Tax & TDS
SSF contribution in Nepal: rates, calculation and what it covers
The employee pays 11% of basic and the employer 20%. Both are calculated on basic salary alone, which is why the basic-to-gross ratio matters more than most employers realise.
Updated August 2026
The Social Security Fund collects a contribution from both sides of the employment relationship. The employee contributes 11% of basic salary and the employer contributes 20% of basic salary.
The base is what trips people up. Both percentages apply to basic salary, not to gross. An employer who raises the basic component of a package without changing gross has increased their own cost and reduced the employee’s take-home, without changing the headline salary at all.
The two rates and where they sit
The employee share reduces take-home pay. The employer share does not touch take-home at all — it is an additional cost the employer carries, which is why cost to company is always higher than gross salary for an SSF-enrolled employee.
| Contribution | Rate | Amount | Where it sits |
|---|---|---|---|
| Employee share | 11% of basic | NPR 4,400 | Withheld from gross salary |
| Employer share | 20% of basic | NPR 8,000 | Added on top of gross, part of cost to company |
| Total | 31% of basic | NPR 12,400 | Remitted to the Fund |
Contribution calculator
- Employee share (11% of basic)
- 4,400.00
- Employer share (20% of basic)
- 8,000.00
- Total monthly contribution
- 12,400.00
Why the basic-to-gross ratio drives everything
Because contributions are a percentage of basic and not of gross, two employees on identical gross salaries can have materially different take-home pay and cost different amounts to employ.
| Basic as % of gross | Basic | Employee SSF | Employer SSF | Cost to company |
|---|---|---|---|---|
| 40% | NPR 40,000 | NPR 4,400 | NPR 8,000 | NPR 1,08,000 |
| 60% | NPR 60,000 | NPR 6,600 | NPR 12,000 | NPR 1,12,000 |
How SSF changes income tax
Enrolment has two separate tax effects, and they pull in the same direction.
- The employee’s 11% contribution is deductible from annual salary income, subject to the combined retirement ceiling — the lower of NPR 5,00,000 or one-third of annual salary income.
- Enrolment waives the 1% social security tax charged on the first income band, so the first NPR 10,00,000 of taxable income is charged at 0% rather than 1%.
Setting it up correctly in payroll
- 1Define the basic component per grade explicitly, rather than deriving it from gross as a rounded fraction after the fact.
- 2Configure the 11% and 20% rates against basic, not gross, and confirm the split on a sample payslip before the first live run.
- 3Confirm the employee is flagged as enrolled, so the 1% first-band waiver is applied to their tax and not just their contribution.
- 4Check that the employer share is excluded from the employee’s assessable income and included in cost-to-company reporting.
- 5Reconcile the total remitted to the Fund against the sum of both shares across all enrolled staff each month.
Frequently asked questions
Is SSF calculated on gross salary or basic salary?
Basic salary. Both the 11% employee share and the 20% employer share apply to the basic component only, not to gross pay including allowances.
Does the employer contribution come out of the employee’s salary?
No. The employer’s 20% is paid on top of gross salary and never appears as a deduction on the payslip. It raises cost to company without reducing take-home.
What if our company uses EPF instead of SSF?
Provident Fund contributions are typically 10% from each side rather than 11% and 20%. Both are approved retirement funds, so either waives the 1% first-band social security tax and both employee contributions are deductible against the same combined ceiling.