 employers, and 3.9 million Guatemalan quetzals (GTQ) were collected, individual accounts were set up for 6,466 workers and three banks began collecting contributions through virtual banking. Debts of GTQ 96 million were recovered.
Strategy | Guideline 3 | Establishing a strategic plan |
---|---|---|
Guideline 4 | Establishing a strategy to ensure consistency between contributions and expected benefits | |
Guideline 5 | Developing systematic compliance risk management and a proactive compliance-oriented strategy | |
Guideline 6 | Supporting the effective extension of contributory social security coverage | |
Operational processes | Guideline 9 | Registering contributors |
Guideline 11 | Recording contributions paid on a contributor’s social insurance record | |
Fraud control | Guideline 15 | Fraud and error risk management strategy |
Peru
Peru’s Derrama Magisterial (a social security institution for teachers) set itself the objective of evolving the manual processes it was using to collect contributions. To do this, it developed a system to enable the timely and reliable receipt of contributions, reducing collection times as well as the number of complaints regarding discrepancies in amounts. The system also provides correct, up-to-date information on the status of individual contribution accounts (Derrama Magisterial, 2018).
The new system cut the time taken to generate a payroll by some 90 per cent and halved the time required to download it. The number of payrolls rejected fell to 1 per cent and there was a radical drop in complaints and grievances, with only 35 recorded in 2019.
Strategy | Guideline 3 | Establishing a strategic plan |
---|---|---|
Guideline 4 | Establishing a strategy to ensure consistency between contributions and expected benefits | |
Guideline 6 | Supporting the effective extension of contributory social security coverage | |
Operational processes | Guideline 8 | Specifying a model connecting the main operational processes and information flow |
Guideline 9 | Registering contributors | |
Guideline 10 | Determining contribution amounts and billing | |
Guideline 14 | Providing online services to facilitate contribution and compliance |
Saint Vincent and the Grenadines
In 2009, the National Insurance Services (NIS) in Saint Vincent and the Grenadines opted to implement a web-based collection system. They developed the e-Submit+ application, making it possible to declare contributions online at any time and offering a very user-friendly interface (National Insurance Services, 2020). The challenge for the NIS was to reduce the administrative burden and cost of those procedures whose long processing times complicated the processing of benefits.
The project’s key objectives were an 80-per-cent reduction in the time required for data entry and improved data quality, thereby cutting the time taken to process a benefit from seven days down to three. The next step was to work towards the goal of having all declarations submitted electronically.
To achieve these objectives, the NIS put a series of communication strategies in place, including training sessions to outline the benefits of the new model to employers, explanatory videos and face-to-face events. Of particular note were the “eSubmit+ Fridays”, which provided an opportunity to tell employers about the advantages of the eSubmit+ system. In conjunction, employees were offered incentives for the highest number of registrations per month.
Once in place, the system achieved extremely positive results. Some 75 per cent of businesses reported savings in terms of administrative costs and staff time. There was also a 58-per-cent increase in compliance among employers using their own software. The NIS noted faster processing times in 60 per cent of submissions.
Strategy | Guideline 3 | Establishing a strategic plan |
---|---|---|
Guideline 6 | Supporting the effective extension of contributory social security coverage | |
Operational processes | Guideline 9 | Registering contributors |
Guideline 11 | Recording contributions paid on a contributor’s social insurance record | |
Guideline 14 | Providing online services to facilitate contribution and compliance |
Uruguay
Uruguay’s Social Insurance Bank (Banco de Previsión Social – BPS) started down the road of remote contribution declarations in the late 1990s. However, the collection model at the time expected employers to submit their employees’ payroll and make contribution payments according to their own calculations. This required subsequent checks for consistency between what was declared and what was ultimately paid, which proved costly and inefficient.
To improve service efficiency and quality, the BPS developed its systems in an attempt to simplify the model for contributors, improve response times and provide certainty on the contribution amounts due (Social Insurance Bank, 2020). The evolution of this service was founded on three key aspects: (i) technological modernization, adopting the internet as the principal communications channel; (ii) the requirement to submit payrolls online; and (iii) the calculation of tax liabilities in BPS’s systems, which gave employers legal certainty regarding the level of their obligations.
The final aspect turned out to be the most innovative as it altered both the contributor’s and the BPS’s responsibility. Contributors are now responsible for submitting payrolls containing correct information about their employees and the BPS is responsible for calculating the contributions due by verifying the data submitted and making the appropriate calculations. It also improved the efficiency of compliance controls and audit controls.
In 2009, as a result of this process of development, the BPS calculated 98 per cent of companies’ social security obligations. This figure has since hit 100 per cent.
In 2017, the BPS received ISSA recognition for its application of the ISSA Guidelines on Contribution Collection and Compliance.
Strategy | Guideline 3 | Establishing a strategic plan |
---|---|---|
Guideline 4 | Establishing a strategy to ensure consistency between contributions and expected benefits | |
Guideline 6 | Supporting the effective extension of contributory social security coverage | |
Operational processes | Guideline 8 | Specifying a model connecting the main operational processes and information flow |
Guideline 9 | Registering contributors | |
Guideline 10 | Determining contribution amounts and billing | |
Guideline 11 | Recording contributions paid on a contributor’s social insurance record | |
Guideline 14 | Providing online services to facilitate contribution and compliance |
Also in Uruguay, the Bank Employees’ Pension Fund (Caja de Jubilaciones y Pensiones Bancarias – CJPB) modernized its collection system principally by introducing a remote connection system for payroll submissions.
