What is PASI?
The Social Security Law and its amendments promulgated by Sultani Decree 72/91 came into force on July 1, 1992 (the “Social Security Law”). Article 5 of the Social Security Law provides that a public authority shall be formed under the name of Public Authority for Social Insurance (“PASI”) with administrative and financial independence, and is responsible for the implementation of the Social Security Law.
The Social Security Law aims to provide security against old age, disability, death or occupational injury and disease, thereby ensuring a social stability for the insured and their dependents. The Social Security Law only applies to Omani nationals employed in the Sultanate of Oman.
What are the employer’s contribution and obligations?
Under the Social Security Law, the employer is solely responsible for the payment to PASI in respect of each relevant employee, and the payments must be made on the basis of the actual wage drawn by that employee. Currently, the employer is required to contribute a total of 11.5% to PASI (10.5% of the employee’s gross salary, plus an additional 1% for occupational injuries and disease). The employee is required to contribute an amount equal to 7% of its gross salary.
Each company in Oman has online access to the PASI scheme (which sets out the details of each Omani employee and his or her salary). As a standard practice, in January each year, PASI updates the contribution that the employee and employer are required to make based on the standard minimum 3% increment to the gross salary. However, if the employer grants an increment of more than 3%, it is the employer’s obligation to notify PASI of the new salary by updating the employee’s salary details online. Generally, PASI would require the company to amend and notify PASI of the employee’s salary within a period of one month from implementing the revised salary.
Is it compulsory for companies to comply with the rules under Social Security Law? Or can companies provide their own scheme?
Article 16 of the Social Security Law requires the employer to undertake payment of the full social security subscriptions to PASI, and the employer is solely responsible for payment of these subscriptions, and may deduct the employee’s contribution from the secured employee’s salary.
However, if a company has a workers savings fund scheme by which the Omani employees receive more than the PASI entitlement that the employer is required to contribute (i.e., the contribution made by the employer is equivalent to, or more than, the 10.5% of the gross salary to be contributed by the employer), then such scheme is acceptable and the employer is exempted from making PASI contributions on behalf of its employees. However, if it falls below what is defined under the Social Security Law, then it is important to note that the company may be foreseen as breaching the Omani Labour Law and the Social Security Law.
Article 7 of the Social Security Law provides that an employee has one year from the date of leaving to bring any claim regarding PASI. In such case, the concerned employee will have one year from when he or she leaves to raise a grievance against the company.
What happens if the employer defaults?
Article 17 of the Social Security Law provides that the employer who is subject to the law, but does not pay the contribution according to actual wages of the employees, or does not pay the insurance contribution for all or some of his employees, or does not pay the end of service benefits or refuses or delays the payments of the due contribution at the time, then the employer shall be obliged to pay to PASI an additional amount estimated at 13.5% of the contribution which the employer failed to pay, or of the amounts which are due for end of service benefits, unless there are unavoidable reasons, to be evaluated by the Board of Directors of the PASI.
In addition to the penalty imposed under Article 17, PASI also sets out an additional penalty under Article 74 of the Social Security Law, whereby if the employer violates any of the provisions of the Social Security Law, the employer shall be punished with a fine of not less than OMR 100 and not more than OMR 500, and the limits of the punishment will be double in case of repetition of the violation, and the fine multiplies according to the number of the employees with respect to whom the employer commits one or more violations.
Therefore, it is important for a company to comply with PASI rules. If the company has revised the employee’s salary, it is the responsibility of the company to notify PASI of the new salary and undertake to pay the full subscription to PASI accordingly.
Monday, December 19, 2016
What is PASI?