Confusions surrounding Social Security Fund (SSF)

Posted by Parajuli Sushil 3 years Ago 27 Comments 28 Min Read

Its been a while now with the introduction of Social Security Fund Act, Regulation and Directive. But the confusions around it doesn’t yet seem to be settled. Let’s see what are the usual doubts surrounding it in the text below:

Timeline for enforcement of relevant laws

  • Labor Act 2074 was certified and published on September 4, 2017 (2074.05.19)
  • Labor Rules 2075 was certified and published on June 22, 2018 (2075.03.08)
  • Contribution Based Social Security Fund Act 2074 was certified and published on August 13, 2017 (2074.04.29)
  • Contribution Based Social Security Fund Act 2074 came into enforcement on November 12, 2017 (2074.07.26)
  • Contribution based Social Security Fund Rules 2075 was certified and published on November 19, 2018 (2075.08.03)
  • Directive on Operation of Social Security Schemes was certified and published on November 22, 2018 (2075.08.06) 
  • Directive on Operation of Social Security Schemes was First Ammended on July 14, 2019 (2076.03.29)
  • Directive on Operation of Social Security Schemes was Second Ammended on February 11, 2021 (2077.10.29)
  • SSF Employee Administration Bylaws 2075 was certified and published on 2075
  • Procedure for SSF’s Investment in Commercial Bank was certified and published on 2075
  • Procedure for SSF’s Investment in Commercial Bank was First Ammended on January 3, 2020 (2076.09.18)
  • Procedure for SSF’s Investment in Commercial Bank was Second Ammended on February 4, 2020 (2076.10.29)
  • SSF Employees and Employers registration procedure was certified and published on 2075
  • SSF Financial Administration Regulation was certified and published on 2076
  • SSF Health Institute Selection Procedure was certified and published on 2076
  • SSF Health Institute Selection Procedure, 2076 was First Ammended on January 3, 2020 (2076.09.18)
  • Procedure for SSF’s Investment in Commercial Bank was Second Ammended on August 10, 2020 (2077.04.26)
  • SSF Investment Procedure was certified and published on 2077

Deadlines for enrollment of employer in Social Security Fund

Due to lack of participation from the employers in Social Security Fund, the timeline deadline for registration has been extended for several times now. 

Employers existing at the time of enforcement of Act

The first timeline for registration was as follows:

  • Province Number 1: Within March 14, 2019 (2075.11.30)
  • Province Number 2: Within March 28, 2019 (2075.12.14)
  • Province Number 3 (Kathmandu Valley): Within February 17, 2019 (2075.11.05)
  • Province Number 3 (Other than Kathmandu Valley): Within February 26, 2019 (2075.11.14)
  • Province Number 4, 5, 6 and 7: Within April 13, 2019 (2075.12.30)
  • Province Number 4, 5, 6 and 7: Within April 13, 2019 (2075.12.30)

Then the timeline was extended till October 17, 2019 (2076.06.30). 

Employers existing after the enforcement of Act

Newly incorporated employers are to be registered in SSF once the employment relationship is established.

Not registered even after the expiry of deadline?

The last extension date for registration has expired. However, many employers has still not been registered in the SSF. What should they do?

Obviously, interested entity can register even in after the expiry of the time limit. But there could be some sanctions applicable in this scenario. Section 17 of the SSF Act 2074 states that if the employer defaults to be enlisted in SSF within the prescribed time or fails to enlist the employee under SSF then SSF may:

  1. Require the employer to be enlisted and enlist employees in immediate effect
  2. Require to deposit the amount to be deposited as per the Act with retrospective effect from the date of engagement along with interest (even in the cases where the employment engagement may have been terminated)

It is not necessary that these sanctions are compulsorily applicable to the employees who may have been late to get enlisted in the SSF. It is at the discretion of the SSF. Based on the underwhelming participation of the employers in SSF till date, it is highly unlikely that these sanctions would necessarily be applicable. However, if for any reason the the employee hasn’t been enlisted even within the expiry of the deadline, the minimum benefit under the Labor Act 2075 should have been provided in stead. 

Shifting from other Retirement Funds to Social Security Fund

Lets say an employee has been depositing the amount of provident fund and gratuity in other Retirement Plans They may be Citizen Investment Trust (CIT), Provident Fund (PF), Unapproved Retirement Funds (UARF) or Funds managed locally by the employer, before starting to deposit in SSF. 

As per Section 19 Directive on Operation of Social Security Schemes 2075, the employer has three options: 

  1. Transfer the amount in such fund to SSF as per the procedure prescribed by SSF in coordination with employer or retirement plan. 
    (Transition to SSF can be done in 4 installments over the period of 2 years from the date of enlistment in SSF as well  as per Rule 22 and Rule 23 of Labor Rules 2075)
  2. Pay out the the amount due to employee.
  3. Transfer such amount in retirement funds established under the prevailing law.
    (Managing provident fund and gratuity locally by the employer is not allowed)  
Most beneficial option: Option 1 and Option 2 will create an equal amount of liability. So either plan may be chosen as per the collective agreement with the employees.
However, Option 3 might be more burdensome financially in long term if the employees consists mostly of those who were engaged prior to enforcement of Labor Act 2074. This is because as per Rule 23(3) of Labor Rules 2075, for employees engaged in employment prior to the enforcement of Labor Act 2074, the gratuity amount has to be continually recalculated based on the remuneration existing at the date of calculation of gratuity liability. This has further been supported by the case of Hulas Metal Crafts Vs Dallu Shah. 

