The contribution based Social Security Scheme is touted as a much-needed step towards protection of rights and interests of employees being directed to the benefit of employees of both formal and informal sectors as well as the self-employed. The introduction of the social security scheme by the government has been highly praised by labour rights activists and the civil society.
The social security scheme is regulated by the Contribution Based Social Security Act 2017 and its Regulation. The Act has created a fund known as Social Security Fund (SSF) which is the ultimate authority to collect funds from the employees (contributors). The SSF has framed a separate directive known as Social Security Schemes Operating Procedure. As per its directive, the SSF collects on a monthly basis the total of 31% of an employee’s monthly basic remuneration; it is comprised of 20% contribution from the employer’s side and 11% from the employee side. The contribution is divided into several benefit schemes offered by the SSF which includes (a) medical, health and maternity benefit (b) accidental and disability benefit (c) protection of dependent family benefit, and (d) old-age protection benefit. Contribution in SSF is mandatory to become eligible for these benefits.
Medical Treatment, Health, and Maternity Benefit
Under this scheme, the contributors are entitled to medical treatment up to (a) Rs. 100,000 per year if admitted to hospital, and (b) Rs. 25,000 per year for services taken from a doctor as an outpatient. Further, contributors are entitled to maternity benefit which covers (a) cost up to Rs. 100,000 incurred for regular pregnancy test of the contributor or contributor’s wife, hospital admission, operation and treatment of child for three months, (b) cost equivalent to one month’s minimum remuneration per child for maternity care or in case of miscarriage after 24 weeks of pregnancy/stillbirth. The maternity and sick leave pay (in addition to the leave pay available under the existing Labour Act 2017) is available to the contributor from the SSF for up to 98 days and 13 weeks (in a year) respectively. Additional leave benefit covers the cost up to 60% of the basic remuneration even if the employee is not in employment at the time of becoming pregnant or falling sick. As per the records of SSF, total of 430 employees have been benefited from this scheme as of September 28, 2020.
Accident and Disability Protection Benefit
Under this scheme, the contributor is entitled to total expenses incurred for the treatment of employment related accident or occupational diseases and expenses up to Rs. 700,000 for other accidents. An amount equivalent to 60% of the employee’s basic remuneration is available on monthly basis to the contributor (a) until s/he returns to work, in case of temporary or full disability; and (b) for lifetime in case of permanent full disability due to occupational hazard or diseases. In case of permanent disability due to occupational hazard or diseases, lifetime monthly remuneration in the proportion of 60% of the employee’s basic remuneration is provided based on the ratio of disability. As per the records of SSF, total of 34 employees have been benefited from this scheme as of September 28, 2020.
Protection of Dependent Family Benefit
This benefit is available to the dependent family members in the event of death of the contributor. In the event of death of contributor due to any reason, the spouse is entitled to lifetime pension equivalent to 60% of last drawn basic remuneration of the contributor (not entitled, if has any alternative employment or in case of remarriage). The dependent parents would also be entitled to the same, if they have no alternative employment. The children of the contributor who have not completed 18 years of age in the event of death of the contributor would be entitled to monthly scholarship equivalent to 40% of the last drawn basic remuneration of the contributor. This entitlement shall continue only till the age of 21, except in case of physical or mental incapacity of the child. Additionally, the dependent family members will also be entitled to an amount of Rs. 25,000 as funeral expense. As per the records of SSF, total of nine employees have been benefited from this scheme as of September 28, 2020.
Old Age Protection Benefit
The retirement benefit is available under this scheme. The contributor Nepali citizen (foreigner will be eligible to withdraw at any time after termination of employment based in Nepal) would be eligible to withdraw the said benefit on reaching the age of 60 years and contributing for 180 months. The contributor will have two options: they may either receive lump sum consisting of principal with the accrued income, or receive pension for lifetime calculated by multiplying the sum of contribution and accrued income by 180. In case of death of the contributor before completion of eligibility time, his/her spouse would be entitled to receive 50% of total monthly pension received by the contributor. As per the records of SSF, total of 19 employees have been benefited from this scheme as of September 28, 2020.
The benefits offered by the SSF are based on the period of contribution. For instance, to become eligible for medical treatment, health and maternity benefit, the contributor must contribute for a minimum of three months Thereafter, the coverage of this benefit would be extended till three months after the contributor stops making contribution. All the benefits stated above contain the eligibility period. The rate of contribution does not affect the eligibility of the contributors to be entitled of the benefits offered by the SSF. For instance, the contributor who contributes Rs. 5,000 per month and the contributor who contributes Rs. 30,000 per month, both would be eligible for the same benefit after completion of the eligibility period. Moreover, the contributor’s uncertain future risks are shifted to the SSF providing protection to them. This shows that the social security scheme is more beneficial to people struggling for their sustenance.
The coverage of the social security scheme is not only limited to employees of the formal sector, it also offers the social security schemes to employees working in the informal sector as well as those who are self-employed. Currently, the guidelines for regulating the contribution from the informal sector is in the pipeline.
The SSF is also planning to introduce schemes for providing different kinds of loans to contributors and enterprises, which is likely to attract a greater number of employers and contributors. As of now, the total number of employers and contributors enrolled at SSF has reached 12,757 and 175,529 respectively. It is assumed that the numbers will increase once the SSF opens the scheme to the informal sector and the self-employed.