Govt, not employers, responsible for employees

Shekhar Golchha in Kantipur, 27 November

The contribution-based social security scheme announced by the government this week is an important step towards delivering social justice, and it is expected to protect people employed in the private sector.

Under the new scheme, private companies will no longer need to pay for provident fund and gratuity of their employees. Instead, they will have to deposit 31% of basic salary of each employee -- 20% from the employer and 11% from the worker -- into a government-owned social security fund. Private sector employees will get their pension and other facilities from this fund.

The employers will now have to pay 1.67% more than what they have been paying for provident fund and gratuity of their employees.

But us employers are not unhappy. Our only concern is an adjustment of the government-fixed basic salary of employees. About 550,000 people are currently employed by businesses, and they will all be covered by the scheme in its first phase. But will the mechanism for the social security fund be able to serve such a huge number of clients, and won’t government now have more liability? When the informal sector is also brought under this scheme, the number of beneficiaries and their deposits will increase 10 fold. Can the government afford this outlay?

The money deposited into the social security fund will keep growing. Where and how will the government invest this money? As of now, the employees’ provident fund and gratuity are controlled by not just government agencies, but also the employers. Employees cannot withdraw their money without a letter from the employers. Under the new scheme, employers need not keep records of provident fund and gratuity. The money will be controlled by the government.

The government will now be solely responsible for social security of private sector employees. The employers are just responsible for adding the 20% of basic salary.

What if the government loses the data of employees registered in the social security fund? How will the employees recover their money? The government now has a legal structure for social security, but it should not waste time in developing an administrative and technical structure to implement this scheme.

Shekhar Golchha is Vice Chair of Federation of Nepalese Chambers of Commerce and Industry (FNCCI)

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