First Business News Portal in English from Nepal
KATHMANDU: Nepal’s Social Security Fund has embarked on an initiative to encompass the most vulnerable segments of informal and self-employed laborers under the umbrella of contribution-based social security.
Within Nepal’s domestic labor market, a significant 4.4 million workers operate within the informal sector. After five years of focusing on formal sector coverage, the government has launched a program to encompass informal sector workers within the social security framework.
Previously, arrangements were established for formal sector and foreign employment workers to join the fund. Now, comprehensive solutions are set to address the myriad challenges faced by informal sector workers who have been brought under social security.
In accordance with the most recent labor force survey, out of the 7.08 million workers employed domestically, 4.41 million (62.2 percent) are engaged in the informal sector. Among these, 1.34 million are in the agricultural sector, 2.04 million in the non-agricultural sector, and 73,000 are involved in domestic labor. Notably, one in every five individuals is employed in agriculture, which remains the largest employment sector.
The trade sector employs 17.5 percent of the workforce, followed by the construction sector at 13.8 percent, and the service and sales profession at 23.8 percent. These workers typically earn an average of NPR 17,809 per week, working between 44 to 55 hours.
Presently, these workers can access 20.37 percent of the government’s set minimum basic wage. Of this amount, 11 percent (NPR 1,912) is contributed by the workers themselves, while 9.37 percent (approximately NPR 880) is contributed by local authorities.
For self-employed individuals, the contribution can be as high as 31 percent of the minimum basic salary (NPR 2,999), with the ability to contribute up to three times the minimum salary monthly.
Local governments are tasked with registering informal workers within their jurisdictions and recommending their participation in the fund. Bhimphedi rural municipality in Makwanpur and Fedikhola rural municipality in Kaski are among the 753 local governments that have signed agreements with the fund to involve informal workers.
Ghanshyam Subedi, chairman of Fedikhola Rural Municipality, stated, “We initiated the workers’ provident fund three years ago. Previously, workers were depositing 15 percent of their earnings, while the rural municipality added 15 percent. Now, these contributions will be directed to the social security fund.”
Minister of Labour, Employment and Social Security, Sharad Singh Bhandari, highlights how the absence of social security in Nepal’s labor market drives workers to seek opportunities in international markets.
He stated that this leads to a shortage of labor in the domestic market, emphasizing that all types of workers are now covered by social security. He expressed confidence that joining each worker to the fund mitigates future uncertainties in a systematic manner.
Contributing workers who maintain regular contributions will receive medical treatment up to NPR 100,000. Female contributors will be entitled to maternity benefits equivalent to 60 percent of the minimum basic salary for up to 98 days.
For infant care, an amount equivalent to one month’s minimum basic salary per child will be granted. In case of accidents, medical expenses up to NPR 700,000 are covered. For permanent disabilities, 60 percent of the minimum basic salary is provided, and in case of a contributor’s death, their dependent family will receive pension facilities along with funeral expenses.
Vinod Shrestha, president of the United Trade Union Coordinating Center (JTUC), Nepal’s trade unions’ umbrella organization, suggests that the government should make participation in social security voluntary, rather than mandatory, for workers in all sectors.
In the formal sector, 18,000 employers have enrolled 716,000 workers in the fund. Shrestha asserts that social security has introduced labor flexibility and calls for strict enforcement, suggesting penalties for non-compliant employers.
Labor Secretary Kewal Prasad Bhandari, also the fund’s chairman, asserts that the contribution-based social security fund is reducing the state’s social security burden.
He emphasizes the need to augment social security through contributions, stating that the plan has progressively integrated workers from the formal sector since November 10, 2075. Prime Minister Pushpa Kamal Dahal articulated that this program aims to include over four million informal sector laborers within the social security program, aligning with Nepal’s constitutional ethos and striving to secure a better future for workers.
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