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Social Security System in Nepal

January 11, 2019

1. Social Security Regulation, 2018 (2075)

The Government of Nepal (“GoN”) has framed the Contribution Based Social Security Regulations, 2018 (2075) (“Social Security Regulations”) by exercising the power conferred to it under Section 69 of the Contribution based Social Security Act (“Social Security Act”). The Social Security Regulations has been published in Nepal Gazette on November 19, 2018 (Mangsir 03, 2075) with immediate effect.

The Social Security Regulations has prescribed certain matters as required by the Social Security Act. Such matters include (a) the procedure for participation in Social Security Schemes (b) registration of the employer and employee with Social Security Fund (c) operation of fund, etc.

 

2. Social Security Schemes Operation Directives, 2018 (2075)

The Social Security Fund (the “SSF”) has formulated the Social Security Schemes Operational Directives (“Directives”) to operate the Social Security Schemes pursuant to Section 10 of the Social Security Act. The Directive has been approved by the Ministry of Labor, Employment and Social Security on November 22, 2018 (2075/08/06) and has been effective thereof.

 

3. Laws dealing with Social Security Schemes

The Social Security Schemes are subject to the following laws, regulations, directives and notifications:

Legal Sources

Effective Date

Labor Act, 2074 (“Labor Act”)

September 04, 2017

Labor Regulations, 2075 (“Labor Regulations”)

June 22, 2018

Contribution Based Social Security Act, 2074 (“Social Security  Act”)

August 13, 2017

Contribution Based Social Security Regulations, 2075 (“Social Security Regulations”)

November 19, 2018

Social Security Schemes Operational Directives, 2075 (“Directives”)

November 22, 2018

Gazette Notice Requiring Enrollment of Employer to the Social Security Fund ("Enrollment Gazette Notice")

November 12, 2018

 

4. Requirement of Enrollment By Employer

4.1. 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 employers are required to be registered with the SSF.

4.2. The Enrollment Gazette Notice requires the Employers to enroll with the SSF within the timeline as below:

Employers by Region (Location)

Timeline

Date

Employers and Outsourcing Companies within Kathmandu Valley

Within 3 months from Mangsir 06, 2075 (November 22, 2018)

Within Falgun 05, 2075 (February 17, 2019) 

Employers of Province Number 3 (except Kathmandu Valley)

Within 3 months from Mangsir 15, 2075 (December 01, 2018)

Within Falgun 14, 2075 (February 26, 2019)

Employers of Province Number 1

Within 3 months from Poush 01, 2075 (December 16, 2018)

Within Falgun 30, 2075 (March 14, 2019)

Employers of Province Number 2

Within 3 months from Poush 15, 2075 (December 30, 2018)

Within Chaitra 14, 2075 (March 28, 2019)

Employers of Gandaki Province and Province Number 5

Within 3 months from Magh 01, 2075 (January 15, 2019)

Within Chaitra 30, 2075 (April 13, 2019

 

4.3. Upon enrollment of employers within the aforementioned timeline, they are required to enroll their employees with the SSF within 3 months after registration of the employers.

4.4. Submission of Application  

The required list of the documents to be submitted along with the application for enrollment of the employers with the SSF and the detailed process for registration is provided in the link below: https://ssf.gov.np/uploads/content/1542636187_np.pdf

 

5. Social Security Schemes

The Social Security Fund has introduced the following Social Security Schemes:

(a) Medical Treatment, Health and Maternity Protection Scheme

(b) Accident and Disability Protection Scheme

(c) Dependent Family Protection Scheme and,

(d) Old Age Protection Scheme

 

6. Contribution

The Employer and the Employees are required to contribute certain amount of the employee’s basic salary each month to the Social Security Fund.  The rate of contribution is as follows:

Contributor

Amount(basic salary)

Employee

11%

Employer

20%

Total

31%

 

7. Allocation of Contribution

The total amount of contribution made by the Employer and Employee will be allocated to the different schemes in the following manner:

S.N.

Social Security Schemes

Allocation

1

Medical Treatment, Health and Maternity Protection Scheme

1%

2

Accident and Disability Protection Scheme

1.40%

3

Dependent Family  Protection Scheme

0.27%

4

Old Age Protection Scheme

28.33%

 

Total

31%

 

8. Schemes their Coverage and Exclusions

8.1. Medical Treatment, Health and Maternity Protection Scheme

The Medical Treatment, Health and Maternity Protection Scheme comprises of (a) Medical Treatment and Health Safety Schemes and (b) Safe Motherhood Schemes for the Contributor or Contributors Wife. The Contributor who have contributed in the Fund for a period of 6 (six) months are entitled to facilities under this scheme. However, Contributors should contribute for 12 (twelve) months within a period of 18 (eighteen) months in order to benefit from the Maternity Safety Schemes.

8.1.1. Coverage under Medical Treatment, Health and Maternity Protection Scheme

          Pursuant to number 5 of the Directive, Contributors get the following benefits out of this Scheme:

  1. Medical consultancy services,
  2. Admission and operation fee of the hospital,
  3. Examination and treatment cost,
  4. Medicine Expenses equivalent to medical bill,
  5.  Expenses incurred for the regular pregnancy test of the Contributor or Contributor's Wife, hospital admission, operation and treatment of child for 3 (three) months,     
  6. Medical consultancy fee for the medical treatment undergone at home in case the contributor is unable to reach hospital.

