Social Security Fund in Nepal : Enrollment Process

Government has introduced the Social Security Fund system in Nepal by introducing the Contribution Based Social Security Act, 2018 (2075) to provide all the workers across the country a strong economic and social support during and after their employment. The schemes provide financial guarantees to employees and their families in the event of a contingency as well as cover their medical needs.

The Enrollment Gazette Notice does not specify the sector or nature of industry, business, service or transaction subject to the enrollment with SSF. Therefore, all registered entities are required to be registered with the SSF.

 

The principal legislation governing the social security fund (“SSF”) system in the context of Nepal are as mentioned:
a. Social Security Act, 2018 (2075)
b. Social Security Fund Regulations, 2075 (2018)
c. Social Security Scheme Operation Directive, 2075 (2018).

 

SSF undergo registration at the Office of Social Security Fund. The responsibility of overseeing and guiding activities pertaining to SSF lies with the Office of the Social Security Fund.

 

Following entities and individual can participate on SSF in Nepal:

 

S.N.	Participating Individuals	Types of Participation	Remarks
1.	All registered entities	Mandatory	--
2.	Employees working for the registered entities in Nepal	Mandatory	--
3.	Self-employed Individual and person employed within the informal sector	Voluntary	--
4.	Migrant workers	Voluntary	Migrant workers or self-employed persons based abroad if interested can contribute at least 21.33 percent of the minimum basic monthly salary fixed by the Nepal government for domestic industrial workers. The maximum amount they can contribute into the scheme is three times the minimum basic salary.

 

The Employer and the Employees are required to contribute total 31 % of employee’s basic salary each month to the SSF. The rate of contribution is shown in pie chart below: 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

The total amount of contribution made by the employer and employee shall be allocated to the different schemes in the following manner:

 

 

To be eligible for a pension from the SSF, an individual must consistently contribute for a minimum of 15 years or shall contribute till the age of 60 years.

 

The process for enrolling both employees and employers in SSF involves several steps:

 

Note: It's important to note that Employers must ensure that they enroll their employees with the SSF within three months of registering themselves during the specified timeline.

 

Given the diverse types of enrollment employer and employees associated with the social security fund, some documents are required during the registration process, as listed below:

 

i) For Employer

SN.	Documents required for employer
1.	Company registration Certificate
2.	PAN/VAT certificate
3.	Details of Employer
4.	Application

 

ii) For employee

SN.	Documents required
1.	Details of Employee
2.	Citizenship, National identity card, PAN card and password of Employee
3.	Passport size photo of Employee

 

Illustration: If salary of Person A (“A”) has salary of NPR 1,00,000 (1 lakh). Employee can separate 40 % of the basic salary as allowance. Therefore, A has basic salary of NPR 60,000 and allowance of NPR 40,000:

For	Contribution Amount (NPR)
Total contribution from employee (11% of 60,000)	6600/-
Total contribution from employer (20% of 60,000)	12000/-
Total contribution at SSF Per Month	18600/-

 

Benefits:
As per number 5 of Social Security Scheme Operating Procedure, 2075 (2018), the contributor shall be entitled to the following benefits under the scheme:
(a)Physician's consultation service,
(b)Fee charged for hospital admission and surgery,
(c)Expenses of diagnosis and treatment of disease,
(d) Expenses as per bill of medicines,
(e) Expenses of regular pregnancy test of the male contributor's wife or female contributor, expenses of surgery related to maternity or treatment following admission in a hospital, expenses for child delivery in a hospital, expenses related to maternity for up to six weeks of delivery, and expenses of treatment of new born up to three months old,
(f)Consultation fee for home service in case of non-admission in a hospital but has received home service from a physician or health worker due to inability to visit the hospital for treatment.

 

Scope of Health Benefits:

S.N.	Scope of Benefits	Entitlement	Contributor’s Cost
1	Treatment at Hospital	Amount not exceeding NPR 100,000 p.a.	20% of the claim amount
2	Expenses related to the standard pregnancy test for the Contributor or the Contributor's spouse, hospitalization, surgical procedures, and the three-month care of the child.	Amount not exceeding NPR 100,000 p.a.	20% of the claim amount
3	Medical care as per the doctor's prescription without the need for hospitalization.	Amount not exceeding NPR 25,000 p.a.	20% of the claim amount
4	Maternity Care/Miscarriage after 24 weeks of pregnancy/stillbirth	Amount equivalent to one month’s minimum remuneration per child. Up to two children

 

Exclusions

As per number 8 of Social Security Scheme Operating Procedure, 2075 (2018), the following treatments are not eligible for coverage under this Scheme:
1. Expenses of plastic surgery or dental treatment except, where it is required as treatment following an accident,
2. Expenses of bariatric Surgery.
3. In the event where the scheme has been suspended due to inability of the Fund to meet the expenses following the outbreak of an epidemic in the country,
4. Expenses of abortion carried out in conditions other than as per the prevailing law,
5. If a similar benefit has already been received under Accident and Disability Safety Schemes.

