Implementing Social Security Fund

Uttam Maharjan


The social security fund was unveiled in November 2018. When the fund was launched with much pomp and show, Prime Minister KP Oli declared that a new era had started. In fact, this development is a feather in the social security cap. The social security scheme is now confined to distribution of allowances to the elderly and widows. The concept of the social security fund is broad and covers medical treatment, health and maternity protection; accident and disability protection; dependent family protection; and old age protection.

The social security fund was launched on the tripartite consensus between the government, employers and labour unions and is intended to provide benefits for employees from the day they join an organisation till they retire from that or some other organisation. An employee need not work for the same organisation throughout his/her life to enjoy the benefits; he/she can change his/her organisation and yet his/her service period is counted from the day he/she joins his/her first organisation. But the thing is the organisations an employee joins should be registered with the fund. Only those organisations which have joined the fund can reap benefits from the fund. Unregistered organisations are outside the ambit of the fund.
To take part in the social security fund, an organisation should register itself with the fund and later registers its employees with the fund. The organisation will get a registration number from the fund, whereas its employees will get social security numbers. An employee needs to contribute 11 per cent of his/her basic salary to the fund every month, whereas the organisation needs to contribute 20 per cent. Thus, the total monthly contribution to the fund will come out at 31 per cent. Out of this amount, one per cent will be earmarked for the medical treatment, health and maternity protection scheme; 1.4 per cent for the accident and disability protection scheme; 0.27 per cent for the dependent family protection scheme; and 28.33 per cent for the old age protection scheme. The 28.33 percentage includes 20 per cent for the provident fund and 8.33 per cent for the gratuity. However, an employee that has reached sixty years of age and contributed to the fund for at least fifteen years will be entitled to a pension.
The concept of the social security fund is good as it benefits employees a lot. However, many organisations have not shown interest in the fund. That only around 2,600 organisations have registered themselves with the fund paints a dismal picture. As per the Central Bureau of Statistics, there are around 922,000 organisations and 3,400,000 employees in the country. The initial deadline for registering with the fund has already expired. When the fund was unveiled, the government thought that every formal organisation would join the fund and considered brining into the fund organisations working in the informal sector as well in due course. The enthusiasm shown for the fund in the beginning was also encouraging but now the enthusiasm has subsided, especially among small and medium organisations. Most of such organisations have no provision for an employment provident fund; they pay lump-sum amounts when their employees are severed from the service. Such organisations are reluctant to join the fund as they are unwilling to bear 20 per cent of the basic salary of their employees.
After the social security fund fully comes into operation, the citizen investment trust and employee provident funds need to be transferred to the fund. The funds generated by levying one per cent social security tax also need to be brought into the fund. But there are hassles in transferring such funds to the fund.
The government is determined to implement the social security fund at any cost. It has said that it will take action against those organisations that refuse to join the fund. The government is planning to implement the fund from the next fiscal year 2076/77. At the time of launching the scheme, the government intended to operationalise the fund from May 22, 2019.
The fading enthusiasm about the social security fund has cast a doubt on its successful implementation. The social security act, regulations and directives have already been issued. But the concerned claim that there is some ambiguity which needs to be eliminated.

As only a small number of organisations have shown interest in joining the social security fund, it behoves the government and labour unions to convince the unwilling organisations to join the fund. Before the launch of the fund, employees and labour unions had been demanding establishment of such a fund for the welfare and security of the future of their employees. Now they have hesitated to join the fund.
Therefore, the government and labour unions should act on a war footing as only two months remain for the fund to be implemented and the fund has now been tied up with the prestige of the government, which unveiled the fund with much éclat, going as far as saying that a new era had been ushered in.
(Former banker, Maharjan has been regularly writing on contemporary issues for this daily since 2000)

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