Uttam Maharjan

 has been a year since the Social Service Fund (SSF) was launched. At the time of the launch, the contribution-based scheme was touted as an epoch-making event. However, a large number of firms and companies are still reluctant to join the SSF despite frequent extension of the deadline for joining the scheme.
The main aim of the SSF is to secure the future of the employees working in the private sector by providing them with various facilities like medical treatment, health and maternity security; accidental and disablement security; dependent family security; and old age security. As per the scheme, the employees have to contribute 11 per cent of their basic salary to the SSF, while their employers are required to contribute 20 per cent of the basic salary. The overall contribution is assorted into 3.22 per cent for medical treatment, health and maternity; 4.52 per cent for accidental and disablement security; 0.87 per cent for dependent family security; and 91.39 per cent for old age security. The lion's share of 91.39 for old age security consists of 20 per cent equivalent to existing PF contributions and 8.33 per cent for a gratuity.
As per the data, there are around 3.4 million employees working in around 923,000 firms and companies, out of which around 128,000 employees working in about 11,670 firms and companies have joined the SSF so far. This goes on to show that the majority of employers and employees are balking at joining the scheme. Small-scale firms and companies complain that they will have to bear an extra economic burden if they are to join the scheme.

Discrimination
Even commercial banks, financial institutions and insurance companies have not joined the SSF. They are of the view that some provisions in the Social Service Act are biased, while some big corporate house question different provisions in the Act. It is said that there is discrimination between the employees under the SSF and government employees. The government employees are entitled to both provident fund and pension facilities, whereas the employees covered by the SSF will be entitled to a pension facility only, that too less than what their government counterparts will be getting after retirement. The funds collected as provident funds and gratuity contributions will be paid out to the contributors as a pension.
Thus, they will be deprived of their provident fund contributions. Moreover, they will be entitled to a pension only when they have reached the age of 60 after contributing to the SSF for at least 15 years. From the taxation point of view, the contributors will be subject to double taxation: one at the time of sending contributions to the SSF and the other at the time of pay-out.
Commercial banks have almost all the facilities covered by the SSF except a pension for their employees. In lieu of pensions, there is provision for gratuity. There is also provision for provident funds. Other facilities are covered by insurance for medical treatment, accidental death, disablement, maternity, etc. Further, the rate of gratuity payment may be one month, one and a half months or two months per year depending on the length of the service period. On the other hand, the contribution of 8.33 per cent of the basic salary (which would denote one month's basic salary per year) as stipulated in the Social Security Act seems to be fixed. This means that a long-serving bank employee, if he joins the SSF, will get a less amount of pension than what he will get as a gratuity when he retires.
The SSF has aimed at collecting Rs. 40 billion with the participation of all the employees working in the formal sector. The funds so collected will be invested, after developing the investment modality, in different sectors such as hydropower, roadways, railways, airways, agriculture, tourism and service sectors. The investments will be diversified as not more than 20 per cent of the total deposited amount can be invested in a single sector. The SSF will also provide the contributors with loans such as home, education and social loans at minimum interest.
The SSF is an independent institution. It is, however, similar to the Employees Provident Fund (EPF) and Citizens Investment Trust (CIT). These institutions also make investments in various sectors and provide their contributors with loans. However, the scope of the SSF is unlimited. In case it cannot fulfill its liabilities, the government will come on the scene to discharge the liabilities.
Informal sector
Now the government is intent on implementing the SSF at any cost. The SSF is also considering attracting the employees working in the informal sector. But as the primary goal of the SSF- enlisting the participation of all the employees working in the formal sector- has not been met, it has put on the backburner the second phase of the scheme: bringing the employees working in the informal sector to its fold.
As the SSF is similar to the EPF and CIT and some of its schemes are similar to those of the government and insurance companies, it should consult the concerned stakeholders as well as commercial banks, financial institutions and insurance companies and big corporate houses on making the scheme employee-friendly, making it one of the major components of social security. Further, the SSF should also scrutinise why the majority of the firms and companies and their employees are hesitating to join the scheme when it has been introduced with the tripartite consent of the government, labour unions and employees. The SSF has, however, kept its hope alive that all the employees working in the formal sector will join the scheme.