 

Benefits
As per number 9 of Social Security Scheme Operating Procedure, 2075 (2018), the contributor is eligible for the subsequent benefits under this Scheme:
(a) Benefits against accidents.
(b) Benefits against disability.

 

Conditions for Qualifying for Benefits:

As per number 9 of Social Security Scheme Operating Procedure, 2075 (2018), the conditions for qualifying for benefits:
1. If the contributor requires medical treatment due to an accident, they can receive benefits as outlined in this scheme.
2. The benefits mentioned in Condition no 1 become effective from the date the Social Security Fund receives contributions following enrollment. These benefits are not accessible if contributions are halted.
3. Despite what is stated in condition no 2, benefits for occupational diseases and related issues are only available after contributing for a minimum of two years. The contributor remains eligible for these benefits until two years after discontinuing contributions.

 

Limitations of Accident and Disability Protection Scheme benefits
Benefits under this scheme are subject to the following conditions:

1. (a) Full coverage for work injuries or occupational diseases, with a requirement to notify the Fund within seven days using designated contact methods in case of a work injury.
(The SSF should be informed within seven days by the employer, employee, or a family member. Notification can be made via phone,  email, or other methods specified by SSF, and must include the social security number.)
(b) If not informed as per (a) and treatment occurs in a non-approved hospital, expenses exceeding NPR seven lakhs are not covered.
2. The Fund covers up to NPR seven lakhs for non-work-related accidents. If other insurance provides NPR seven lakhs or more, the Fund won't cover any expenses; if less, it covers the remaining amount.
3. Temporary full disability due to work injuries or occupational diseases receives a monthly amount equal to 60% of basic salary until return to work.
4. Permanent disability due to work injuries or occupational diseases results in a lifelong monthly pension based on disability severity, with 60% of basic remuneration equating to 100% disability.
5. For contributors with permanent full disability, a monthly payment of 60% of their basic salary is made for life or to their caregiver if they are disable.
6. Payment to caregivers or institutions requires approval from the relevant rural municipality or municipality.
7. Periodic reviews of disability status may lead to benefit adjustments.
8. The pension amount is adjusted for inflation based on a rate determined by the Board of Directors using actuarial reports.

 

As per number 14 of Social Security Scheme Operating Procedure, 2075 (2018), in case of death of the contributor, the dependent family shall be entitled to the following benefits under this Scheme:
a) The pension to be received by the spouse,
b) educational allowance to be received by offspring,
c) Benefit to be received by dependent parents,
d) Funeral expenses.

 

Pension Benefits:

In the event of the contributor's demise due to an accident or occupational diseases, the spouse of the contributor will receive a pension benefit. This pension benefit will continue throughout their lifetime and will amount to 60% of the contributor's last received basic salary.

 

Scholarship Schemes for Contributor's Children:

This scheme applies to children who have not yet reached 18 years of age and whose contributor parent has passed away. The scholarship amount, which will be granted on a monthly basis, will be 40% of the contributor's last basic salary.

 

Benefits for Contributor's Parents:

If the contributor lacks a spouse, children, or both, and is living jointly with dependent parents, this benefit comes into effect. The dependent parents will receive a lifelong benefit amounting to 60% of the contributor's basic salary.

 

Funeral Expense Entitlement:

Upon the contributor's passing, regardless of the cause, the nominee or dependent family member will receive funeral expenses totaling NPR 25,000.

 

Pension amount for husband and wife
As per number 19 of Social Security Scheme Operating Procedure, 2075 (2018), The Fund shall operate old age protection scheme from the total of 28.33 per cent amount of the basic salary of the worker deposited in the Fund that include 10 per cent as provident fund and 8.33 per cent as gratuity (totaling 18.33 per cent) from the employer, and 10 per cent of contribution from the worker as provident fund.

 

Inclusion in the Pension Scheme

Employees who were in the employer's service prior to Shrawan 01, 2076 (July 17, 2019), and who have accepted the Scheme under a collective bargaining agreement, are eligible for the Old Age Protection Scheme.

