Most of us know that the Government has introduced the Social Security Fund via Contribution Based Social Security Act 2074, also known as the SSF, to provide all the workers across the country a strong economic cum social support during and after their employment.
Though there were several acts in existence earlier that had provided similar benefits, expected results could not be floated to the workers since these all were scattered and not integrated. Hence to mitigate this, the Government has introduced the SSF. It may be noted that the Act has not provided any exemption i.e. all the employers and employees, irrespective of their nature and salary scale, have to get registered with the fund.
As per the quarterly report published by the fund for up to Chaitra 2077 (13th April 2021), only 13,704 employers and 1,97,783 employees have been registered with the fund. This clearly shows that besides the several efforts made by the Government, enrollment with the fund since its introduction is not satisfactory.
This write-up is all about identifying major causes responsible for poor enrollment with the fund that you need to know. The reference to the act, rules, and procedure given below shall be drawn from the Contribution Based Social Security Act 2074, Contribution Based Social Security Fund Rule 2075, and Social Security Scheme Operating Procedure 2075 respectively.
1. Medical Treatment, Health & Mortality Security Plan:
- Not Eligible for the Plan: Operating Procedure 4 has provided that these facilities shall be provided only upon regular contribution to the fund for 3 months which means an individual who has just registered with the fund or is contributing to the fund for less than 3 months is not eligible to avail this facility.
- Limit is only Rs 100,000 Per Year: Operating Procedure 6 has provided that in case the individual is admitted to the hospital, the total amount to be paid under this plan is Rs 1,00,000. Considering the current scenario, this amount is too small.
- Individual to Contribute 20% of the Claim: Operating Procedure 6 has further provided that the individual has to contribute 20% of the claim made by him, to avail of the security under this plan. This seems unfair since this will result in an additional economic burden on the individual even after contributing to the fund.
- No Security at All: Operating Procedure 8 has denied the individual providing any security under the plan in case the fund has suspended any scheme due to any pandemic spread across the country. This may lead to the belief that you may not get any benefit in case of any pandemic.
2. Accidental & Disability Security Plan
- Not Eligible to the Plan: Operating Procedure 10 has provided that the individual who has not contributed to the plan for 2 years is not eligible to avail of this plan.
- Limit is only Rs 7,00,000: Operating Procedure 11 has provided that in case the individual gets treatment from a hospital, without giving notice about the same to the fund within 7 days, which is not registered with the fund then the total security amount is restricted to Rs 7 lakh only under this plan. Also in case, the individual gets an accident other than during the employment, the security amount is restricted to Rs 7 lakh only under this plan.
- No Security At All: Operating Procedure 11 has also provided that in case the individual gets coverage by an insurance policy, other than provided by the fund, for Rs 7 lakh or more, no security will be provided by the fund under this plan. It seems that even if you have contributed to the plan, you will not get any benefit of the same in such a case.
3. Dependent Family Security Plan
- No Security at All to the Spouse: Operating Procedure 15 has provided that in case of death of the individual, his/her spouse will not be eligible to avail of any security under this plan if the spouse is engaged in other employment or gets married. It means suppose both husband and wife are contributing to the fund and if the husband dies then no security will be provided to the wife from the amount deposited by the husband.
Further, It is not clear in the laws as to the status of the sum available to the fund, under this plan, at the time of death of the individual. This requires further clarification.
- No Security at all to the Parent: Operating Procedure 17 has provided that in case of death of the individual, his/her parents will not be eligible to avail of any security under this plan if the parents are engaged in other employment or are entitled to any sum otherwise than from the fund. Further, It is not clear in the laws as to the status of the sum available to the fund, under this plan, at the time of death of the individual. This requires further clarification
- Only Rs 25,000 as Funeral Cost: Operating Procedure 18 has provided that in case of death of the individual, a funeral cost of Rs 25000 will be provided to the family members or the legal heirs. Considering the current scenario, this amount is too small.
