In Nepal, the landscape of employee benefits, especially concerning retirement plans, is often clouded by misunderstandings. This is particularly alarming given that even professionals such as Chartered Accountants and lawyers sometimes perpetuate these misconceptions. A closer look at the prevailing laws can shed light on these issues and provide clarity. Let’s bust some prevalent myths surrounding retirement benefits in Nepal.
Myth 1: Contribution to the Social Security Fund (SSF) is Optional
Fact: Contribution to the SSF is mandatory for all companies and employees in Nepal under Social Security Act 2017(2074). This regulation is in place to ensure that all workers have access to a social safety net, safeguarding them during retirement or in times of need. Ignoring this requirement can lead to penalties for both employers and employees. However, independent consultants are not required to be enlisted in the SSF.
Myth 2: Companies Can Choose Between Provident Fund, SSF, or CIT
Fact: Companies cannot simply choose between contributing to the Provident Fund, SSF, or Company Insurance Trust (CIT). The SSF encompasses contributions towards several components, including the Provident Fund, gratuity, and other benefits.
Breakdown of SSF Contributions:
- Provident Fund: 20% of the basic salary (contributed equally by employer and employee).
- Gratuity: 8.33% of the basic salary.
- Other Benefits (e.g., medical insurance): 2.67%.
This totals to 31% of the basic salary, with 28.33% being the employee’s money, accessible upon retirement after fulfilling certain conditions. The remaining 2.67% acts more like an insurance premium, ensuring additional coverage and benefits.
Myth 3: Gratuity is Only Payable After 5 Years of Service
Fact: The rule around gratuity has changed. Previously, employees had to complete five years of service to qualify for gratuity. However, since the introduction of new regulations in 2074, gratuity is now payable from the very first day of service. This means that all employees, regardless of their tenure, are entitled to gratuity, which is now deposited into the SSF as mentioned above.
Myth 4: Small Companies are Exempt from Enrolling in SSF
Fact: There are no exemptions based on the size of the company, employee count, or salary levels. All companies operating in Nepal are required to enroll in the SSF, ensuring that every worker, regardless of the company’s scale, has access to essential retirement benefits.
Raising Awareness and Clearing Doubts
Misconceptions about retirement benefits can lead to serious consequences for both employers and employees. A clear understanding of the laws governing these benefits is crucial for compliance and for safeguarding employees’ financial futures.
If you need more details on SSF and employee benefits, or if you’re looking for assistance in meeting local compliance, Sanchaya Staffing Services is here to help. We specialize in comprehensive payroll solutions designed to streamline payroll processing and ensure compliance with all regulations.
Sanchaya Staffing Services: Your Partner in Payroll and Compliance
We make payroll easy and hassle-free. As a legally authorized company for Employer of Record (EOR) services in Nepal, we serve as the legal employer for your workforce. This arrangement allows your company to hire employees in Nepal without the need to establish a legal entity in the country. We take on the responsibility for payroll, benefits, compliance, and other HR functions, ensuring that your business operates smoothly and in accordance with local laws.
From onboarding to offboarding, we ensure the best service for our clients, allowing you to focus on growing your business while we handle the intricacies of employee management.