Social Security System in Nepal

January 11, 2019

1. Social Security Regulation, 2018 (2075)
The Government of Nepal (“GoN”) has framed the Contribution Based Social Security
Regulations, 2018 (2075) (“Social Security Regulations”) by exercising the power
conferred to it under Section 69 of the Contribution based Social Security Act (“Social
Security Act”). The Social Security Regulations has been published in Nepal Gazette on
November 19, 2018 (Mangsir 03, 2075) with immediate effect.
The Social Security Regulations has prescribed certain matters as required by the Social
Security Act. Such matters include (a) the procedure for participation in Social Security
Schemes (b) registration of the employer and employee with Social Security Fund (c)
operation of fund, etc.

2. Social Security Schemes Operation Directives, 2018 (2075)

The Social Security Fund (the “SSF”) has formulated the Social Security Schemes
Operational Directives (“Directives”) to operate the Social Security Schemes pursuant to
Section 10 of the Social Security Act. The Directive has been approved by the Ministry of
Labor, Employment and Social Security on November 22, 2018 (2075/08/06) and has
been effective thereof.

3. Laws dealing with Social Security Schemes

The Social Security Schemes are subject to the following laws, regulations, directives and
notifications:
Legal Sources Effective Date
September 04,
Labor Act, 2074 (“Labor Act”)
2017
Labor Regulations, 2075 (“Labor Regulations”) June 22, 2018
Contribution Based Social Security Act, 2074 (“Social
August 13, 2017
Security Act”)
Contribution Based Social Security Regulations, 2075 (“Social
November 19, 2018
Security Regulations”)
Social Security Schemes Operational Directives, 2075
November 22, 2018
(“Directives”)
Gazette Notice Requiring Enrollment of Employer to the Social
November 12, 2018
Security Fund ("Enrollment Gazette Notice")
4. Requirement of Enrollment By Employer
4.1. The Enrollment Gazette Notice does not specify the sector or nature of industry,
business, service or transaction subject to the enrollment with SSF. Therefore, all
employers are required to be registered with the SSF.
4.2. The Enrollment Gazette Notice requires the Employers to enroll with the SSF within
the timeline as below:
Employers by Region (Location) Timeline Date
Employers and Outsourcing Within 3 months from Mangsir
Within Falgun 05, 2075
Companies within Kathmandu 06, 2075 (November 22,
(February 17, 2019)
Valley 2018)
Employers of Province Number Within 3 months from Mangsir Within Falgun 14, 2075
3 (except Kathmandu Valley) 15, 2075 (December 01, 2018) (February 26, 2019)
Employers of Province Number Within 3 months from Poush Within Falgun 30, 2075
1 01, 2075 (December 16, 2018) (March 14, 2019)
Employers of Province Number Within 3 months from Poush Within Chaitra 14,
2 15, 2075 (December 30, 2018) 2075 (March 28, 2019)
Employers of Gandaki Province Within 3 months from Magh Within Chaitra 30,
and Province Number 5 01, 2075 (January 15, 2019) 2075 (April 13, 2019

4.3. Upon enrollment of employers within the aforementioned timeline, they are required
to enroll their employees with the SSF within 3 months after registration of the
employers.
4.4. Submission of Application
The required list of the documents to be submitted along with the application for
enrollment of the employers with the SSF and the detailed process for registration is
provided in the link below: https://ssf.gov.np/uploads/content/1542636187_np.pdf

5. Social Security Schemes

The Social Security Fund has introduced the following Social Security Schemes:
(a) Medical Treatment, Health and Maternity Protection Scheme
(b) Accident and Disability Protection Scheme
(c) Dependent Family Protection Scheme and,
(d) Old Age Protection Scheme
6. Contribution
The Employer and the Employees are required to contribute certain amount of the
employee’s basic salary each month to the Social Security Fund. The rate of contribution
is as follows:
Contributor Amount(basic salary)
Employee 11%
Employer 20%
Total 31%

7. Allocation of Contribution
The total amount of contribution made by the Employer and Employee will be allocated
to the different schemes in the following manner:
S.N. Social Security Schemes Allocation
Medical Treatment, Health and Maternity
1 1%
Protection Scheme
2 Accident and Disability Protection Scheme 1.40%
3 Dependent Family Protection Scheme 0.27%
4 Old Age Protection Scheme 28.33%
Total 31%

8. Schemes their Coverage and Exclusions

8.1. Medical Treatment, Health and Maternity Protection Scheme
The Medical Treatment, Health and Maternity Protection Scheme comprises of (a)
Medical Treatment and Health Safety Schemes and (b) Safe Motherhood Schemes for
the Contributor or Contributors Wife. The Contributor who have contributed in the Fund
for a period of 6 (six) months are entitled to facilities under this scheme. However,
Contributors should contribute for 12 (twelve) months within a period of 18 (eighteen)
months in order to benefit from the Maternity Safety Schemes.
8.1.1. Coverage under Medical Treatment, Health and Maternity Protection Scheme
Pursuant to number 5 of the Directive, Contributors get the following benefits out
of this Scheme:

a. Medical consultancy services,

b. Admission and operation fee of the hospital,
c. Examination and treatment cost,
 d. Medicine Expenses equivalent to medical bill,
e. Expenses incurred for the regular pregnancy test of the Contributor or
Contributor's Wife, hospital admission, operation and treatment of child for 3
(three) months,
f. Medical consultancy fee for the medical treatment undergone at home in case the
contributor is unable to reach hospital.

