Nepal's contribution-based social security scheme has been expanded to include workers in the informal economy and the self-employed. Previously, only workers in the formal sector and migrant workers were permitted to participate in the plan.

Speaking at the launching ceremony on Wednesday, Prime Minister Pushpa Kamal Dahal said, “There are around 4-5 million workers in the informal sector. They are vulnerable to job insecurity. The contribution-based social security will provide financial security to the workers and their families, and give formality to the informal economy.”

Administered by the Social Security Fund, the plan covers eight of the nine branches of social security grouped around four key schemes: Medical care, health and maternity benefits scheme; accidental and disability protection scheme; dependent family protection scheme; and old age protection scheme.

Nepal’s Constitution recognises social protection as a fundamental right, and the government has committed to achieve 60 percent coverage by 2025. The contribution-based Social Security Act 2017 makes provisions for all workers to participate in social security.

According to the International Labour Organisation (ILO), Nepal’s economy is characterised by high levels of informality, which is reflected in the structure of its labour market. In 2018, formal employment accounted for approximately a million jobs, mostly concentrated in large organisations.

At the same time, about 6 million workers were engaged in informal employment, amounting to 84.6 percent of all the employed population, the ILO said.

As per the scheme, 20.37 percent of the basic monthly salary of workers in the informal sector has to be contributed to the Social Security Fund, out of which workers pay 11 percent and the local government chips in 9.37 percent.

The basic monthly salary of informal workers currently stands at Rs9,385.

In the self-employed individuals category, they have to contribute 31 percent of their basic monthly salary to the fund to enrol in the scheme. The local government makes no contribution.

Agricultural workers except those operating as a registered firm, wage-based construction workers, domestic workers, transport workers under unions or committees, and persons who perform religious activities are classified as informal workers.

Self-employed persons include grocery entrepreneurs, doctors, consultants, chartered accountants who have their own firm, directors of a company, insurance agents, brokers and equity investors, and individual entrepreneurs, among others.

Roshan Koju, director of the Social Security Fund, said self-employed individuals with a basic monthly salary of Rs9,385 to Rs28,155 can participate in the scheme.

Phedikhola Rural Municipality in Syangja and Bhimphedi Rural Municipality in Makawanpur have signed a memorandum of understanding with the fund for the scheme’s implementation.

Tarakhola Rural Municipality in Baglung, Bansgadhi Municipality in Bardiya, Budhanilakantha Municipality in Kathmandu and Bagmati Rural Municipality in Lalitpur are in the process of forming an agreement with the fund.

“Gradually, this programme will be introduced in all 753 local bodies in the country,” said Koju.

At present, the scheme is accessible only to workers in the agriculture, transportation, construction and household sectors.

“Interested workers can enrol in the programme with the help of the local government or via the website of the Social Security Fund,” Koju added.

After joining the fund, workers in the informal sector and the self-employed will get benefits such as medicine allowance of up to Rs100,000. In case of an accident, they will receive a treatment allowance of up to Rs700,000, and a disability pension equivalent to 60 percent of their basic monthly salary.

The workers will also get a paid 98-day maternity leave and child care allowance equal to one month's basic salary.

After retirement at the age of 60 years, the workers will also get a monthly pension based on the amount they have contributed to the fund.

In case of death of the workers, their family members will get a Rs25,000 allowance to perform the funeral rites, and the spouse will get a monthly allowance equivalent to 40 percent of their basic monthly salary.

The children of the deceased workers will be entitled to an educational allowance amounting to 40 percent of their basic monthly salary till they reach 21 years of age. The age limit doesn’t apply to physically challenged children.

The Social Security Fund will also cover 80 percent of the medical treatment cost of the workers at 54 participating private and government hospitals across the country.

To be eligible for the benefits, the workers should have been enrolled in the scheme for a year, and they should have made monthly contributions for at least nine months.

According to Numan Ozcan, country director of ILO Nepal, self-employed and informal workers are the most vulnerable workforce in the entire economy.

“These workers are exposed to several kinds of insecurities, their employers are in threat of unhealthy competition and government risks losing a capable workforce due to any mishap, therefore, such a programme of social security helps to transform informal sectors into formal,” said Ozcan.

“Right of social security of workers is embedded in the values of ILO, so we are willing to have a partnership with the government and the Social Security Fund to protect the rights of workers.”

Representatives of the private sector such as the Nepal Chamber of Commerce, the Federation of Nepalese Chambers of Commerce and Industry, and the Confederation of Nepalese Industries have suggested that the government invest the amount collected in the Social Security Fund in productive sectors like infrastructure and public-private partnership projects.

“The government needs to put all the welfare funds such as the Employees Provident Fund, the Citizen Investment Trust and the Social Security Fund in one basket so that it can make sizable investments in the desired sectors,” said Rajendra Malla, president of the Nepal Chamber of Commerce.

Labour unions have demanded that there be strict implementation and evaluation of the scheme for the welfare of workers.

Binod Shrestha, president of the Joint Trade Union Coordination Centre, the common platform of the Nepali working class, said under 20,000 formal organisations out of the 900,000 in the country had enrolled their employees in the contribution-based Social Security Fund.

“The government brings attractive schemes, but it makes little or no effort to implement them. The scheme for informal sector workers and the self-employed is important, and we wish for its best implementation,” said Shrestha.

“The government must make sure that information regarding the scheme for informal and self-employed individuals reaches the targeted people. It must set up a labour desk at each local government office to protect the interest of the workers in the formal and informal sectors.”

According to the Social Security Fund, 420,000 workers from the formal sector and 280,000 migrant workers have already enrolled in the contribution-based scheme.

Launched in November 2018, the fund was initially accessible only to workers in the formal sector. In March 2023, it was extended to migrant workers.

Published on: 17 August 2023 | The Kathmandu Post