“It would be a big achievement if we could roll out at least one social security scheme, say medicare, by next fiscal year (which begins in mid-July),” SSF Executive Director Kewal Bhandari told an interaction organized by the Nepal Business Forum in Kathmandu on Friday. “To achieve this goal support of employers is essential as they need to make contributions to the Fund.”
The government since June 2011 has been raising funds to implement social security schemes by making it mandatory for formal sector workers to contribute one percent of their basic salary in the form of social security tax.
By this mean, the government is expected to raise Rs 4.4 billion by the end of this fiscal year.
As per the plan, employers should now contribute 20 percent of basic salary of workers, while employees should hand over 10 percent of their basic salary to the SSF to implement social security schemes.
“We want employers to make their part of contribution so that we could launch at least one scheme,” Bhandari said.
Employers are also ready to chip in funds. “But prior to this we want the government to introduce the new labor law,” said Pashupati Murarka, chairman of the Employers Council of the Federation of Nepalese Chambers of Commerce and Industry (FNCCI), the largest umbrella organization of the private sector.
Although introduction of social security schemes and enforcement of new labor act sound like two different issues, employers take them as two sides of a coin as the new labor law is expected to introduce provisions like ´no work, no pay´ and ´hire and fire´, which firms want to link with social security.
In other words, employers want the SSF to extend necessary compensation to employees who remain absent from workplace or are fired by introducing unemployment benefit scheme, which the SSF is planning to design in the future.
“We are keenly waiting for launch of social security schemes as it is expected to improve labor relation which is crucial to attract both domestic and foreign investment,” Manish Agarwal, co-chairman of FNCCI´s Employers Council, said.
Another reason why the concept of social security is gaining momentum is its contributory nature. This means no one will be able to take benefit of social security schemes unless they make financial contribution to the SSF, which will ultimately reduce financial burden on the government to deliver various subsidized programs.
As of now, the government is spending Rs 36 billion per year on various social security schemes like old-age, maternity, child, health and disabled benefits. In addition, the government also spends another Rs 24 billion per year to finance public sector pension program.
Currently, these costs are being financed through revenue generated by the government. “But within a decade, these costs will soar to Rs 437 billion and the government´s revenue will not be able to sustain these expenses. This means the state will have to resort to credit to finance these schemes,” Bhandari said, urging the concerned authorities not to delay implementation of social security schemes.
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