8.1.2. Scope of Health Benefits

Contributors are entitled to following health benefits:
Contributor's
S.N Scopes of Benefits Entitlement
Cost
Amount not exceeding 20% of the claim
1 Treatment at Hospital
NPR 100,000 p.a. amount
Cost incurred for the regular
pregnancy test of the
Contributor or Contributors Amount not exceeding 20% of the claim
2
Wife, hospital admission, NPR 100,000 p.a. amount
operation and treatment of
child for 3 months
Treatment without admitting
Amount not exceeding 20% of the claim
3 to hospital as per the
NPR 25,000 p.a. amount
prescription of doctor
Maternity Care/Miscarriage Amount equivalent to one
Up to two
4 after 24 weeks of month’s minimum
children.
pregnancy/stillbirth remuneration per child.

8.1.3. Exclusions
Contributors are not entitled to following treatment under this Scheme:

a. The cost incurred for plastic surgery or dental treatment except the expenses
required for the accidental treatment,
b. Expenses incurred for Bariatric Surgery,
c. In case the Fund is unable to bear the expenses and suspends the schemes due
to the spread of epidemic diseases over the country,
d. In case the similar benefit has been entitled under Accident and Disability Safety
Schemes.

8.2. Accident and Disability Protection Scheme

Accident and Disability Protection Scheme comprises of (a) Accidental Benefits and (b)
Disability Benefit.
This scheme is applicable from the date of contribution to the Contributor who requires
treatment for the employment related accident. However, the Contributors who have not
contributed for a minimum period of 2 (two) years shall not be entitled to the benefit related
to the treatment of occupational diseases and other benefit relating to the treatment of
occupational health diseases.
8.2.1. Scope of Benefits

a. Total expenses incurred for the treatment of employment related accident or

occupational diseases.
b. Treatment expenses up to NPR 7,00,000 in case of accident except the
employment related accident.
c. Amount equivalent to 60% of the employee’s basic remuneration until returning to
work in case of temporary full disability due to occupational hazard or diseases.
d. Lifetime monthly pension based on the ratio of disability of the Contributor in case
of permanent disability due to occupational hazard or diseases.
e. Lifetime monthly payment equivalent to 60% of the employee’s basic remuneration
in case of permanent full disability due to occupational hazard or diseases.

8.3. Dependent Family Protection Scheme

This benefit is provided in the event of death of the Contributor. Dependent Family
Protection Scheme comprises of (a) pension benefits to husband or wife, (b) Scholarship
to the children of the Contributor, (c) benefits provided to dependent family members and
(d) funeral expenses

a. Pension Benefits

The Pension benefit is provided to husband or wife of the Contributor in the

event of death of Contributor due to accident or occupational diseases. The
husband or wife is entitled to lifetime pension benefit equivalent to 60% of last
drawn basic remuneration of the Contributor.

b. Scholarship Schemes to the Contributor’s Children

This Scheme covers the children who have not completed 18 years of age in
the event of death of the Contributor. The amount of such scholarship shall be
40% of the last drawn basic remuneration of the Contributor and it shall be
entitled every month.

c. Benefits to the Contributor’s Parents

 This benefit is provided to the dependent parents living joint with the Contributor
in case the Contributor does not have husband or wife or children. The
dependent parents will be entitled to 60% of the basic remuneration for life time.

d. Entitlement of Funeral Expenses

In case of death of Contributor for any reason whatsoever the dependent family
member or the nominee will be entitled to funeral expenses of NPR 25,000.

8.4. Old Age Protection Scheme

The Old Age Protection Scheme will be operated by the total amount of 28.33% of the
employee’s basic salary (10+10% provident fund and 8.33% gratuity) deposited in the
SSF. The contributing employees shall receive (i) pension, or (ii) retirement scheme
benefits.
The amount of gratuity prior to Bhadra 19, 2074 (September 04, 2017) (cut-off date)
should be paid out to the employee and the amount of gratuity only after the cut-off date
should be transferred to the SSF.
8.4.1. Participation in Pension Scheme
The Old Age Protection Scheme applies to the employees working with the employer prior
to Shrawan 01, 2076 (July 17, 2019) if the accept the Scheme under the collective
bargaining agreement.
8.4.2. Benefits under the Pension Scheme:
Upon completion of the retirement age, the total sum amount of contribution made by the
employer and the employee and the amount of accrued from the investment made by the
Fund will be divided by 180 months (15 years) and such amount will be provided as
pension every month during the employee’s lifetime. Upon death of the Contributor prior
to the retirement age, their heir shall receive the total lump sum amount of the contribution
made by the employer and the employee and the accrued benefit received from the Fund.
8.4.3. Eligibility for Pension Entitlement:
The Contributor should have completed the age of 60 and should have contributed for at
least 180 months or 15 years.
8.4.4. Retirement Benefits:
The Contributors working prior to Shrawan 01, 2076 (July 17, 2019) contributing 28.33%
for provident fund and gratuity shall be entitled to receive a lump sum amount of the
contribution and income accrued on such amount upon retirement.

9. Opt-In and Opt-Out

9.1. Pursuant to Section 6 of the Social Security Act, employees do not have the option to
opt in or opt out of the Schemes and all employees are required to participate in all
schemes (No option to participate in some schemes).
9.2. However, the following employees have the opt-in option for the following scheme (a)
existing employees having employment relationship prior to Shrawan 01, 2076 (July 17,
2019), (b) under the Collective Bargaining Agreement, (c) to Old Age Protection Scheme.
Until they exercise the opt-in option they are not included in the Old Age Protection
Scheme and get the principal and accrued income of their provident fund and gratuity.