The private sector has asked the government to introduce the Social Security Act and Labour Act simultaneously through an ordinance for effective implementation.

“They are related to each other and in the absence of the Labour Act, the Social Security Act may not be effective,” said chairperson of Employers’ Council and vice president of the Federation of Nepalese Chambers of Commerce and Industry (FNCCI) Pashupati Murarka, at an interaction on Social Security Fund, organised by Nepal Business Forum — a public private dialogue forum promoted by the International Finance Corporation (IFC) — here, today.

A draft of the Social Security Act is ready but the draft of the Labour Act needs more amendments and could be delayed, according to the Ministry of Labour.

“If the government cannot bring both the Acts simultaneously through an ordinance, then the Labour Act must be brought before the employers start contributing to the Social Security Fund,” said Murarka, adding that the two Acts complement each other. 

“Social Security Act will not only help increase productivity of employees and mitigate disputes among employers and employees, but also help attract investment, as employees will feel secure,” Murarka added. “Smooth relations between employees and employers will send a positive message to investors who are interested in investing in Nepal.”

Labour dispute, lack of skilled manpower, and over politicisation of trade unions have hurt the investment climate of the country, said executive director of Social Security Fund secretariat Kewal Bhandari, on the occasion. The social security schemes will help manage the labour market, boosting their confidence and increasing their productivity, he said, adding that the fund that has Rs 4.40 billion is planning to launch at least one social security scheme — medical scheme — from the next fiscal year. The government has been charging one per cent social security tax on employees since 2011. 

The fund has prepared four social security schemes. It is planning to collect data of 1.2 million employees — that are estimated to be working in the private sector in the country — according to sectors. 

“Till date, the fund has registered some 80,000 employees,” said Bhandari, adding that data collection, policy level confusion, rate of contribution of the employers and providing social security card are some of the challenges for the fund, though it is committed to implementing contribution based pension.

Contribution based pension can sustain for a long time, as the government cannot manage the public expenditure on social security that has been rising by around 20 per cent annually. “Providing social security is not only the state’s responsibility but it will also help reduce poverty and attract investment,” Bhandari added.

The workforce should feel secure, said senior private sector development specialist at IFC — a private sector lending arm of the World Bank — Laura Watson. Social Security Fund is the solution to the critical labour issue that has been making the investments shy away, she said, adding that it will help create a good working environment.

Nepal Business Forum had been urging government since 2010 to implement social security scheme that could help create an investment friendly environment in the country.

Published on: 29 June 2013 | The Himalayan Times