Contribution-based Social Security Act, 2017 was enacted on 29 Shrawan, 2074 (13 August 2017) and has been enforced since the 91st day of the enactment. The notice for enrolling with Social Security Fund was published on 26 Karthik, 2076 (12 November 2019) requiring employers of all nature to enroll their employees regardless of their nature of employment.
We have answered some frequently asked questions about contribution based social security:
Q1: Is it mandatory to enroll with Social Security Fund?
Yes, it is a mandatory legal requirement to enroll the employer followed by enrollment of employees with the Social Security Fund. However, enrollment is not mandatory for independent consultants.
Q2: Is it mandatory to enroll with the Fund if the employer has very few numbers of employees?
Yes. There is no exemption from enrolling with the Fund even if the headcount of the employees is less.
Q3: When should the employees be enrolled? Should employees enroll themselves?
Upon enrollment of the employer, an employer should enroll the employees. Employees cannot enroll themselves. An employee should be enrolled within three months from the date of establishing the employment relationship with the Employer.
Q4: Are employer required to enroll part time employees?
Yes. All the employees including part time employees, regardless of the nature of employment should be enrolled with the Fund.
Q5: Should foreign nationals also enroll in the Fund?
Foreign nationals working in Nepal should be enrolled with the Fund and send the contribution to the Fund during the time of contribution.
Q6: How can the enrollment with the Fund be done?
Enrollment can be done online by clicking SOSYS online registration at www.ssf.gov.np. User guideline available at https://ssf.gov.np/uploads/content/1542636187.pdf and https://ssf.gov.np/uploads/content/1542636187.pdf can be followed for enrollment with the Fund.
Q7: Is there any registration fee charged?
Q8: What is the sanction for failure to enroll? Are employees subjected to any sanction for not enrolling with the Fund?
It is the obligation of the employer to enroll itself and its employees with the Fund. Thus, the liability for the failure to enroll with the Fund is on the employer.
If the employer fails to enroll the employees, SSF may give a directive requiring the employee (a) to immediately enroll itself and its employees with the Fund, (b)deposit the contribution along with a 10% fine, or (c) pay the equivalent benefits to the employee whose employment is terminated. Also, a fine of up to NRs. 50,000 may be charged to the employer.
Q9: What is the contribution rate to be deposited at the Fund?
An employer should contribute 20% of the basic salary of the employee and the employee should contribute 11% of the basic salary to the Fund. An employer should deduct an employee’s contribution at the time of payment of salary and deposit it in the Fund.
Q10: Does Employer or Employee have to provision additionally for provident fund, gratuity, or medical insurance?
Upon contribution to the Fund, Employer or Employee does not need to make an additional contribution for provident fund, gratuity, or medical insurance. However, if an employer provides additional medical insurance benefits, such additional benefits are not prohibited.
Q11: Can Employer continue to provide additional benefits to employees?
Yes. Additional benefits can be provided to employees. Further, if any additional benefits are being provided, such existing benefits cannot be reduced unilaterally by the Employer.
Q12: Does Employee need to pay the social security tax?
It is not required to pay Social Security Tax under Income Tax Act if the Employee has been contributing to the Fund.
Q13: When should the contribution be deposited in the Fund?
The 31% of the basic salary should be deposited every month within 15 days of the next month. The Fund can recover the contribution along with 10% interest from the employer if the employer fails to deposit the contribution within 15 days of the next month.
However, if the delay is caused due to the circumstances beyond the control of the employer, the Fund may exempt the interest partially or completely if such conditions explained in the application provided by the employer are found to be reasonable.
Q14: How can the amount be deposited in the Fund?
The Fund has maintained an account in Nepal Bank Limited, with account number 002116067200012000002. The amount can be deposited online through ConnectIPS.
Q15: What happens if the Employer does not deposit the contribution amount?
If the Employer misappropriates the amount of contribution, the Employer is subjected to a fine of amount equivalent to such contribution or up to NRs. 100,000 (if the misappropriated amount cannot be determined) or imprisonment up to 1 year or both.
Q16: What are the schemes operated by the Fund?
Following Schemes are being operated by the Fund:
- Medical Treatment, Health and Maternity Protection Scheme
- Accidental and Disability Protection Scheme
- Dependent Family Protection Scheme
- Old Age Protection Scheme
Q17: What is Retirement and Pension Fund?