 

Pension Scheme Benefits

Upon reaching the retirement age, the total combined contributions from the employer and the employee, along with the accrued returns from the Fund's investments, will be divided by 180 months (equivalent to 15 years). This amount will then be pay out as a monthly pension for the duration of the employee's lifetime. In the unfortunate event of the Contributor's demise before reaching the retirement age, their heirs will receive the entire lump sum of contributions made by the employer and the employee, as well as the accrued benefits from the Fund.

 

Eligibility for Pension Entitlement

To be eligible for pension benefits, contributors must have attained the age of 60 and have contributed for a minimum of 180 months, equivalent to 15 years.

 

Retirement Benefits
Employees who were contributors prior to Shrawan 01, 2076 (July 17, 2019), and contributed 28.33% of their salary towards the provident fund and gratuity, are entitled to receive a lump sum that includes both their contributions and the accrued income upon their retirement.

 

Remittance Permissions for Foreign Citizens:

1. Foreign citizens, upon the conclusion of their employment, have the option to remit the total amount due to them under the old age protection scheme in the Fund as a lump sum at any given time.
2. In the unfortunate event of the demise of a foreign citizen during their employment in Nepal or before remitting their entitled amount following the termination of service, the Fund will disburse the sum to their official dependents or legal heirs.
3. If any Nepali citizen decides to renounce their Nepalese citizenship in favor of acquiring foreign citizenship, they will be granted permission by the Fund to remit their accumulated amount as a foreign citizen, provided they submit an application along with supporting evidence.
4. Regardless of the provisions outlined in Sub-section (2), if a foreign citizen, who has contributed to the Fund, passes away and their legal heir is entitled to benefits as per Sections 15, 16, and 17, of Social Security Scheme Operating Procedure, 2075 (2018) and chooses to receive a lump sum payment in lieu of benefits, they will receive an amount of up to NPR seven lakhs.

 

 

Through the SSF, individuals have the opportunity to access various loans with favorable interest rates, covering four distinct categories:
i. Housing loan,
ii. Education loan,
iii. social events loan,
iv. specialized loan.

 

a) Under these credit facilities, a contributor can access a total credit limit based on either (a) their 15-year salary, (b) their salary until they reach the age of 60, or (c) a maximum of Rs 10 million, whichever is lower. However, it's important to note that collateral must be presented when seeking these loans.

 

b) In cases where collateral is not provided, contributors can borrow up to 80% of their deposited funds.

 

c) Nonetheless, there are specific limits on borrowing amounts, with Rs 3.5 million allocated for educational purposes, either for the contributors themselves or their family members. For housing needs, such as purchasing residential properties or renovation, the borrowing limit is set at Rs 7.5 million. In the case of social events, such as weddings, contributors can borrow up to Rs 500,000.

 

d) To be eligible for these loans, individuals must have a minimum of 36 months of consistent contributions to the fund and be at least two years away from their maximum retirement age for service. It's important to note that the requirement of 36 months of regular contributions does not apply to loans transferred from another approved retirement fund.

 

e) Regarding the specific details and scope of special loan, the SSF has yet to provide clear information on this matter.

 

In accordance with Section 6 of the Contribution based Social Security Act, employees are mandated to partake in all schemes, with no provision for opting in or out. All employees are obliged to be participants in all the schemes; there is no choice to participate in only certain schemes.

 

Nevertheless, the subsequent circumstances grant certain employees the opportunity to opt into specific schemes: (a) employees who had established an employment relationship before Shrawan 01, 2076 (July 17, 2019), (b) those covered under the Collective Bargaining Agreement, and (c) those eligible for the Old Age Protection Scheme. Until they decide to exercise the opt-in option, they remain excluded from the Old Age Protection Scheme and retain the principal and accrued income from their provident fund and gratuity.

 

In accordance with Section 7 of the Contribution-Based Social Security Act, the obligated sum must be transferred and deposited into the fund within fifteen days following the conclusion of the month in which the contributable income becomes due for payment.

 

The SSF allows for the retrieval of employer contributions, along with a 10% interest charge, if there's a failure to deposit them within 15 days from the conclusion of each month. Should an employer, for instance, deduct funds from an employee's monthly salary but not deposit them into the SSF, they may face penalties. These penalties include fines equivalent to the misappropriated amount (or Rs.100,000 if the exact sum cannot be ascertained) or imprisonment for a maximum period of one year, or a combination of both.

 

Date of Publication: 22 August 2023

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