Government vows to review Social Security Fund guidelines

After repeated complaints from employers, employees and other stakeholders on some provisions in the Social Security Fund (SSF), the government has finally agreed to review the guidelines within three months.
Addressing the ‘Econ-ity’ discussion on ‘Understanding the Social Security fund: Opportunities and Challenges,’ organised by Samridhhi Foundation, here today, executive director of the Social Security Fund Kapilmani Gyawali said that the government is going to make amendments of the provisions that the employers, employees and stakeholders have been seeking.
There have also been complaints that the guidelines discriminate between public and private sector employees and that participants in the fund will have to actually pay double taxes. Likewise, stakeholders have also criticised the policy as both workers and employers seem to be reluctant to participate in the social security programme.
Gyawali, however, said that the government is going to make amendments as the fund has been receiving widespread criticism due to the lower benefits it offers and unprofitable provisions. “We are going to hire a group of ‘actuaries’ from abroad, who will look into the issues being raised by different stakeholders and will make adjustments to the facilities that will be provided by the fund,” he said, adding that the provision related to insurance and taxation will also be revised. “We will come up with arrangements that can be easily integrated into the fund.”
An actuary is a business professional, who deals with the measurement and management of risk and uncertainty. Saying that Social Security Fund is working on solving the issue of taxation also, Gyawali said that the government is ready to amend the law after objections were raised regarding the age limit of retirement and insurance arrangements being unrealistic and the fund being discriminatory between public and private sector employees.
Speaking on behalf of Nepal Bankers Association (NBA) chief executive officer of Agriculture Development Bank Anil Sharma said that they have observed some contradictory provisions in the Act. As a representative of the private sector, he believes that there is a need to discuss on the Act itself. “The scheme should be sector-specific based on the varying needs and capacity of different sectors or the same for all sectors,” he said, agreeing on the fact that a lot of shortcomings need to be handled addressing all the issues in order to achieve positive outcomes.
Likewise, vice president of Confederation of Nepalese Industries (CNI) Rajesh Agrawal, on the occasion, stressed on the need to balance the schemes in regards to varying sectors. He also ensured that CNI has also raised voices for the small and medium enterprises (SMEs) and not just the large corporations. He further ensured that they will address the needs of the SMEs in the social security scheme in the days to come.
Discussing on various frameworks in regards to the contribution based social security scheme, the participants delved into the emerging trend with the implications of the recent developments and benefits that will accrue the people from different sector. Likewise, the programme attempted to inform on the possible directions that Nepal is heading towards to ensure stability and security.
Participants, on the occasion, however asked why the government has treated private-sector employees as second class citizens. “This is obvious when we compare the benefits contributors receive from the Fund with benefits the government employees receive from Pension Fund,” a participant said, adding that the most of the government and private sector associations are currently associated with the Citizen Investment Trust (CIT) and the Employees’ Provident Fund (EPF) and since these two organisations provide better facilities there was no point in joining the scheme.
Though, the government has launched the programme with much fanfare last year, Social Security Fund has turned to be only a ‘pension scheme’ that offers benefits far below the existing EPF and CIT.
A researcher at Samriddhi Foudnation Ankshita Chaudhary began the session by giving a brief introduction of the emergence of the contribution-based social security scheme. The presentation highlighted – the inability of the SMEs to cope with rising costs, differences between the government and private sector employees, issues of taxation, among many – some of the difficulties associated with the fund.
Under the Social Security Fund, enrolled employees will be entitled to assistance for medical treatment, health and maternity protection, accident and disability protection, dependent family protection, and elderly protection (pension). The employers, who have signed up in the Social Security Fund system have listed over 50,140 employees for their contribution in the scheme.
Last week also, a team from the Federation of Nepalese Chambers of Commerce and Industry (FNCCI) had requested the government to revise and include more realistic provisions that could help attract more contributors.

BFI employees not interested to join Social Security Fund

Banks and financial institutions (BFIs) expressed their reservations on Social Security Fund (SSF) despite the government and central bank’s direction last week on mandatory enrollment.
The members of the Nepal Financial Institution Association (NFIA) – an association of people working in banks and financial institutions – threatened to launch protests, if the central bank forces then and does not roll back its direction of mandatory participation in the scheme.
“The regulatory body has issued a circular without consulting BFIs,” according to a press note issued by the association. “It is not under the jurisdiction of the central bank to direct BFIs to join the scheme,” the press note reads, adding that financial institutions will not join the social security programme as it does not ensure basic rights of workers in the financial sector. “We will be compelled to protest, if central bank does not roll back its direction.”
They have been demanding that the government include insurance policy for dependent family members of the banking staffers. Likewise, they are also demanding that mandatory registration of staffers in the Social Security Fund for those who had joined the institution after the fund has been established.
The government fixed November 30 deadline for the private sector to get listed in the scheme, which aims at providing pension to retired employees of the private sector as well. Though, government is planning to extend the deadline to convince more private sector institutions – especially BFIs – in the scheme, the private sector employees are not much interested in joining the scheme.
Meanwhile, commercial banks have also expressed their concern in the scheme. They, though, claim that the scheme is good, the bank employees are not interested as they think they are not ensured of the basic facility that they have been getting.
“We are already registered at the Employees Provident Fund (EPF) and Citizen Investment Trust (CIT),” the association said, adding that they are not interested in joining the scheme as they are not ensured of facilities that they have been already getting through EPF and CIT.
Likewise, Nepal Bankers Association (NBA) is going to held meeting with the central bank to rely their concerns. Some 131,577 workers and 11,797 employers have been listed in the social security scheme till date.