Under Old Age Protection Scheme, SSF maintains two funds, (a) Retirement Fund, and (b) Pension Fund. Generally, the amount of provident fund i.e. 20% of basic salary is deposited in the Pension Fund and amount of gratuity i.e.8.33% of the basic salary is deposited in the Retirement Fund.
Q18: When can the contributor receive the amount of the Retirement Fund?
The lumpsum of amount contributed along with returns on it can be received by the contributor or the beneficiary in following event:
- Termination of Employment, or
- Death of the Contributor.
Q19: When can the contributor receive the amount of the Pension Fund?
The amount in the Pension Fund is provided as monthly pension after the completion of age of 60 years for the entire life of the contributor. If the contributor completes the age of 60 prior to contributing for 180 months, the contributor can choose whether (a) to receive the lumpsum of amount contributed along with returns on it, or (b) to receive the monthly pension.
Q20: How is the amount of monthly pension calculated?
The monthly pension amount is the resultant amount after dividing the sum of total amount deposited in the pension fund and the returns on it by 160.
i.e. Pension Amount= (Amount Contributed in the Pension Fund + Returns on it)/160
Q21: What happens to the amount in Pension Fund if a contributor dies before the completion of age of 60?
If the contributor dies before completing the age of 60, the beneficiary of the contributor is entitled to receive the lumpsum amount of contribution in the pension fund and the returns on it.
Q22: What happens to the amount in the Pension Fund if a contributor dies after the completion of age of 60?
If the contributor dies after having started to receive the monthly pension but prior to receiving such pension for the period of 180 months, the spouse of the contributor is entitled to receive 50% of such pension amount for the entire life if the spouse does not have alternative employment or pension. Further, such benefit to the spouse shall not be provided if their marital relationship is not continued.
Q23: What happens if the employee is enrolled by 31 Ashadh, 2078 (15 July 2021)?
Employees who enroll and start contributing to the Fund by 31 Ashadh, 2078 (15 July 2021) are placed under Retirement Fund i.e. the 20% of the basic salary which generally is deposited in the Pension Fund is deposited in the Retirement Fund. The contributor does not have to complete the age of 60 to receive the amount from the Retirement Fund, such amount can be received upon retirement or termination of the employment or by the beneficiary in the event of death of the contributor. The contributor may choose to participate under the Pension Fund by submitting an application to the Fund.
Q24: What happens if the Employee is enrolled after 31 Ashadh, 2078 (15 July, 2021)?
Employees who enroll and start contributing to the Fund by 31 Ashadh, 2078 (15 July 2021) are placed under Pension Fund i.e. 20% of the basic salary is deposited in the Pension Fund. They do not have option to deposit such amount in the Retirement Fund. While the amount in the Retirement Fund which also includes 8.33% of the basic salary can be withdrawn upon termination of employment, the amount in the Pension Fund cannot be withdrawn until the completion of age of 60 years. Further, if the contributor has contributed for at least 180 months, such amount is paid as monthly pension.
Q25: Can loan be obtained from the Fund?
Following loan facilities can be availed by the Employee from the Fund:
- Home Loan,
- Education Loan,
- Social Function Loan, and
- Special Loan.
Except Special Loan, the maximum amount of the loan that can be obtained is: (a) Salary of 15 years, or (b) salary for the period until the contributor completes the age of 60, or (c) up to NRs. 10,000,000, whichever is less.
Special Loan can be availed after three years of contributing to the Fund and up to maximum 80% of the amount contributed to the Retirement Fund. However, the three years period is not applicable if the loan is swap from other approved retirement fund.
Q26: Can Employee swap the loan from Citizen Investment Fund – CIT, Employee Provident Fund – EPF ?
Q27: Is it mandatory to transfer the amount of provident fund and gratuity deposited in other approved retirement fund or with Employer to the Fund?
No. However, if such amount is transferred, it is deposited under Retirement Fund.
Q28: What will happen when the employee leaves the job?
Employer is required to inform the Social Security Fund if any employee is no longer in the employment within one month of termination of the employment.
Similarly, an employee switching to a new job of different nature is required to file the application via the new employer to transfer the amount previously contributed to the employee’s account under the new employer.