In 2008, the CJPB migrated its paper-based collection system to a remote mechanism (SICORE), which enabled the online receipt of both detailed and summary payroll declarations, 24 hours a day, seven days a week. It is important to note that, due to a change in the rules, the pool of companies contributing to the CJPB saw a 200-per-cent increase.
The roll-out of this new system had several objectives: to comply with the legal mandate by offering quality services to both existing and new users, to improve data quality and to receive contribution information for every individual prior to the contribution due date.
The approach taken was to use the internet for the receipt of information and a multi-channel scheme, including email, letter, telephone, fax and in-person consultations, for personalized contact with the agency. The new system was rolled out progressively, with a 12-month transition period for existing companies (Bank Employees’ Pension Fund, 2012).
The feedback was very positive. Seventy-six per cent of companies believed that the new system made their job easier, and no comments were received from independent external auditors or comptroller organizations.
The CJPB received ISSA recognition for its application of the ISSA Guidelines on Contribution Collection and Compliance in 2016, and again in 2019.
Strategy | Guideline 3 | Establishing a strategic plan |
---|---|---|
Guideline 4 | Establishing a strategy to ensure consistency between contributions and expected benefits | |
Guideline 6 | Supporting the effective extension of contributory social security coverage | |
Operational processes | Guideline 9 | Registering contributors |
The collection process in COVID-19 times
The crisis caused by the COVID-19 pandemic has put the different organizations’ collection processes and systems to the test. The fact that it was impossible to provide services in person and the special conditions introduced for contributors, with adjusted contribution rates and more flexible payment schedules, were some of the challenges that had to be faced.
By analysing the developments that have taken place within the Americas’ social security institutions, it is possible to identify some critical factors in terms of collection processes that have enabled these institutions to cope with the impact of the health crisis on contribution collection.
First of all, the digitalization of collection processes was crucial. The longer an institution’s contribution collection had been digitalized, the more quickly it was able to adapt to pandemic restrictions, without having to make major changes to its systems. Such mechanisms were vital in countries where a lockdown was imposed.
Likewise, the use of innovative mechanisms for communication and for certain transactions helped to maintain service continuity in times of crisis. For instance, social networks, virtual assistants and messaging services provided opportunities to create new mechanisms for interacting with contributors.
The flexibility of IT systems used for collection proved key to ensuring that social security institutions were rapidly able to adapt their processes, both to new regulatory provisions and to procedural changes that became necessary as a result of the pandemic. In many cases, the capacity to adapt systems efficiently and effectively made it possible to maintain economic sustainability.
Conclusions
Key objectives for institutions that collect social security contributions are ensuring compliance with one’s obligations and achieving the best possible contribution levels. Non-payment and the evasion of payment obligations have serious consequences for system members’ level of protection, as well as for social security schemes’ financial and social legitimacy.
The experiences of ISSA member institutions in the Americas during this period illustrate the level of development and maturity of their contribution collection and compliance processes.
Concretely, several institutions developed strategies to boost collection by encouraging voluntary compliance with obligations through the simplification of processes and systems. This is the approach recommended in the ISSA Guidelines on Administrative Solutions for Coverage Extension since it permits the harmonization of contributors’ interests with those of the institutions and, as such, effectively extends social security coverage. It also enables the implementation of models that incorporate a government contribution, such as the Monotributo (small contributor) system developed in Argentina and Uruguay.
These initiatives were supported by digital transformation programmes, minimizing – and even eliminating – collection processes based on the physical submission of hard-copy payroll documentation. In this way, the institutions significantly improved their operating processes in the field of collection, moving their interactions with contributors online and automating calculations and controls, as recommended in the ISSA Guidelines on Information and Communication Technology and the ISSA Guidelines on Service Quality. In addition to enhancing collection processes, these developments strengthened institutional capacity, thereby helping the institutions to respond efficiently in crisis scenarios such as the one triggered by COVID-19.
On the other hand, the emergence of new forms of work, principally those based on digital platforms, and the ongoing difficulties collecting contributions from hard-to-reach groups pose major challenges for institutions in the Americas, as in other regions.
References
Bank Employees' Pension Fund. 2012. Distance telecommunication system for submitting payments of social security contributions (Good practices in social security). Geneva, International Social Security Association.
Derrama Magisterial. 2018. Collection management: Automating the collection of pension contributions (Good practices in social security). Geneva, International Social Security Association.
Federal Administration of Public Resources. 2012. Simplified registration system: More declared (registered) work (Good practices in social security). Geneva, International Social Security Association.
Federal Administration of Public Resources. 2016. Digital labour and social security documents - One-stop shop for data (digital payroll) (Good practices in social security). Geneva, International Social Security Association.
Federal Administration of Public Resources. 2021. Recaudación y Cobranza de Cotizaciones (Webinar). Geneva, International Social Security Association.
Federal Social Insurance Council. 2020. Online collection system: Declaration of personal and employer contributions application (Good practices in social security). Geneva, International Social Security Association.
ISSA. 2019. ISSA Guidelines on contribution collection and compliance (Revised and updated edition). Geneva, International Social Security Association.
National Insurance Services. 2020. Electronic submission of employee records (Good practices in social security). Geneva, International Social Security Association.
Social Insurance Bank. 2012. Pre-billing of liabilities, one step closer to electronic submission (Good practices in social security). Geneva, International Social Security Association.
Social Security Institute of Guatemala. 2009. Financial modernization of social security (Good practices in social security). Geneva, International Social Security Association.