The government unveiled its contribution-based Social Security Scheme in November last year for formal sector workers. The scheme is compulsory for formal sector workers, in which private sector employees have to mandatorily contribute 11 per cent of their basic salary to the fund and employers another 20 per cent of the employee’s basic salary. However, the scheme has received only lukewarm response from majority of employers. Moreover, there has been criticism related to duplication with other schemes. In this context, Umesh Poudel of The Himalayan Times spoke to Kapil Mani Gyawali, executive director of Social Security Fund, to know more about the scheme. Excerpts:
Since your recent appointment to handle the Social Security Fund, how have you accelerated the works here?
In the first phase, we need to formulate necessary laws for effective operation of the Social Security Fund (SSF), which is expected to take around a year. The SSF has crossed preliminary level of operation and we are in the process of preparing some operational guidelines for its smooth operation. We have done an ‘order of the nefarious mass (ONM)’ survey for necessary human resources. We will soon finalise the terms of reference for the fund’s staffers to generate best results. While we faced some legal hurdles in the initial phase, the issues have been sorted out now. So, at present we are focusing on getting the private firms and their employees registered at the SSF and will focus on collecting the funds after the registration process is completed. Also, we are at the final stage of preparing investment modality of the fund. Moreover, we will soon set up branches in all the provinces for efficient and effective service delivery. As we have to work closely with banks and hospitals, we will integrate our systems with these institutions for better outcome. We plan to establish this institution as a smart institution. Currently around 9,000 firms and 101,000 employees have been registered at the fund, while the deposit amount has reached Rs 90 million. We expect the numbers to rise significantly once all the firms are registered.
Even as the SSF was launched amid much fanfare, the response from the private sector has not been very encouraging. What is your say on this?
Let me clarify that a large number of companies are in the process of being registered with the SSF. So, it would be wrong to say the response has not been good simply looking at the 9,000 companies that have been registered so far. As per our data, banks, financial institutions and insurance companies are yet to participate in the fund. They have argued that the scheme clashes with similar social security programmes that were already in place, like the Employees Provident Fund and Citizen Investment Trust. So, we are holding discussions with these institutions to find a feasible way out. The bottom line is that sooner or later, all private firms will have to join the fund. Also, comparing the number of firms registered with the Office of the Company Registrar (OCR) and those registered at the SSF would be misleading as a large number of firms registered at the OCR are defunct.
But the contributors are also questioning the long-term sustainability of the SSF, isn’t it?
As we are in the initial phase of rolling out the scheme, it is normal for some people to have certain reservations. But I would like to assure everyone that we will prove ourselves by working hard to ensure a secure future for the employers and employees. As per SSF Act, the fund will make necessary investment in different sectors that have received investment from banks and financial institutions, like hydropower, roadways, railways, agriculture, tourism, service, airways, among others. As per law, we won’t be able to invest more than 20 per cent of the total deposited amount in any one sector. This will ensure that all our eggs are not in the same basket. The government has established the fund as an independent institution. We are different from other similar institutions in the sense that our coverage is unlimited. This basically means that even if the fund is unable to cover the liability of the contributors in the case of any major disaster, the government will step in.
The fund is also preparing to float various kinds of loans for the contributors. Can you please elaborate?
We have already finalised the investment guideline and it is currently at the Cabinet for approval. Once approved, we will be able to disperse loan schemes to the depositors. Based on the guideline, we plan to provide home loans, educational loans and social loans to the eligible beneficiaries. The loans will be provided at minimal interest and we hope this will go a long way in upgrading the living standards of all Nepalis.
But isn’t it true that some of the schemes are very similar to the policies being offered by the insurance companies and the government itself?
Yes, we realise there have been some duplications. Therefore, we are currently holding discussions with the concerned stakeholders, especially the government’s Health Insurance Board, to find a solution.
The government recently extended the deadline for private companies to register at SSF for the third time. Will the deadline be extended again if the response remains muted?
The government has been flexible towards the private companies so far. But the deadline will not be extended again, and all active companies registered at OCR need to be registered at SSF within November 29. The reason for the last extension was considering technical issues reported by multinational companies and banks and financial institutions because of which they were unable to meet the earlier deadline. Any existing company that fails to meet the new deadline will have to face the music as per law. Here, I would also like to clarify that new companies will be able to register with the SSF any time. Currently we are conducting massive awareness campaigns to address any concerns of the employers and employees. Moreover, we have set up a call centre to address any grievance and/or concern related to the social security scheme.
A version of this article appears in print on November 05, 2019 of The Himalayan Times.