Social security is a fundamental pillar of a welfare state and an essential mechanism for protecting citizens against various economic and social risks. The establishment of the Social Security Fund (SSF) in 2018 represents a significant shift in the country’s labour and social protection policies. The SSF seeks to institutionalise a contributory social security system that extends protection beyond non-contributors and government employees to workers in the private and informal sectors. The SSF has emerged as a crucial instrument for promoting social justice, economic security and decent work.
Prior to the establishment of the SSF, Nepal’s social protection system was fragmented and limited in scope. Government employees enjoyed pension, gratuity and provident fund facilities, whereas workers in the private sector largely depended on employer-provided benefits or personal savings. The absence of a comprehensive social security mechanism exposed millions of workers in the private sector to exploitation and economic vulnerabilities. Gradually, the concept of a contributory social security system gained momentum. Article 43 of the constitution, Labour Act, 2017 and the Contribution-based Social Security Act, 2017 provided the institutional foundation for a nationwide social security system. Subsequently, the SSF was formally operationalised in 2018 with the objective of collecting legally-defined contributions from employers and employees and providing various social protection benefits.
Financial burden
During its initial phase, the SSF faced numerous challenges. Many employers perceived the contribution requirements as an additional financial burden. Workers were uncertain about the benefits and long-term returns of the scheme. Administrative capacity, technological infrastructure, and public awareness were also limited. Despite these obstacles, the Fund gradually expanded its outreach and gained recognition as a transformative social policy initiative. Now, the Fund is one of Nepal’s most significant social protection institutions. It operates on the principle of shared contributions from employers and employees and provides a range of benefits designed to protect workers and their families against various risks.
The SSF currently administers four major protection schemes. First, the Medical Treatment, Health and Maternity Protection Scheme covers healthcare expenses and maternity-related benefits. Second, the Accident and Disability Protection Scheme provides compensation and support for workplace injuries and disabilities. Third, the Dependent Family Protection Scheme offers financial assistance to surviving family members in the event of a contributor’s death. Fourth, the Old Age Security Scheme aims to ensure income security during retirement through accumulated contributions and pension-like benefits.
The Fund has made notable progress in expanding enrollment among employers and workers. About 2.9 million workers from 23 thousand companies are currently contributing and the collection has exceeded Rs. 110 billion. Around Rs.18 billion has already been distributed as benefits to the 262 thousand contributors. Digital systems have been introduced for registration, contribution collection, and benefit administration, enhancing transparency and efficiency. The government has also taken steps to include migrant workers in the social security system, recognising their substantial contribution to Nepal’s economy through remittances.
Despite these achievements, several challenges persist. Coverage remains concentrated in the formal sector, while a large proportion of Nepal’s workforce (about 4.4 million) continues to operate in informal sector. According to labour market estimates, the majority of workers in Nepal are engaged in informal economic activities, making enrollment and contribution collection difficult. Compliance issues also exist, as some employers fail to register employees or make regular contributions. Another challenge is the limited awareness among contributors regarding available benefits and claim procedures. Many workers continue to view the Fund primarily as a mandatory deduction rather than a long-term social protection mechanism. Furthermore, concerns regarding governance, investment management, and the sustainability of future liabilities require continuous attention.
Nevertheless, the SSF represents a significant advancement in Nepal’s efforts to establish a modern and inclusive social protection system. Its gradual institutional strengthening demonstrates the country’s commitment to protecting workers and promoting social welfare. The future of Nepal’s Social Security Fund depends on its ability to expand coverage, improve service delivery and maintain financial sustainability. One of the most important priorities is extending social security protection to workers in the informal economy. This includes agricultural workers, self-employed individuals, domestic workers, daily wage labourers and workers engaged in digital and platform-based employment. Achieving broader coverage would significantly reduce economic vulnerability and contribute to poverty reduction.
Technological innovation is expected to play a critical role in the future development of the SSF. Digital platforms can facilitate easier registration, contribution payments, benefit claims and information dissemination. Mobile-based applications and integrated databases could enhance accessibility, particularly for workers residing in remote areas. The inclusion of migrant workers presents another important opportunity. Foreign employment remains a major source of household income in Nepal, and many migrant workers face significant occupational and financial risks. Expanding social security coverage for this group can provide valuable protection against accidents, disability, and old-age insecurity while strengthening national social protection systems.
Sustainability
Financial sustainability will remain a key concern. As the Fund accumulates larger resources and future benefit obligations increase, effective investment management becomes essential. Transparent governance, prudent investment strategies and professional fund administration will be necessary to ensure adequate returns and long-term viability. Investments in infrastructure, government securities and productive sectors can contribute both to national development and fund sustainability.
The Fund must also strengthen public trust. Transparency, accountability, and timely benefit delivery are crucial for encouraging voluntary participation and maintaining confidence among contributors. Continuous awareness campaigns will be useful. Nepal may move towards a more integrated social protection system that combines contributory social security, social assistance programmes, health insurance and targeted welfare initiatives. The Integrated National Social Protection Framework, 2081 envisions this transformation. Such integration would create a comprehensive security capable of addressing diverse social and economic risks across the population, capturing their complete life-cycle.