Employers need to embrace social security scheme: Minister Bista

Minister for Labour, Employment and Social Security Gokarna Bista today said that employers need not worry and should embrace the contribution-based social security scheme (SSF), which demanded a small contribution from employers to relieve them from greater economic risk.
Addressing a programme organised by the Joint Trade Union Coordination Center (JTUCC) here today, he said that the employers need not panic as the scheme will not add any financial burden to them. “Under the scheme, employees shall contribute 11 per cent of the basic pay to the fund and employers concerned shall provide 20 per cent to take a total 31 per cent contribution.,” he said, adding that the scheme will be eventually beneficial for both employees and employers. “The trade union should play a key role for the effective enforcement of the scheme.”
The scheme has come as a tripartite agreement among the government, employees and workers and no one could escape it, he added.
Accusing trade union leaders and entrepreneurs for obstructing effective implementation of social security programme across the country, he Bista said that the government has been unable to effectively implement the social security scheme owing to politicians, who own businesses and industries and have not complied with the government’s direction to sign up for the scheme.
He also called the trade union to hold in-depth discussions on the matter. The minister asked the employers to enlist employers and workers under the scheme by coming October 17, otherwise face the music.
Minister Bista has held meeting with the PABSON on the matter the day before and with hoteliers today. He is holding next meeting with the banks and finances.
The JTUCC chair Binod Shrestha, on the occasion, sought the stronger role of the government to implement the scheme effectively. So far, some 4,092 enterprises and 35,500 workers have been listed in the scheme that came into effect from July 17, 2018. According to the official statistics, there are around 900,000 enterprises operating in the country.
The final deadline for all the companies, industries and enterprises to register in the programme has been fixed at October 17. 

Auto dealers call for lowering tariffs to support growth

The dealers called for the lowering of the tariffs on the imports of automobiles.
The auto sales growth rate has dropped to 1.5 per cent from an average growth rate of 20 per cent to 25 per cent – from a year ago – also due to unclear and inconsistent policies, apart from high tariff on imports and government perception that automobiles are luxury goods, they said, adding that the drop in auto sales will hit the government treasury too.
“The slowdown in the growth of automobile business is not a positive sign, according to the immediate past president of Nada – the umbrella organisation of automobile dealers across the country – that is organising Nada Auto Show 2019 from the day after. The slow growth due to rising tariffs on imports of vehicles and tightening of credit flow to the auto sector has not only hit the business but also the revenue mobilisation target of the current fiscal year. The government gets nearly Rs 100 billion in revenue from the auto sector every year.
“The government has imposed a tariff of 255 per cent to 320 per cent on the import of automobiles.”
People, though can ride a car based on their capacity, the high tariff rate is curbing the rights of the people to ride a car, he added.
The failure of the government to expand the road network and build infrastructure are also some of the roadblocks for the smooth ride of the automobile business in the country. “The complaints that there are a lot of vehicles on the road which has caused traffic congestion, is just due to fewer and smaller roads in the country,” he said, adding that the successive governments have failed to spend the budget allocated for the construction of roads.
The recent government move to make permanent account number (PAN) mandatory, online-based vehicle and consignment tracking system (VCTS) and mandatory enrollment in the social security fund (SSF) scheme also made the doing business difficult in Nepal, Shrestha added.

Bring Social Security Act, Labour Act together: Employers

The private sector has asked the government to bring Social Security Act and Labour Act together through ordinance for the effective implementation.
“In an absence of Labour Act, the Social Security Act may not be effective, as they are related to each other,” said chairperson of Employers Council and vice president of Federation of Nepalese Chambers of Commerce and Industry (FNCCI) Pashupati Muraraka, at an interaction on Social Security Fund (SSF) organised by Nepal Business Forum, a public private dialogue forum promoted by the International Finance Corporation (IFC), here today.
However, a draft of Social Security Act is ready and draft Labour Act needs more amendment and could be delayed, according to the Ministry of Labour.
“If the government cannot bring both the Acts through ordinance together, the Labour Act must be brought before the employers start contributing to the Social Security Fund,” he said, adding that the two Acts complement each other.
The Social Security Fund has envisioned some 20 per cent contribution from employers and 11 per cent from the employees making it to a 31 per cent. But it has yet to be finalised.

Social Security Act will not only help increase productivity of the employees and mitigate the dispute among the employers and employees but also help attract investments, as the employees feel secure,” Muraraka added. “Smooth relations between the employees and employers will send a positive message to the investors, who are interested in investing in Nepal.”
Labour dispute, lack of skilled manpower, and over politicisation of trade unions have hurt the investment climate in the country, said executive director of Social Security Fund secretariat Kewal Bhandari, on the occasion.
The social security schemes will help manage labour market boosting their confidence and increasing their productivity, he said, adding that the Fund that has Rs 4.40 billion is planning to launch atleast one social security scheme – medical scheme – from the next fiscal year.
The government has been charging one per cent social security tax to the employees since 2011.
 “Though, the Fund has prepared four social security schemes.”
The Fund is planning to collect data of the some 1.2 million employees – that are estimated to be working in the private sector in the country – sectorwise. “By now the Fund has registered some 80,000 employees, he said, adding that data collection, policy level confusion, rate of contribution of the employers and providing Social security card are some of the challenges for the Fund, though the Fund is committed to implement the contribution based pension.
“The contribution based pension can sustain for a long time, as the government could not manage the public expenditure on social security that has been rising by around 20 per cent annually.
 “Providing social security is not only the state’s responsibility but it will also help reduce poverty and attract investments,” Bhandari added.
The workforce should be secure, said senior private sector development specialist at the IFC, a private sector lending arm of the World Bank, Laura Watson.
Social Security Fund is the solution to the critical labour issue that has been making the investments shy away, she said, adding that it will help create good working environment.
Nepal Business Forum had been pushing the government to implement the social security – since 2010 – that would help create investment friendly environment in the country.