Uttam Maharjan

It has been around eight months since the contribution-based social security fund was launched with a great fanfare. The scheme was launched with the tripartite consensus of the government, employers and employees. At the time, it was believed that all the employees working in the formal sector would join the scheme and it was also planned to woo the participation in the scheme of employees working in the informal sector as well as self-employed people.

However, the scheme has turned out to be a kind of dud as only 3,400 employers along with their employees numbering 20,000 have registered themselves with the scheme. As per the data of the Central Statistics Bureau, there are 922,000 factories/business entities with 3.4 million employees. Most big business entities like banks, insurance companies, hotels and production-oriented companies have joined the scheme, while medium- and small-scale business entities are hesitating to join the scheme.

The deadline for joining the scheme expired with the preceding fiscal year coming to an end on Asadh 31. The government has, however, decided to implement the scheme with effect from Shrawan of this fiscal year even if the number of employees participating in the scheme is dismally low. All the legal mechanisms are now in place to implement the scheme. The Contribution-based Social Security Act, 2074, the Contribution-based Social Security Regulations, 2075 and the Social Security Work Procedures, 2075 are all there. The only problem with the scheme is lukewarm enthusiasm for the scheme. Meanwhile, the government has extended the deadline for participating in the scheme till the end of Aswin in the hope that more employees will join the scheme within the three months.

The main reason for small- and medium-scale business entities being unwilling to join the scheme could be a financial burden they will have to bear once they join the scheme. As per the scheme, employees will have to contribute 11 per cent of their basic salary, whereas their employers will have to contribute 20 per cent of the basic salary, making the total contribution 31 per cent. Out of the 31 per cent, 20 per cent will be for a provident fund and 8.33 per cent will be for a gratuity. The remaining amount will be for other benefits.

No employee can take advantage of the scheme unless he or she contributes to the social security fund. The employee can enjoy an accident and disablement benefit upon contributing to the fund. After contributing to the fund for at least six months, he or she can enjoy medical treatment and health service benefits. For maternity benefits, at least twelve months’ contribution to the fund will be required, while at least two years’ contribution to the fund will be required for entitlement to benefits under occupational diseases. Similarly, an employee will have to contribute to the fund for at least fifteen years and should be sixty years of age to avail himself or herself of a pension. Here, he or she will be given an option to choose between a gratuity and a pension. If he or she chooses a pension, the twenty per cent contribution for the sake of a provident fund will not be paid back to him or her.

It is worth mentioning here that one of the basic thrusts of the social security fund is to enable employees working in the private sector to enjoy a pension upon retirement on a par with their counterparts in the government sector. That is why the scheme drew élan when it was launched in November 2018. It was hoped then that more and more employees would be attracted to the scheme and both national production and productivity would get a shot-in-the-arm. But contrary to expectations, the scheme has lost its charm, especially among small- and medium-scale business entities.

To make the scheme a success, the government ought to hold discussions with employers and labour unions and convince them of the benefits accruing from participating in the scheme. Forcing the business entities to join the scheme may backfire. It was also reported that those business entities that failed to participate in the scheme by the Asadh-end deadline would face the music. Now the deadline has been extended for the next three months and no mention has been made of whether action will be taken against the defaulting business entities. As a matter of fact, the scheme has many benefits such as accident and disablement benefits, medical treatment and health service benefits, maternity service benefits, occupation disease benefits and gratuity or pension benefits. Some private organisations have provided for social security for their employees but the benefits under the scheme are comprehensive. As far as the twenty per cent contribution to be made by employers is concerned, this provision is meant for ensuring a safe future of their employees.

Employee are the pillars of any organisation. When they work hard and honestly, the productivity of the organisation increases, resulting in a better showing of the organisation, which, in turn, leads to quality services and more profit. So the twenty per cent contribution on behalf of business entities should be taken as an investment for them and their employees alike.

As the scheme has been declared implemented with three more months given to willing business entities for registration with the scheme, the government should take the initiative in assimilating all the business entities into the scheme. After that, the informal and self-employment sectors need to be co-opted into the scheme. After all, the scheme has been launched with the best of intentions in the world and both employers and employees can reap benefits from the scheme to their mutual advantage.

Published on: 25 July 2019 | The Rising Nepal