The Contribution-Based Social Security Act, 2074 (2017) made the Social Security Fund (SSF) the mandatory statutory social security arrangement for every business enterprise in Nepal. Many teams once relied on the Citizens Investment Trust (CIT) for retirement savings, but the law has shifted toward a comprehensive, insurance-based model. Here is how the two compare and what it means for your organisation.
Does SSF replace CIT?
In legal terms, yes. SSF is designed to replace mandatory participation in funds like CIT and the Employees' Provident Fund.
Mandatory requirement: Participation in SSF is a statutory requirement for all business enterprises, regardless of the number of employees.
CIT becomes voluntary: Once enrolled in SSF, there is no obligation to keep contributing to CIT. Employees may continue it voluntarily as an additional savings vehicle.
For teams already contributing to CIT, the employer has three legal options for the accumulated balance:
1. Transfer the amount directly to the SSF.
2. Pay out the amount directly to the employees.
3. Maintain the funds where they are currently deposited (keeping them in CIT).
A safety net, not just a savings pot
Social Security Fund (SSF): A comprehensive social security system that bundles multiple insurance schemes with retirement. It protects employees against accidents, illness, disability and old age.
Citizens Investment Trust (CIT): Primarily a savings and investment tool focused on capital accumulation, usually returned as a lump sum with returns.
Feature-by-feature comparison (employee view)
Feature | Social Security Fund (SSF) | Citizens Investment Trust (CIT) |
|---|---|---|
Primary nature | Insurance and retirement: a safety net for major life events. | Investment and savings: focused on capital accumulation. |
Health and maternity | Covers medical treatment (IPD/OPD) and maternity after 3 months of contribution. | Generally no standardised health or maternity cover. |
Accident and disability | 100% cover for workplace accidents; lifetime pension for permanent disability. | Limited to the terms of the individual's own plan. |
Death benefits | Lifetime pension for spouses and scholarships for children. | Pays the accumulated balance to nominees. |
Old-age security | Lifetime pension after age 60 and 180 months of contribution. | Usually a lump-sum payout plus returns. |
Loan facilities | Home, education and social-function loans after 3 years. | Participant loans against the deposited balance. |
Tax advantage | Deductible up to NPR 500,000 or one third of income. | Same deductible treatment applies. |
What makes up the 31%
Employers contribute 20% of basic remuneration and employees contribute 11%, for a total monthly contribution of 31%. The full breakdown is below.
Contribution heading | Rate of basic remuneration |
|---|---|
Employee | |
Provident Fund | 10% |
Social Security Tax | 1% |
Employee sub-total | 11% |
Employer | |
Provident Fund | 10% |
Gratuity | 8.33% |
Additional Contribution | 1.67% |
Employer sub-total | 20% |
Total monthly contribution | 31% |
Where it goes: The largest portion, 28.33% (the 20% total Provident Fund plus 8.33% Gratuity), funds the Old Age Protection Scheme for retirement and pension benefits. The remaining 2.67% (1% Social Security Tax plus 1.67% Additional Contribution) covers the medical, accident and dependent-family schemes.
How the contribution is applied
Calculation basis: The 31% is calculated strictly on basic remuneration. For example, if an employee earns NPR 15,000 in total (NPR 9,385 basic salary and NPR 5,615 allowance), the 31% applies only to the NPR 9,385 basic salary.
Deduction at source: The employer deducts the employee's 11% share from salary at the time of disbursement.
Deposit timeline: The employer must deposit the full 31% into the SSF monthly, within 15 days of the end of the month for which the salary was paid.
Allocation to schemes: The 31% funds all SSF benefits, with 28.33% directed to Old Age Protection and 2.67% to the medical, accident and dependent-family schemes.
From the employer's seat
Liability transfer (major advantage)
By contributing to SSF, the employer transfers the risk of workplace accidents, medical treatment and disability payouts to the Fund. If an employee is injured, the SSF meets the cost, protecting the company from sudden, large liabilities.
Compliance risk
10% interest on late payments.
Fines, and imprisonment for misappropriation.
The Fund can ask authorities to freeze bank accounts or assets of non-compliant employers.
Pros and trade-offs at a glance
SSF (mandatory) | CIT (voluntary) | |
|---|---|---|
Employer (pros) | Ensures statutory compliance and shifts accident, medical and disability liability to the Fund. | A flexible add-on benefit that strengthens the overall compensation package. |
Employer (cons) | Higher fixed contribution cost at 20% of basic remuneration. | Does not reduce or replace the mandatory SSF liability. |
Employee (pros) | Comprehensive, bundled social protection covering insurance and retirement. | A separate long-term savings vehicle with flexible contribution structuring. |
Employee (cons) | Lower flexibility in accessing funds before qualifying events. | No statutory protection or bundled insurance benefits. |
The four SSF schemes
Medical treatment, health and maternity protection.
Accident and disability protection.
Dependent family protection (death benefits).
Old age protection (pension and retirement).
The bottom line
For statutory compliance, transition your teams to the SSF. CIT can stay on as a supplemental benefit for employees who wish to save more, but the mandatory 10% Provident Fund and 8.33% Gratuity should be directed to the SSF to meet obligations under the Contribution-Based Social Security Act, 2017.
This article is a general overview of the SSF and CIT under Nepali law and is not a substitute for professional advice. Contribution rates, thresholds and rules may change, so confirm current requirements before acting.