The Social Security Fund: Good intentions, lousy planningThe scheme needs to be improved and fine-tuned to remove inconsistencies.
Nepal's launched its social security scheme with extraordinary fanfare. The Contributions Based Social Security Act 2017 was promulgated under the same umbrella scheme which envisages the establishment of a Social Security Fund. The fund makes honest efforts to protect the interests of all employees working in the non-governmental sector. But there seems to be a significant disconnect between the extent of its operation and certain private organisations.
The understanding, in general, is that employees contribute 11 percent of their monthly pay and their employer adds what is equivalent to 20 percent of their particular salary for a total of 31 percent. This money is deposited in the Social Security Fund. The contribution is divided into four schemes: 1 percent for Medical Treatment, Health and Maternity Protection Scheme, 1.4 percent for Accident and Disability Protection Scheme, 0.27 percent for Dependent Family Protection Scheme, and 28.33 percent for Old Age Protection Scheme.
The rationale behind the establishment of the Social Security Fund is to recognise the constitutional provision that each labourer shall have a right to contribution-based social security. In other words, one must contribute to the fund to enjoy its benefits. It seems sensible that regardless of the financial standing of an individual contributor, he/she contributes not only to obtain benefits for themself but also to extend the benefits of the scheme to contributors in need who may be less fortunate than him financially.
But the law, with such virtuous intentions on paper, has not been able to gain the confidence of individual sections of society. This is perhaps due to lack of coherence in the applicability of the Social Security Fund, and also partly because the authorities responsible for enforcing it are still figuring out a formula to embrace all strata of the formal sector. The postponement of the enlistment date and a recent amendment to the Social Security Operation Procedure Code show that the authorities themselves are not sure about who should be included and who should be excluded.
Before the amendment, all employees, regardless of when they started working, needed to be enlisted in the fund. After the amendment, employees who started working after July 17, 2019, were given three options: Transfer their contributions from the Employees Provident Fund to the Social Security Fund, withdraw their Employees Provident Fund contributions, or keep the contributions to the Employees Provident Fund or other retirement funds as they are.
If the amendment has provided a breather, other provisions reduce the benefits for which employees contribute to the Social Security Fund. For example, you contribute to the Social Security Fund for years. But if you pass away before you become eligible to claim pension benefit, your spouse will only get half the amount of your contribution. That is also only if your spouse has not remarried. In other words, a portion of the employee’s actual contribution is appropriated by the Social Security Fund itself. There’s more. Even if both you and your spouse contribute to the fund, only one of you may claim maternity care benefits.
Regarding the old age protection scheme, the contributor has to be at least 60 years of age and should have contributed to the Social Security Fund for a minimum of 15 years to claim old-age benefits. However, the retirement age for employees in Nepal stands at 58 years. The law can be described as inconsiderate since a contributor will have to wait for two long years before he becomes eligible to claim benefits. So, someone with no employment and source of income has no choice but to wait uncomplainingly for two years until he can receive the benefits out of the contribution he made from his own pocket. Also currently, employees contributing to the Employees Provident Fund may obtain a loan against their contribution. But the Social Security Fund does not provide such facilities.
Considering this problem, the Social Security Fund needs to think about the current state of affairs and intricately examine the desires and aspirations of the contributors. The major disconnect is that certain organisations in the private sector already enjoy more significant benefits and higher gratuity than what the Social Security Fund offers. And until the fund broadcasts its intent and scope vividly for better mass awareness, or offers more lucrative propositions than what some institutions are providing to their employees, corporate organisations will choose to stay out of the Social Security Fund.
Nepal is a legal practitioner at Abhinawa Law Chambers.
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