BIJAY DAMASE
KATHMANDU, August 4

The government has failed to include informal sector workers, who occupy a significant part of the economy, in the Social Security Fund (SSF).

Nearly a year after the then Prime Minister Pushpa Kamal Dahal announced to include a large number of informal sector workers and self-employed individuals in the SSF, the number of such workers in the fund has been negligible so far.

While around 516,000 formal sector workers have joined the SSF so far, only 451 informal sector workers and self-employed individuals have been enrolled in the scheme yet.

Dahal had announced that more than 5 million workers from the informal sector would be brought under the social safety net.

According to the SSF, only 296 workers from the informal sector and 155 other self-employed people have been registered in the SSF by August 2.

According to a recent study by the Central Department of Economics at the Tribhuvan University (TU), with support from the Nepal Rastra Bank, the average size of Nepal’s informal economy was 40 to 42% of the country’s gross domestic product.

In terms of monetary value, Nepal’s informal economy is worth around Rs 2,200 billion while the country’s economy is worth around Rs 5,381 billion, according to the study.

In December last year, the Social Security Schemes Operational Directive was introduced to include informal sector workers and self-employed individuals. 

According to the approved procedure, informal sector workers are required to contribute 20.37 percent of the basic salary set by the government, which is Rs 1,912, to the fund every month. Of the total, workers have to bear 11% and the rest is covered by the government.

However, if the federal, state, and local governments do not make the necessary deposits, a worker has to make all contribution by himself.

Similarly, Self-employed individuals are required to contribute at least 31 percent of their minimum basic salary to the fund every month.

Though SSF provides various benefits for the contributing workers, informal sector workers have not been that keen on joining the scheme. 

Trade union representatives blame the government’s incompetence for the low enrollment of such workers in the fund.

Yogendra Kumar Kunwar, President of the Nepal Trade Union Congress, said that despite having laws and policies intended to include workers from these sectors into the social security scheme, the entire sector remains neglected due to inadequate government arrangements.

“Informal sector workers should be brought into social security with the support of all three levels of government, but their participation on a large scale has become difficult because the government doesn't want to do it,” Kunwar told the New Business Age.

Officials from the SSF also agreed that integrating workers from these sectors has been more challenging than anticipated.

Difficulties in explaining pension provisions and other benefits of the scheme to the workers and lack of co-contribution have been the reasons hindering the enrollment of such workers in the SSF, according to Uttam Raj Nepal, information officer at the SSF.

“We have not been able to reach people as effectively as we should have,” said Nepal. “Problems have arisen due to the lack of contribution from the local governments, so we plan to hold discussion with local representatives.  We are working on increasing public awareness by visiting the settlements.”

Bishnu Lamsal, President of the General Federation of Nepalese Trade Unions (GEFONT), criticised the failure of state machinery to enforce the scheme effectively.

“Workers in the formal sector received various benefits, but those in the informal sector had not seen similar support,” said Lamsal. “Although the sector has been included in the scheme, the implementation part remains poor.”

Lamsal argued many workers in the informal sector were still unaware of the scheme.

“There are workers who want to participate but do not know about its process,” Lamsal added. “The government should have launched a public awareness campaign about the scheme more broadly and collaborate with local governments to keep accurate data on such workers.”