SSF Contribution Rates: Employer vs Employee

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Meta Description: Understand SSF Contribution Rates in Nepal, covering employer and
employee shares, fund allocation, and common payroll compliance mistakes.
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Understand SSF Contribution Rates: Employee
vs Employer
The rates of contribution to Nepal's Social Security Fund, called the SSF Contribution Rates,
exactly specify the amount that employers and employees must contribute to the fund every
month. A lot of companies sign up to the fund, but don't fully grasp how these percentages
were determined or distributed. This discrepancy in comprehension can then cause payroll
mistakes, wrong deductions or wrong monthly payroll filing. Staff, however, often find a
deduction on their pay slip but are not told the proportion that their employer contributes or
where the employer's matched funds are spent.
This is important not only because it is a requirement, but also because it can impact
retirement savings, health and wellness benefits, and other long-term rewards based on
regular contributions. With more companies moving to formalize payroll procedures and
systems to register under the Social Security Fund system, knowing these rates, rules of
allocation and reporting timelines become vital for HR staff and for the employees who will
be relying on these benefits later.
What the Social Security Fund Actually Covers
The Social Security Fund is a group of employee benefit schemes all funded by the same
contribution. Registered employers now make payments via a single system for the three
components of provident fund, gratuity and insurance. This fund provides protection for
retirement payments, medical treatment, insurance against accidents and payments to
dependents, among other things.
These benefits were previously available in a variety of different and inconsistent
employer-provided systems before this consolidated system. In certain companies, provident
funds were managed properly and there were no insurance policies.In some companies,
insurance policies were not observed and provident funds were managed properly. This was
made uniform across registered employers so workers are in the same position, despite the
company they work for, provided they continue to meet the registration and contribution
obligations.

How Employers and Employees Share Contributions
Contribution rates are split between the employer and employee, with the employer paying a
certain percentage of the basic remuneration and the employee paying another. The current
Social Security Regulations stipulate that the combined rate is 31 per cent of basic salary,
with the 11 per cent rate being borne by the employee and the 20 per cent by the employer.
The employers are clearly the ones with the greater responsibility, as the fund was designed
in a way that it is an employer-sponsored benefit system, not a system the workers
themselves would pay for.
These percentages are based upon basic salary and not gross salary, which can be
confusing to employees who check their payslip deductions and compare them with their
total salary. House rent, Dearness or Travel is not included in this calculation. All HR teams
should use the same percentages for all eligible employees as using different percentages
for different departments or branches could lead to discrepancies if audited or if employees
ask about their percentage. Rates and thresholds are subject to the authority of the official,
so it is always best to check current rates and thresholds on the official portal of the Social
Security Fund before setting up payroll as they can change over time.
How the SSF Allocates Contributions
When contributions are combined, they are not in one undivided account. A total of 31 per
cent is split between four designated sub-funds for four types of benefits. Old age pension
takes the biggest share of about 28.33 per cent as it includes provident fund savings from
both the employer and employee, in addition to a separate gratuity. The other schemes
provide medical/health support at an average of 1 per cent, accident/disability cover at 1.4
per cent, and dependent family/life cover at 0.27 per cent.
Such a scheme arrangement results in an employee's overall contribution eventually being
applied to a number of benefits instead of just one lump sum retirement benefit. Employees
who grasp this breakdown of benefits can become more aware of the benefits they have
access to, which are in addition to the ability to withdraw their savings, such as medical
claims and insurance related assistance in qualifying situations. Note, too, that there is a cap
on salary for contribution purposes as well and those who earn more than this will only be
contributing that amount and not the extra above basic pay.
Registration Requirements Before Contributions Begin
Employers are only required to formally register with the Social Security Fund to pay
contributions. There is a business registration process that involves providing business
documentation, employee information, and payroll data prior to processing monthly
contributions properly. Employers that have postponed the registration are likely to build up a
pile of contributions that are not paid, which can get more complicated for the employer later
in the process.
In addition, each employee must be registered with the fund (usually at the same time or
soon after the employer) for them to be part of the fund. If this individual enrollment isn't in
place, they will not be able to see the contribution credits correctly attributed to the right

employee's account even if the employer pays on time. Many small businesses are caught
off-guard when enrolling for the first time in their compliance cycle because of this two-part
registration requirement.
Common payroll mistakes that relate to contribution rates.
Many HR departments come up with their contributions by taking a percentage of gross
salary rather than fixed remuneration, which can lead to over-payment or under-payment for
an entire payroll cycle. It is hard to spot this error until an audit or employee complaint leads
to identifying the error, then having to fix a months-long period of inaccurate contributions.
Another common problem is that sometimes a company files the return one month and
doesn't file it the following month. Others may fall behind on payments or miss several
months when they experience cash flow issues, and then realize that they are accruing
penalties and not covering all of the employee benefit eligibility requirements. Affected
employees have the potential to miss out on some benefits when they require them due to
unexplained gaps in their contribution history.
Other problems arise when employees are misclassified. Not all categories of workers would
need to have the same treatment of their contributions, and businesses using a blanket
approach towards staff which apply the same pattern to all employee categories may end up
contributing too much for exempt workers, or too little for those who are exempt and should
be fully contributing.
Why Accuracy Here Protects Both Sides
Employers who keep accurate contribution records ensure that they won't face penalties,
audits or be involved in a dispute which can take months to resolve. The consistency of the
contribution history in clean records also helps a company's reputation when it is subject to
an external compliance check, as an inconsistent history may raise an immediate concern
for the auditor.
This is no less true for the employees because the final outcome of retirement funds,
medical claims or insurance benefits received depends heavily on their contribution history
being uninterrupted and correct. An error in calculation can be a small detail at the moment,
but can make future claims for benefits more complex years down the road when that
employee does need the benefits. When the accuracy of contributions is treated as a
continuous focus an afterthought each month will not long-term outcomes will be in
everyone's best interests.
Completing SSF Employer Registration Without Delays
An employer's understanding of rates of contribution occurs after he has been duly
registered under the SSF system. Registration requires providing business information,
confirming employee information and establishing a compliant payroll system before any
contributions can be processed. Having this paperwork done beforehand helps businesses

steer clear of backlog and penalty risks that can arise from enrollment delays once hiring
starts.
Frequently asked questions
Is gross or basic salary used to calculate SSF Contribution Rates?
One common mistake when creating a payroll is to include contributions on top of the basic
remuneration instead of on total gross earnings.
Are the percentages contributed by both employers and employees equal?
No. The employer's contribution is 31 percent, with 11 percent from the employee and 20
percent from the employer.
What implications does it have if an employer fails to make a contribution each
month?
Failure to participate can lead to penalties and gaps in an employee's benefit eligibility,
especially in relation to benefit eligibility based on a history of participation.
Must all staff be registered as part of the fund?
Yes. It is compulsory to register each individual employee separately from the employer for
contributions to be credited properly to each employee's account.
Is it permissible to have different contribution rates for different classes of workers?
Yes. It can be difficult to ensure compliance if a uniform rate is applied to all workers, as
some classifications may be eligible for different or more favorable treatment or have
different treatment under pay rules.