8.1.2. Scope of Health Benefits

Contributors are entitled to following health benefits:

S.N

Scopes of Benefits

Entitlement

Contributor's Cost

1

Treatment at Hospital

Amount not exceeding NPR 100,000 p.a.

20% of the claim amount

2

Cost incurred for the regular pregnancy test of the Contributor or Contributors Wife, hospital admission, operation and treatment of child for 3 months

Amount not exceeding NPR 100,000 p.a.

20% of the claim amount

3

Treatment without admitting to hospital as per the prescription of doctor

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.

 

8.1.3. Exclusions

Contributors are not entitled to following treatment under this Scheme:

  1. The cost incurred for plastic surgery or dental treatment except the expenses required for the accidental treatment,
  2. Expenses incurred for Bariatric Surgery,
  3. In case the Fund is unable to bear the expenses and suspends the schemes due to the spread of epidemic diseases over the country,
  4. In case the similar benefit has been entitled under Accident and Disability Safety Schemes.

 

8.2. Accident and Disability Protection Scheme 

Accident and Disability Protection Scheme comprises of (a) Accidental Benefits and (b) Disability Benefit.

This scheme is applicable from the date of contribution to the Contributor who requires treatment for the employment related accident. However, the Contributors who have not contributed for a minimum period of 2 (two) years shall not be entitled to the benefit related to the treatment of occupational diseases and other benefit relating to the treatment of occupational health diseases.   

8.2.1.  Scope of Benefits

  1. Total expenses incurred for the treatment of employment related accident or occupational diseases.
  2. Treatment expenses up to NPR 7,00,000 in case of accident except the employment related accident.
  3. Amount equivalent to 60% of the employee’s basic remuneration until returning to work in case of temporary full disability due to occupational hazard or diseases.
  4. Lifetime monthly pension based on the ratio of disability of the Contributor in case of permanent disability due to occupational hazard or diseases.
  5. Lifetime monthly payment equivalent to 60% of the employee’s basic remuneration in case of permanent full disability due to occupational hazard or diseases.

 

8.3. Dependent Family Protection Scheme

This benefit is provided in the event of death of the Contributor. Dependent Family Protection Scheme comprises of (a) pension benefits to husband or wife, (b) Scholarship to the children of the Contributor, (c) benefits provided to dependent family members and (d) funeral expenses

  1. Pension Benefits

The Pension benefit is provided to husband or wife of the Contributor in the event of death of Contributor due to accident or occupational diseases. The husband or wife is entitled to lifetime pension benefit equivalent to 60% of last drawn basic remuneration of the Contributor.

  1. Scholarship Schemes to the Contributor’s Children

This Scheme covers the children who have not completed 18 years of age in the event of death of the Contributor. The amount of such scholarship shall be 40% of the last drawn basic remuneration of the Contributor and it shall be entitled every month.

  1. Benefits to the Contributor’s Parents

This benefit is provided to the dependent parents living joint with the Contributor in case the Contributor does not have husband or wife or children. The dependent parents will be entitled to 60% of the basic remuneration for life time.

  1. Entitlement of Funeral Expenses

In case of death of Contributor for any reason whatsoever the dependent family member or the nominee will be entitled to funeral expenses of NPR 25,000. 

 

8.4. Old Age Protection Scheme

The Old Age Protection Scheme will be operated by the total amount of 28.33% of the employee’s basic salary (10+10% provident fund and 8.33% gratuity) deposited in the SSF. The contributing employees shall receive (i) pension, or (ii) retirement scheme benefits.

The amount of gratuity prior to Bhadra 19, 2074 (September 04, 2017) (cut-off date) should be paid out to the employee and the amount of gratuity only after the cut-off date should be transferred to the SSF.

8.4.1. Participation in Pension Scheme

The Old Age Protection Scheme applies to the employees working with the employer prior to Shrawan 01, 2076 (July 17, 2019) if the accept the Scheme under the collective bargaining agreement.

8.4.2. Benefits under the Pension Scheme:

Upon completion of the retirement age, the total sum amount of contribution made by the employer and the employee and the amount of accrued from the investment made by the Fund will be divided by 180 months (15 years) and such amount will be provided as pension every month during the employee’s lifetime. Upon death of the Contributor prior to the retirement age, their heir shall receive the total lump sum amount of the contribution made by the employer and the employee and the accrued benefit received from the Fund.

8.4.3. Eligibility for Pension Entitlement:

The Contributor should have completed the age of 60 and should have contributed for at least 180 months or 15 years.

8.4.4. Retirement Benefits:

The Contributors working prior to Shrawan 01, 2076 (July 17, 2019) contributing 28.33% for provident fund and gratuity shall be entitled to receive a lump sum amount of the contribution and income accrued on such amount upon retirement.

 

9. Opt-In and Opt-Out

9.1. Pursuant to Section 6 of the Social Security Act, employees do not have the option to opt in or opt out of the Schemes and all employees are required to participate in all schemes (No option to participate in some schemes).

9.2. However, the following employees have the opt-in option for the following scheme (a) existing employees having employment relationship prior to Shrawan 01, 2076 (July 17, 2019), (b) under the Collective Bargaining Agreement, (c) to Old Age Protection Scheme. Until they exercise the opt-in option they are not included in the Old Age Protection Scheme and get the principal and accrued income of their provident fund and gratuity.

 

**DISCLAIMER: This document is prepared for general understanding and should not be taken for any legal purpose without consulting legal professionals. ** The copyright of the document is vested with PLA.

 

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