The institution defines a strategy on administrative error risk management, evasion of contributions and fraud control for difficult-to-cover groups as part of its overall compliance strategy that gives due consideration to the processes, people (internal and external), data and technology.
Guideline code
EXT_02200
Mechanism
Mechanism
- The management should perform calculations and early data validations in order to prevent and mitigate risks of error and fraud from the initial steps of the contribution collection processes.
- Based on formal agreements, collaboration should be carried out with other government departments, for example, for cross-checking entitlements.
- A direct link with tax authorities and civil affairs administrations can not only improve record-keeping but also identify under-declaration issues and fraudulent claims (such as a continued claim of pension benefit after the death of a pensioner).
- The management may consider the following practices to address the issue of under-declaration of income:
- A notional wage might be used as a basis for contribution for all members, the wage being determined in reference to the average salary or minimum salary in a sector, region or industry;
- A flat-rate contribution might be determined without any reference to personal income. As a less complicated approach, it moves away from an income-related payment, which may create a threshold-level of payment that is likely to prove difficult to achieve for those with the lowest incomes;
- Contribution might be assessed on another basis. For example, the contribution might be based on the number of hours worked, assets held or another easy-to-measure and verifiable variable;
- Full declaration of income might be incentivized. Such an approach typically requires demonstration of the value of benefits that an individual would be entitled to;
- Tougher penalties may be put in place to discourage under-declaration. Their effectiveness will depend greatly on the number and effectiveness of controls and the level of fines.
- For migrant workers special measures may need to be taken by the institution, for example:
- Working closely with stakeholders and migrant workers’ organizations to support affiliation efforts;
- Tailored communication to migrant workers to be delivered in their own languages via the most appropriate communication channels;
- A focus on particular economic sectors with a concentration of major employers of migrant workers.
Structure
Structure
- The management should establish risk management processes for the systematic identification, assessment, ranking and treatment of contribution compliance risks for difficult-to-cover groups.
- The management should define specific performance indicators to evaluate the achievement of goals and measures on managing compliance risks for these groups.
- These measures should be consistent with Part D, Fraud Control, of the ISSA Guidelines on Contribution Collection and Compliance.
Title HTML
Guideline 17. Adopting a proactive strategy on addressing administrative error, evasion of contributions and fraud
Type
Guideline_1
Weight
24