Contribution from employer and employee

Due date for depositing the contribution

As per Section 4 of the Contribution based Social Security Fund Act 2074, the amount of accruing from the date of enlistment in the SSF. The amount shall be deposited within 15 days from the end of the month of remuneration. 

Period where employee is not able to receive remuneration

As per Section 8 of the Contribution based Social Security Fund Act 2074, where the employee is not able to receive remuneration and by the same reason is not able to contribute to the SSF, employer shall have to deposit such contribution on employee’s parts as well for a period not exceeding 3 months. Employer is entitled to recover such amount from the employee. However, as per Rule 7 of the Contribution based Social Security Fund Rule 2075, in recovering such amount, the amount to be recovered shall not exceed 33% of the total remuneration and benefits for the month.  

Delay in depositing the amount in SSF

As per Section 9 of the Contribution based Social Security Fund Act 2074, where the employer is not able to deposit the amount in SSF within the prescribed time, SSF shall recover such amount from employer along with an interest at the rate of 15% per annum. SSF may also write to the concerned person to

  • Withhold the amount in bank, movable/immovable property
  • Withhold any concession or facilities available under the prevalent laws
  • Suspend the license of the employer
  • Withhold the passport of the concerned person

Further, if it is found that the amount to be deposited as SSF contribution has been misused, submitted false details or recovers more benefit than actually entitled to, a fine equivalent to amount in controversy and imprisonment upto one year may be made. If the amount in controversy cannot be decided, fine upto Rs. 100,000 may be levied.  Also, if anyone contravenes the direction of SSF, a fine upto Rs. 50,000 may be levied. 

Termination of employment engagement

As per Section 24 of the Contribution based Social Security Fund Act 2074, where the employment relationship is terminated, employer shall notify SSF within one month of such termination. 

Composition of contribution

As per Section 25 of the Directive on Operation of Social Security Schemes 2075, the contribution of the employee and employer in the SSF will be as follows: 

Schemes under Social Security Fund

As per Section 25 of the Directive on Operation of Social Security Schemes 2075, the total contribution of 31% of the basic salary will utilized in the operation of the schemes under SSF as follows: 

Applicability to Foreign Employees

The rules and laws under the Contribution based Social Security Fund Act 2074 and Social Security Fund Rules 2075 are applicable to Foreign employees working in Nepal as well. 

Foreign employee can receive the contribution amount accumulated in his account in lump sum as soon as his employment contract ends. If such foreign employee dies before the end of such contract, such amount shall be provided to the nominee or his heir. Also, Nepali Citizen who relinquishes his Nepali citizenry can receive the amount immediate to such relinquishment. (Section 24Ka of Directive on Operation of Social Security Schemes 2075) 

In the event of death of any foreign national contributing to the Fund, and his/her heir is entitled to the benefits under Dependent Family Protection Scheme, such heir can receive up to NRs. 700,000/- in case they want to receive a lumpsum amount in place of the benefits.

Applicability to employees over 60 years of age

No, it is not compulsory for employee over 60 years of age to participate in SSF Schemes. However, they may participate voluntarily.  (Section 24Gna of Directive on Operation of Social Security Schemes 2075)

Unclaimed Amounts

As per Section 58 of the Contribution based Social Security Fund Act 2074, if the person entitled to the benefits under the scheme fails to claim such amounts within 5 years from the date of entitlement, such amount shall devolve to the SSF. 

Process of enlistment in SSF

Process to New Employer Registration

  • Click on the ‘SOSYS Icon’ on the webpage http://ssf.gov.np and go to New Registration under Employer registration
  • Ensure to fill the below mentioned details on the page generated after (a) above, and click the Submit button:
    • User ID
    • Password
    • Confirmation password
    • User Full Name
    • Address
    • Phone No.
    • Email
  • Ensure to note the submission number which is generated after clicking submission button
  • Ensure to fill all the details including employer name both Nepali and English language, nature of employer, and also other fields
  • Go to Employer Address Tab, fill the details then click on Add button. There, click on mail icon to fill details regarding mode of contact, Contact details and contact priority and click on Add button to save the details
  • Go to Documents Tab, fill out documents details.
  • Go to Chairman Tab and fill the details required.
  • Go to Chief Executive Tab and fill the details required.
  • Ensure to click the ‘Save’ button after filling all the required details in the form. 

Process to Update Temporarily saved Data of employer

  • Click ‘Login’ in the Employer Registration section to login, edit and/or submit the form which was saved using submission number, username and password noted
    earlier.
  • At last, click submit button after verifying that all the details filled in the form are correct.

Documents to be uploaded

  • PAN certificate
  • Firm/ Company registration certificate
  • Decision of the employer to get enlisted in SSF
  • Details of the employees of the employer