De Jure and De Facto Coverage of Parental Benefits in Nepal

Women constitute nearly half of the young working age-population in Nepal but are less likely than men to participate in the labor force. When employed, they work largely in informal, or subsistence work characterized by inadequate social protection and are subject to lower wages relative to men. A key factor behind these outcomes is that childcare responsibilities fall primarily on women with little or inadequate support at work, in the family, or more broadly at a societal level. A holistic and inclusive parental benefits framework which includes all parents (men and women), and all working individuals irrespective of type of employment (formal, informal, part time), is required to bridge the gap between childcare responsibilities and employment for women. The design and implementation of such benefits in developing economies must be cognizant to the trade-offs arising from source of financing (payroll or general revenue); and extent of cost-sharing. This study examines the laws, policies and schemes governing parental benefits in Nepal to outline de-jure coverage. It then presents the results of a survey with 1000 workers in urban Nepal that identify de-facto coverage of these benefits and enquires about labor market choices of mothers and fathers. Four key messages emerge. First, the formal sector workforce, which is less than 10 percent of the employed in Nepal has legislated coverage of the key parental benefits, but suffers from gaps in awareness, and compliance. Second, workers in the informal sector currently lack parental benefits, 28 percent of whom have to borrow money around childbirth while others stop work, reduce hours or dip into savings. Third, there is a willingness to contribute among informal sector workers, to the recently launched social insurance scheme that includes maternity benefits. Finally, women in Nepal are more likely to shift in and out of employment based on childbirth and childrearing constraints, while men are less likely to use childcare as a factor in work decisions, signaling the need for policies to be complemented with a sustainable social norm change.