4. Old Age Security Plan
- Pension Amount: Formula 160: Operating Procedure 21 has provided that the individual is eligible for a pension amount, after his retirement, for an amount equal to the sum available under this plan on the retirement plus the return derived by the plan divided by 160 which will be paid to him for a lifetime. Surprisingly, the amount available after dividing the total sum by 160 is even lower than the amount that would have been derived by keeping the sum in any fixed deposit scheme. Let's take an example to suppose an individual's basic salary was Rs 20000 per month. He joined the job at the age of 25 and worked till the age of 58. Then the total amount deposited under the pension plan will be Rs 1584000 i.e. (20000*20%*12*33). Monthly eligible pension as per the fund = 1584000/160= Rs 9900 per month monthly interest income in case of the FD = 1584000*9%/12 = Rs 11880 per month.Hence, the monthly loss will be Rs 1980 in case he/she joins the fund. This loss would be even more since the increment in basic salary and the return derived by the fund over the period are not considered in the above example.
- Pension Amount to the Spouse on His/Her Death: As per Operating Procedure 24 Ga, in case of death of the individual before 180 months of getting the pension from the fund or spouse not engaged in any employment then 50% of the pension being derived by the individual will be paid to the spouse. Many believe that paying only 50% of the pension is not justifiable on any grounds.
- Non-Clarity about Total Amount Available under the Pension Plan: It is not clear in the laws about the status of the pension sum available on his retirement, once he starts to get the pension, as to whether the monthly pension amount ( i.e Rs 9900 per month in above example) will be deducted from his main pension balance or such amount will be handed over to his legal heirs after his death. Many employees and even labor organizations believe that monthly pension payments will be deducted from the main pension balance and the whole pension amount will lapse upon his death. Hence, a strong clarification is required in this regard.
- Withdrawal of Total Sum Under the Plan: Operating Procedure 24 KA has provided the following case in which the whole sum of money deposited under this plan will be given to him.
- The whole sum of money under the plan will be provided to the foreign national in case of completion of his employment tenure.
- In case a Nepali citizen obtains foreign citizenship then such sum will be provided to him. For this purpose, Nepali citizens will be treated as equivalent to foreign nationals.
Further, it has also provided that in case a claim is made by any legal heir, on his death, under Procedure 15 (Pension to the spouse), Procedure 16 (educational fund to the children), or Procedure 17 (security to the parent under old age security plan) then the total claim amount, altogether, is restricted to Rs 7 lakhs only. However, there is no restriction on such claim amount in other cases. This results in a policy crisis.
5. Suspension of the Plan
Operating Procedure 34 has provided that in case any plan under the fund can not be operated or any additional facility can not be provided then the Board of Directors of the fund can apply to the ministry for suspension of the plan. This may result in total insecurity concerning the facility and the sum available in the fund which can not be interpreted as social security.
6. Alteration in the Operation Procedure
Operating Procedure 36 has provided that the Board of Directors of the fund can apply to the ministry for alteration in the Operating Procedure. However, the procedure has not laid down any criteria or any basis for the same. This has raised serious doubt about the uniformity of the procedure.
7. Mortgage Against the Loan
As per procedures 9 & 10 of the Social Security Fund Investment Procedure 2077, home loans and education loans will be provided only against the mortgage. This provision seems to be burdensome since this loan is not an ordinary banking loan but a loan against their own deposit money. This is the same as taking your own money out of your pocket which requires furnishing the mortgage.
However, there is no requirement of furnishing the mortgage in case of social work loan & or special loan. This has clearly shown the policy crisis in the case of mortgage requirements.
Disclaimer: This write up is only about an attempt to initiate an open room discussion about the various provisions made in the laws applicable to social security in Nepal and, therefore, shall not be constructed as a hot criticism of the same nor an attempt to make any solid discouragement to any person or any organization, to enroll themselves with the fund and get benefits of the same.