Workers shall get lower salary while cost of doing business rises for companies
KATHMANDU, Jan 1: The government has tabled a bill in the parliament that will cut salaries of employees working in profit-making companies.
A provision in Some Nepal Act Amendment Bill, which will be tabled in the parliament in Tuesday's session, will take away employees' welfare fund from the companies. This will directly reduce the remuneration the employees are drawing from profit-making companies.
The fund, which is a 70 percent of the total amount remaining after distributing bonus up to four months' salary to each employee out of allocated bonus, is being managed by the company.
Any company making net profit has to allocate 10 percent of the amount for the bonus. The amount remaining after distributing bonus is divided into 70 and 30 percent. The latter is already being collected at the national level welfare fund, the recently established Social Security Fund (SSF).
They distribute the amount from the fund as health and education benefits to employees on monthly basis.
“This means the amount each employee is drawing from the company will be lower than they are getting if this law is endorsed as it is,” said S R Lamichhane, coordinator of Multinational Companies Trade Union. The government wants to collect this 70 percent also into SSF along with 30 percent.
Lamichhane said that this is against the employees' benefit, and the government is trying to take away 10 percent of the bonus allocated to workers in any company while the company owners enjoy 90 percent of the net profits.
“This kind of law is unexpected from the current government that has embraced socialism," added Lamichhane.
CEO of Sunrise Bank Ratna Raj Bajracharya said that the government was trying to confiscate the money distributed for the employee's welfare.
“We have been paying our staff in different ways, such as scholarship for their wards, assistance for health treatment for staff and their family members when needed, and for any emergency expenses through a decision of a welfare fund management company," said Bajracharya. "But the law shall make us helpless to help our staffs."
Ramesh Badal, vice-president of General Federation of Nepalese Trade Unions (GEFONT), a trade union associated with Nepal Communist Party, said that confiscating the fund from companies will have multiple negatives impacts.
"This provision will de-motivate employees and profits may be affected while the company with lower profits may contribute to low capital gain tax," argued Badal. “The employees contribute to the social security fund in another way and there is no point of confiscating the existing employee's welfare fund."
Badal argued that the government was taking regressive moves. He also warned that they will have no choice to resort to street protests against the provision.
The employees have also been barred from receiving bonus in proportion to the current minimum wage rates as the Bonus Act has not been revised for the last 26 years.
The Bonus Act 2049 BS has restricted distributing bonus beyond 6 months of one's monthly salary but the maximum threshold was calculated based on the minimum wage of Rs of 814 as of 2049 BS. The act says an employee can draw bonus not exceeding the amount equal to the salaries of 6 months, 4 months and 3 months in the categories of lower than Rs 5000, Rs 5000 to Rs 10,000, and above Rs 15,000 as monthly salary.
"These thresholds are based on the minimum wage of Rs 814. The minimum wage has now been increased to Rs 13450, but the government is heedless to our appeals to update these thresholds," lamented Badal.