- 03
- Feb.
- 2024
New NSSF Policies Facing Employer Discontent
modified on 11 Apr. 2024 à 15:45 Read : 2 minute(s) A A A
On Friday, Mohamad Karaki, the Director-General of the National Social Security Fund (NSSF), made a pivotal decision to set the exchange rate at 89,500 Lebanese pounds per one dollar for calculating contributions from NSSF members who receive their salaries, either in full or in part, in foreign currencies. This adjustment becomes effective as of February 1, 2024.
In an informational notice, Mohamad Karaki disclosed that on January 24, 2024, he submitted a letter marked as number 210 to the Lebanese poundsBoard of Directors, urging the adoption of the highest official dollar exchange rate, approved by the Central Bank of Lebanon, at 89,500 Lebanese pounds for one US dollar.
This decision is part of Karaki's strategy to ensure the financial sustainability of the CNSS, whose reserves were depleted following Lebanon’s default declaration in March 2020. As is commonly known, the NSSF has heavily invested in Treasury bonds. The challenge was further exacerbated by the resounding collapse of the national currency, which witnessed a 98% depreciation compared to the period preceding October 30, 2019.
Triple-Digit Inflation
This decision, also foreseeable, has drawn disapproval from employers who argue that such measures, made outside of a comprehensive crisis resolution plan, unfairly places the burden of triple-digit inflation solely on the private sector. This poses a substantial challenge for SMEs, which have been the backbone of an economy experiencing zero growth for over four years.
A Sixfold Increase
Breaking down the figures, the adjustment in the exchange rate from 15,000 to 89,500 Lebanese pounds per US dollar translates to a sixfold increase in annual NSSF member contributions.
However, employers' primary concern lies in the calculation of end-of-service indemnities. These indemnities are traditionally computed based on an employee's final salary multiplied by the number of years in service. According to current legislation, employers bear the brunt of addressing the inflation impacting annual salary increases, which compels businesses to establish reserves.
Financial Strain
Today, employers find themselves in a challenging position. The question arises: do they possess the means to establish sufficient reserves to cope with a sharp rise in NSSF contributions?
A member of the board of economic organizations, who has called for an urgent meeting next Monday, spoke to This is Beirut and alluded to a "premeditated plan to undermine SMEs." Within this context, he underscored the "weakening of the banking sector, with the exception of "Al-Qard al-Hassan," which has expanded to over fifty branches. Additionally, he pointed out the weakening of the health sector, followed by education, and now the strain on SMEs."
This source, requesting anonymity, condemned Karaki's behavior, asserting that he "substituted himself to the price index committee" and referenced his statement, in which he emphasized not accepting a salary declaration lower than twenty million Lebanese pounds.
Read more
Comments