Strengthen Social Security Scheme

The concept of social security is to maximise state benefits for citizens. In Nepal, a social security scheme was launched for the first time during the Manmohan Adhikary-led government by providing social security allowances for the elderly. Now, there are various such allowances for target groups of people such as widows and the disabled. In order to add a feather to the social security cap, the social security fund (SSF) was established in Chait 2067 in accordance with the Social Security Fund (Management and Operation) Rules, 2067. The Regulations are governed by the Social Security Act, 2075.  

Accordingly, a contribution-based social security scheme was launched in Mangsir 2075 for the people working in the formal sector. The scheme has been fully implemented since Saun 2076. It may be noted that the government levied social security tax in 2066/67 to systematise and expand social security in the country. In course of expanding the scheme, Nepali migrant workers involved in foreign employment were inducted into the scheme in Chait 2079. People working in the informal sector and self-employed people were included in the scheme in Saun 2080.  

Contribution 

In accordance with the rules of the SSF, employees have to contribute 11 per cent of their basic pay to the fund, whereas employers have to contribute 20 per cent to the fund. Thus, 31 per cent of the basic pay is contributed to the fund every month. The benefits of the fund are medicine, health and maternity protection; accident and disability safety; dependent family protection; and old age protection. Although it was launched by the Oli-led government with a great fanfare, terming the scheme a new era, the scheme has not been able to generate excitement among companies and employees. The Social Security Act, 2075 requires every employer and employee to be eanrolled in the scheme but such enrolment stands at just two per cent now. 

As per the National Economic Survey, 2075, there were 923,356 business companies in the country in 2075. As per recent data, the number of employers enrolled in the scheme is 18,823, which is just two per cent of the existing companies. That only two per cent of the companies/employers have joined the scheme in five years shows that there is something amiss in the scheme. There may be several factors responsible for such a dismal state of affairs. Many employees are not willing to join the scheme because they think the benefits they are receiving from their companies are better than those offered by the scheme. Those earning high salaries and benefits, such as bank employees, are not willing to join the scheme any time soon. They think if they join the scheme, the existing benefits they are receiving now may be retrenched. 

The general minimum wage as determined by the government is Rs. 17,300 per month. There are companies who are providing less than this amount for their employees. Such companies may not be desirous of enrolling in the scheme because doing so will compel them to raise the salaries of those receiving less than the minimum wage. As per the SSF concept, even employees receiving less than the minimum wage are to be enrolled in the scheme. The scheme does not distinguish between high-earning and low-earning employees. 

There is the Employees Provident Fund and the Citizens Investment Fund. Both of these funds are successful in mobilising and investing funds in lucrative sectors. The SSF is not match for these funds. The policies relating to the SSF are formulated by government employees. It seems adequate attention has not been paid to attracting as many companies as possible to the scheme. There is a provision that the Secretary at the Ministry of Labour, Employment and Social Security shall be the Chairman of the SSF. It is a no-brainer that there is political instability in the country. A change of the minister concerned may change the priorities of the ministry as well with the result that the SSF sector may be affected.   

The government tends to blame the business community for the dismal state of the scheme. The government thinks that the business community is not doing enough to enroll companies and their employees in the scheme. On the other hand, the business community asserts that it is due to the weakness of the government that the scheme has not been able to pick up required momentum. For example, the government has not strictly enforced the minimum wage policy. Further, the business community is of the view that employees cannot be forced to join the scheme. Whether to join the scheme or not depends on their willingness.

Additional benefits 

However, the SSF has been working hard to make the scheme a success. For this, the SSF is mulling over introducing additional benefits by amending the procedures. The benefits under medicine, health and maternity protection will be extended to the families of people working in the formal sector. Children of such employees under the age of 18 will also be covered under the above plan. This benefit is valid for employees’ spouses only now. The spouses of employees working in the informal sector are not covered under this plan. However, the plan will be expanded to cover the spouses and children. 

At present, there is no health insurance for Nepali migrant workers working abroad. The insurance facility will be made for not only such workers but also for their spouses and children in recognition of their contributions to the national economy through remittances. Given that the scheme is almost a failure, the government, the banking and financial sector, the business community and stakeholders should huddle together to discuss the scheme extensively and make amendments to the procedures, if need be, so as to make the scheme a success.       

(Maharjan has been regularly writing on contemporary issues for this daily since 2000.)