Expand Scope Of Social Security Fund

The Social Security Fund (SSF) was launched in 2018 in accordance with the Social Security Act, 2017. The SSF is part of the social security plans adopted by Nepal for the benefit of people. As per the Social Security Act, all businesses are required to join the SSF with the exemption of independent consultants. Accordingly, all workers in formal and informal sectors are required to join the SSF. The scope of the SSF covers even temporary and contract workers as well as self-employed people, outsourced workers and migrant workers.

The Constitution of Nepal, 2015 envisages Nepal as a socialism-oriented state. As per Article 43, social security is guaranteed as one of the fundamental rights of vulnerable and poor people. To materialise this provision, social security schemes need to be in place. The SSF is a component of these social security schemes. The SSF is a contribution-based scheme involving contributions to the Fund by workers and their employers. The SSF is subject to the Labour Act, 2074 and Labour Regulations, 2075. The SSF acts as a cushion against the economic and social risks of workers. As part of social security plans, the SSF is geared towards the wellbeing of workers. The International Labour Organisation has been assisting Nepal in executing the social security plans.  

Maternity protection

The SSF has provisions for medical treatment, health and maternity protection; accident and disability protection; dependent family protection; and old age protection. Employees contribute 21 per cent of their basic salary, whereas employers contribute 11 per cent. The contributions are earmarked for various benefits, with the provision for old age protection receiving the lion’s share at 28.33 per cent. When the SSF was launched six years ago, it was expected that all workers would join it. But contrary to expectations, very few workers have joined the scheme so far. As per the Nepal Economic Forum, there are 7.1 million employees. The number of those who have joined the SSF is around one million, which represents just 14 per cent. 

There are a large number of migrant workers working in Gulf and other countries. The number of such workers is estimated at five million. However, only 1.2 million workers are found enrolled in the SSF. Efforts were made three years ago to enroll more and more migrant workers in the SSF but very little headway has been made on this front. At present, there is a mandatory provision for prospective migrant workers to join the SSF before departure to Gulf and other countries. But this provision has not worked well. 

The private sector generates 85 per cent of employment in Nepal. But most of the workers working in the private sector are still out of the SSF. The SSF has not been able to attract bank employees to it. In 2021, the government made it mandatory for all bank employees to join the SSF from the fiscal year 2021/022. At the time, two banks – Laxmi Bank and Standard Chartered Bank – had joined the SSF. And three government-affiliated banks – Nepal Bank Limited, Rastriya Banijya Banijya Bank and Agriculture Development Bank – were exempt from joining the SSF.  But the trade unions of the remaining 22 banks filed a case against the SSF at the Supreme Court. 

The trade unions argued that the benefits being received by bank employees preponderated over the benefits provided by the SSF. The Supreme Court asked the authorities concerned to stop forcibly enrolling private sector workers in the SSF. Banks are governed by the Banks and Financial Institutions Act, 2074, which was in force before the promulgation of the Labour Act, 2074. The government should, therefore, form a committee to study the benefits being provided by banks and those being provided by the SSF. As per the banks, the benefits being provided by the SSF are not fair vis-à-vis those provided by them. The benefits from the SSF should be at least equal to those being provided by the banks. The government should pay attention to the complaints by the banks and amend the relevant provisions so that they will make no bones about joining the SSF. 

On the other hand, the government should embark upon awareness campaigns across the country and apprise workers of the benefits that can be enjoyed from the SSF. Six years have elapsed since the SSF was launched. When it was launched, it was touted as a game changer in the social security sector. But it has failed to attract as many workers as possible to its fold. The Ministry of Labour, Employment and Social Security has announced that it is consulting with the Ministry of Finance to enroll temporary and contract employees working in the public sector in the SSF. 

New provisions

Prime Minister K. P. Sharma Oli recently announced that in three months’ time, the scope of the SSF would be extended to enable the children of contributing employees to enjoy the benefits from the SSF and contributors requiring treatment costing over Rs. 100,000 will get a 50 per cent refund from the SSF over and above insurance claims. To materialise what the Prime Minister announced, the Social Security Act will have to be amended. The new provisions cannot be implemented just as per the Prime Minister’s announcement. 

The funds collected in the SSF should be invested in the productive sectors so as to reap benefits. Part of such benefits should be returned to contributing employees so as to enhance their trust in the SSF. Further, contributing employees need to be provided with all the facilities as recommended by the International Labour Organisation. However, there are challenges ahead in making the SSF a success, which the government should overcome by taking concrete steps in consultation with all the stakeholders concerned.    

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