Uttam Maharjan

The Social Security Fund (SSF) was launched in Nepal in 2017. The scheme was passed by federal parliament in July 2017 and ratified by the President in August 2017. The scheme has been implemented since November 2017. The SSF has been enforced in pursuant to the Labour Act 2074 and the Labour Regulations 2075. The Act and Regulations have provision for social security, which is aimed at ensuring a bright future for employees, whether from formal or informal sectors, and fulfilling the concept of the welfare state.
Although the SSF was launched with a great fanfare to the extent of announcing that it would herald a new era, the scheme has not picked up steam even three years after its launch. In fact, the scheme was started with the tripartite agreement between the government, employers and employees. The SSF includes four schemes: the medical treatment, health and maternity protection scheme; the accident and disablement protection scheme; the dependent family protection scheme; and the old age protection scheme.

Contribution-based scheme
The SSF scheme is a contribution-based scheme. Employees have to contribute 11 per cent of their basic salary to the SSF, whereas their employers have to contribute 20 per cent of the basic salary. Thus, 31 per cent of the basic salary of an employee is collected in the fund every month. The funds so collected are used for the benefit of employees themselves as per the four schemes enumerated above.
The basic thrust of the SSF scheme is to provide protection for employees during their service as well as after retirement. The scheme not only benefits employees but also their employers as they will not have to bear a huge financial burden when their employees retire. It can be said that the scheme was initiated with bona fide intention. However, the scheme has not been able to draw as many employees and employers as expected. In fact, the initial excitement about the scheme has been fading away.
Despite the fact that the SSF scheme was launched with the tripartite consent of the government, employers and employees, most employers and employees have not shown interest in joining the scheme. At the end of last fiscal year, only 12,479 employers and 168,242 employees had joined the scheme. There are over 922,000 employers and over 3.4 million employees in the country. This shows that many employers and employees are still outside the scheme. There may be several factors for the lacklustre performance of the scheme. Since the scheme is the first of its kind in the country, many people may not be aware of the operations and benefits of the scheme.
When the scheme was launched, some provisions such as those relating to pension facilities were not favourable. And bank staffers say that they are getting more facilities than what they will get after joining the scheme. That is why they are reluctant to join the scheme. The need for making reforms in the SSF scheme has, therefore, been felt. However, some reforms have already been made in the scheme. As per an amendment to the SSF Investment Guidelines made in December 2020, specific areas have been explored for the mobilisation of funds. Now contributors to the SSF can get various types of loans: home, education and emergency loans.
Under home loans, a contributor can get a loan amounting to Rs. 7.5 million or equivalent to the amount of 15 years' salary, whichever is lower, to purchase a house or to repair or renovate his existing house. Under education loans, a contributor is allowed a maximum of Rs. 3.5 million for higher studies, whether at home or abroad, for himself or for his family members. Under emergency loans, a contributor can enjoy a loan of up to Rs. 500,000 for social and other purposes. However, a contributor must have contributed to the SSF for at least three years to avail himself of such a facility and he must have adequate repayment sources. The provision for loans is a step towards diversifying the investment portfolio of the SSF.
Some recent amendments to Social Security Plan Operations Procedures (Amendment) 2075 are also noteworthy. As per the new provisions, a contributor can make a claim of up to Rs. 100,000 annually any time under the medical treatment, health and maternity protection scheme. Likewise, a contributor can recoup himself for up to six months of the treatment expense for his wife after parturition. Previously, the time period of was not mentioned. Under the accident and disablement protection scheme, it was stipulated that a contributor could make a claim equivalent to a maximum of three times the minimum wages fixed by the government. The ceiling has been removed. Now a contributor can claim an amount equivalent to 60 per cent of his basic wages/remuneration. This will benefit those with higher salaries.
A contributor will be eligible for a pension after contributing to the SSF for at least 15 years. As per the previous provision, the total contribution would be divided by 180 and the amount so derived would be given to the contributor every month as a pension. Moreover, the contributor would not get the amount till he reached 60 years. So a person retiring at 55 would have to wait for five more years to lay his hands on the pension. This provision was highly unpalatable. Now the provision has been revised. A contributor who has contributed to the SSF for at least 15 years will get a pension after retirement forthwith, no matter whether he has reached 60 years of age or not. The pension amount has also been increased by 12.5 per cent with a change in the calculation of the amount. The total contribution amount will be divided by 160, instead of by 180.

Informal sector
Further, a contributor can get, upon retirement, both a pension and a gratuity, if he so desires. In this case, the contribution amount will be bifurcated into two portions. The pension portion will include the amount equivalent to 20 per cent out of 28.33 per cent, while the gratuity portion will include 8.33 per cent. A contributor can also get a gratuity in the lump sum instead of a pension. The above amendments to the SSF scheme should arouse interest in employers and employees in joining the scheme. To attract employees not only from the formal sector, but also from the informal sector as well as self-employed people, it is imperative to make reforms in the SSF by keeping abreast of the times.

(Former banker, Maharjan has been regularly writing on contemporary issues for this daily since 2000. uttam.maharjan1964@gmail.com)