Kathmandu, July 24
Seven years since Nepal implemented
the contribution-based social security scheme for the employees, the question remains
on how to better attract Nepali businesses to the Social Security Fund (SSF).
In particular, micro and small enterprises
(MSEs), which according to the Economic Census of 2018 constitute 99.5 per cent
of total 923,356 in operation then, are lagging in this regard.
While the law has mandatory
provisions for formal schemes, MSEs remain apprehensive whether they could
continue with SSF in a sustainable manner. The take-up across informal sector
schemes, and the self-employed schemes also remain sluggish.
MSEs contribute about 22 per cent to
the national economy and employ about 1.8 million people.
Chairperson of Cottage and Small
Industry Committee at the Federation of Nepalese Chamber of Commerce and
Industry (FNCCI), Narendra Kumar Khadka, said that in the current economic
situation and stringent policies, it is not easy for the employers to ensure
the sustainability of contribution-based social security.
"The micro and small
enterprises are between compulsion and understanding in terms of executing the
social security provisions. We need to find a middle ground to support the
employers and facilitate the employees," he said.
According to him, the FNCCI is working
on it through a committee led by the Ministry of Labour, Employment and Social
Security, Social Security Fund (MoLESS) to implement the National Action Plan
on Formalization with technical assistance from the International Labour
Organization (ILO) which is promoting the registration of MSEs into SSF.
The Contribution-Based Social
Security Act 2017 envisions all business establishments – both in formal and
informal sectors – as well as non-profit sector institutions, and individuals
including those in foreign employment to be included in the system.
According to the law, the employee
contributes 11 per cent and the employer puts up 20 percent making it 31 per
cent of the basic salary for formal schemes. The informal sector worker schemes
have 11 per cent of the workers and 9.37 per cent from the local government while
self-employed schemes see the full 31 per cent contributed from income.
The benefits on offer include
medical treatment and health benefit, and various protections like maternity,
accident, incapacity, old age, dependent family and unemployment. Such schemes
ensure protection for both employers and workers, enhancing productivity and
promoting employment security.
However, in case of
failure to deposit the contribution within 15 days after the end of each month may result in a 10 per cent interest charge on the overdue amount.
However, there is a clause in the law whereby the employer can register an
application to the SSF to deposit the money within 30 days if there are
plausible reasons that the situation was beyond their control.
If the non-compliance continued beyond the
period agreed by the SSF, it can write to the concerned authorities to freeze
the bank account, moveable and immoveable assets of the concerned individuals
or institutions, suspend or stop the rebate facility entitled by law and
suspend their permit or license, and freeze the passport of the persons concerned.
These provisions have
forced the MSMEs, many of which lack business sustainability plan, think twice
before joining the SSF.
The SSF has estimates that out of
21,031 economic establishments registered with the Fund, 3,000 (about 14 per
cent) are MSEs. Its collections had reached Rs. 86.93 billion in contribution
till Wednesday 23 July 2025 and paid Rs. 15.79 billion against the claims for
medical and health treatment, accident and disability, dependent family
protection and retirement facility.
MSEs' possibility of joining SSF
A sample survey on micro and small
enterprise contribution capacity has now completed by the MoLESS led the committee
in charge of implementing the national action plan on formalization.
On the demand side, it was found
that nearly half
of the non-contributing enterprises demonstrated good financial health,
suggesting the potential to participate in SSF. Also, many MSEs lacked proper
bookkeeping, with some even lacking bank accounts in the name of the enterprise,
which calls for financial literacy and business management support. Interestingly,
it was found that there was a segment of unregistered businesses that could
join SSF, and in cases unaware of the different formal, informal sector and self-employed
schemes on offer.
On the supply side, a need to
consider subsidies, financed through tax mechanisms or redistribution though
carefully designed to ensure sustainability and avoid creating disincentives
for MSE formalisation or business growth was found.
Spokesperson for the SSF, Krishna
Adhikari, has made a primary assessment that there is a possibility to include
all the MCSEs in the social security scheme.
"We found that joining the SSF
may not be a financial burden to the enterprises since it entails other various
benefits, relieves the employers from the potential extra expenses on health
and other areas while employees could be more motivated," he said.
Yet, there is a need for intensive
campaign for information, awareness and education to micro, and small
entrepreneurs to attract them to the scheme.
Meanwhile, the FNCCI together with
MoLESS, SSF and other members of the committee with technical assistance from
the ILO, and the European Union United Nations Empowered Women Prosperous Nepal
programme has begun implementing a targeted awareness programme based on the
findings.
In Nepal, micro enterprises are businesses with fixed assets of up to Rs. 2
million and employ up to nine persons with direct involvement of the investor.
Small enterprises are the businesses with fixed assets ranging between Rs. 2
million and Rs. 50 million employing between 10 and 49 persons. Similarly, medium
enterprises have fixed assets between Rs. 50 million and Rs. 150 million and
employ between 50 and 249 persons. These investments are excluding the land and
buildings.
Published in The Rising Nepal daily on 25 July 2025.
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