Kapil Mani Gyawali is the Executive Director of Social Security Fund (SSF). In November 2018, the government led by the then Prime Minister KP Sharma Oli launched the SSF amid much fanfare hailing it as a landmark scheme for the welfare of the private sector workers. Three years down the line, there is still apprehension over the arrangements of SSF, and a section of private sector employees, especially those working in banks and financial institutions (BFIs) are against joining the fund. In an exclusive interview with The HRM Magazine, Gyawali talked about the progress made so far, and why it is necessary for private sector employees to join SSF. Excerpts:
After three years of establishment, do you think SSF has been successful in achieving its objectives?
The government launched the contribution-based Social Security Fund (SSF) on November 27, 2018, in an effort to protect workers nationwide with a comprehensive welfare package. SSF schemes came into effect on July 17, 2019, whereby the workers are entitled to get four types of schemes. The SSF has four social security schemes – Medical Treatment, Health and Maternity Protection Scheme, Accident and Disability Protection Scheme, Dependent Family Protection Scheme, and Old Age Protection Scheme for its contributors.
Till now, more than 15,500 employers (organizations) and 281,000 employees (contributors) have joined SSF.
SSF has collected over Rs 8 billion from them as contributions. As of now, we have paid Rs 317.1 million to the contributors under the pension scheme and accident scheme.
The SSF is an international concept of social security. With SSF, we provide protection of the dependent family in the event of risks such as illness, disability, accident, death in connection with the work of the workers, the provision of income continuity after retirement (from 60-year to till death).
While expectations from SSF may not have been met as of now, but the benefits are far greater than that an employee gets from any organization.
Before SSF, we already have Employees Provident Fund (EPF). What is the fundamental difference between the SSF and the EPF?
Employees Provident Fund or other retirement fund allows annual income deduction benefit on the contribution by a member to his/her PF and Pension Fund account and special tax benefit privilege at the time of repayment of PF after retirement. The amount deposited in their Provident Fund can be withdrawn as a lump sum after retirement.
But what Social Security Fund does is the implementation of the Labor Act. The Act has provisions whereby employers have to contribute to the provident fund, provide gratuity, provide medical insurance and accidental insurance to the employees. The retirement funds do not have these facilities.
Unlike the public sector, private sector employees do not have pension benefits. Hence, the Labour Act envisioned these facilities with a view that they (private sector employees) should not be deprived of these facilities and the SSF is the part of that implementation.
For other retirement funds, it is not mandatory to bring the schemes that SSF has introduced. The schemes under the SSF provide provides lifetime monthly pension if the worker (contributor) becomes disabled for life for any reason. In case of the untimely demise of the guardian of the family, the fund saves the dependent family from being in trouble under the Dependent Family Protection Scheme. The family gets a lifetime pension benefit equivalent to 60 percent of the last drawn basic remuneration of the contributor. The children of the contributor get scholarships equivalent to 40 percent of the last drawn basic remuneration.
Even now there are some doubts about the SSF in some quarters. The employees of banks and financial institutions filed a case against the SSF in Supreme Court. As the head of this fund, what do you have to say about the reasons for joining the SSF?
The SSF is a contribution-based fund and is also mandatory. As it is mandatory, the premium accumulated in it is also high, due to which the facilities it offers are higher than elsewhere. The fund has moved ahead to facilitate the medical scheme as envisioned by the act. Once the SSF is fully implemented, it will ensure harmony in workplaces. On the one hand, SSF takes care of the workers’ social security requirements. On the other hand, it will also reduce the liability (responsibility) of the employer who does not have to spend time and energy on managing issues related to workplace accidents or even the death of the employees. As the SSF provides fundamental facilities, it will enable harmonious labor relations which we believe will have a multiplier impact on the economy and productivity. The fact the developed economies are doing well is due to a fully functional social security system and harmonized relations. Once we have that situation here (Nepal), it will have a positive impact on the state, fostering an investment-friendly environment and attracting foreign investment.
The SSF is participatory in nature as it has a tripartite representation of the employer, employee, and the government.
The SSF board has representation from the private sector, trade union, and the government.
How is the compliance level, especially on the part of the employer?
The employer will have to deduct 11 percent of the basic salary of the employee and contribute another 20 percent of the employees’ basic salary to deposit to the SSF. The contribution to the SSF must be done on a monthly basis within 15 days from the end of the previous month. The compliance level varies from company to company, but largely bigger employers have been contributing as per the rule.
If monthly contribution is not deposited regularly, then it will be difficult for the SSF to provide compensation as per the scheme to the contributor in case of his/her death.
There has been strong resistance, especially by the employees of banks and financial institutions (BFIs) to join the SSF. What are their main grievances?
We have been regularly interacting with the employees of the banks and financial institutions (BFIs). We also made a second amendment to the Social Security Fund (SSF) Operation Guidelines. After which some of the BFIs and insurance companies joined the SSF. However, they (BFIs’ employees) approached the Supreme Court and filed a case against the SSF.
There are two or three issues regarding BFIs employees’ reservations over the arrangements of SSF. First, they believe the trade union rights as per the law will be diminished if they join SSF. Another, they have a retirement fund in the BFIs and fear that the benefits they are getting maybe deducted by their employers on which they are seeking assurances. The third is the resistance towards change as SSF is a totally new concept in Nepal.
Responding to the writ filed by the BFIs’ employees, the Supreme Court has recently issued an interim order, asking the SSF to halt the implementation of the mandatory rule of listing in the SSF. Don’t you think it will impact the SSF, especially if the companies stop listing in the fund?
Even after the Supreme Court interim order, institutions are continuously joining the SSF. The SSF as an entity is moving ahead organically. Since the issue is under sub-judice, it would not be good to comment on the matter.
However, I believe that the honorable court will give the verdict as per the spirit of the constitution and the act under which the SSF has been envisioned.
How are SSF’s investments regulated? Are there any guidelines that they need to follow to safeguard contributor’s deposits as well as provide a good return?
The fund has SSF Investment Procedure 2077 in place for effective mobilization of the fund’s money for investment. We have deposited the contributors’ amount in the call deposit and fixed deposit of class ‘A’ banks. We have also invested in debentures. As per the investment procedure, we can invest in mutual funds, land as well as provide project loans and be part of consortium lending.
We have SSF, EPT and CIT which are in some ways are same in nature as they have retirement schemes. Do you think there is the possibility of consolidating all these three entities into one entity in the future?
All these three entities are different in nature. The Employees Provident Fund caters to the civil servant or permanent employees of the government, the SSF takes care of the organized private sector and the Citizen Investment Trust runs various retirement schemes as per its Act. But there is one commonality, i.e., all three are government entities. Hence, how to take forward them in the future depends upon the government policy and program.
The government allocates billions of rupees annually for social security schemes which also include old age allowance. And, there is also pension for civil servants. Now, there is the SSF. Don’t you think there will be duplicity in the future in the sense that people may get both benefits which will be a burden to the state in the long run?
The SSF is all about contribution-based social security. The other social security schemes are budget-based schemes. It’s up to the government to decide whether the SSF schemes and budget-based schemes can be brought together. I think it needs larger discussion and homework at the national level for this.