Currently, the government has been mobilizing financial resources for the fund by slapping one percent social security tax on all employees working in the formal sector. [break]
Although the government started collecting this amount since the beginning of fiscal year 2009/10, it does not have records of funds collected that year, as the entire amount raised was diverted to other government accounts. This was because the government´s account book in the year 2009/10 “did not have a separate heading for social security tax”, according to officials at the finance ministry.
To determine the amount that was “misplaced”, the government has formed a committee. But it has remained virtually non-functional.
Meanwhile, a sum of Rs 100 million has been extended to the fund as compensation. But after it came to light that social security tax generated Rs 742.46 million in the last fiscal, the fund has been pressing the government to release more money.
“We have now written to the Ministry of Labor and Transport Management (the parent agency of the Social Security Fund) asking for a sum of Rs 640 million in compensation as Rs 100 million is too little,” Mahesh Baral, director of the Fund, told Republica.He said the fund had derived the amount based on revenue growth rate of previous fiscal years. Baral, however, did not elaborate.
The government had created the fund to introduce social security schemes for all civil servants and private sector employees working in the formal sector.
To give legal teeth to the program, the fund has recently created a draft of Social Security Organization Act and forwarded it to the labor ministry.
Once the draft bill is endorsed, all formal sector employers will have to compulsorily enroll their staff in social security schemes launched by the government.
Employers found flouting the rule may be fined up to Rs 100,000 and jailed for up to six months, according to the draft. “Similar fine and jail sentence will be slapped on employers who fail to enroll employees in social security schemes within six months of enforcement of the law or within three months of bringing a firm into operation,” the draft says.
So far, the fund has identified six core social security schemes that will be rolled out over the years, including unemployment, disability, maternity, medical, dependent and old-age benefits.
Related story
Social Security Fund now mandatory for all employers
