New legislation, developed with extensive technical support from the ILO, is considered among the most significant socioeconomic reforms Lebanon has witnessed over the past three decades. Attention now turns towards ensuring its prompt implementation.
15 December, 2023
BEIRUT (ILO News) – The Parliament of Lebanon has passed a law that establishes a comprehensive pension system for private sector workers and fundamentally reshapes the governance of the National Social Security Fund (NSSF).
Previous attempts spanning three decades to replace Lebanon’s end-of-service indemnity system with a modern pension scheme had been met with failure. Until this recent milestone, Lebanon stood as one of only two countries in the Arab region without a scheme that protects insured workers with long-term periodical benefits for retirement, death and disability.
The International Labour Organization (ILO) provided extensive technical support to the relevant parliamentary committees, the NSSF and workers and employers’ organizations in Lebanon to reach consensus over the design and parameters of the scheme, and the final text of the legislation that was adopted by Parliament, ensuring its alignment with international labour standards for social security.
“We congratulate all partners in Lebanon for achieving this historical milestone” said ILO Regional Director for Arab States Ruba Jaradat. “At a time of unprecedented social and economic crises, Lebanon shows that advancing structural reforms is possible and at the same time unavoidable. Stronger public social protection mechanisms and better functioning national institutions are critical to ensure that the economic recovery is also accompanied by a much need advancement of social justice,“ she added, acknowledging the collaboration with successive ministers of Labour who spearheaded this endeavour.
Nicolas Nahas, former minister and member of parliament, who headed the parliamentary sub-committee that revised and finalized the project of the law in the past legislature, considers this a major milestone for Lebanon “We have pursued this transformative legislation for years and are elated to witness its approval today. It marks a crucial step forward for our country given the benefit it will bring to both workers and employers. We hope that the implementation will meet the set targets in due course”, he said.
Older people in Lebanon have been hit hard by the unprecedented crises that have afflicted the country since 2019 – from the collapse of the economy to the Covid-19 pandemic, and the August 2020 Beirut Port explosion. Rising rates of poverty and unemployment across the country, coupled with an inadequate social protection system, have made it increasingly difficult for all people to meet their basic needs and have in particular negatively affected the social and physical wellbeing of those in later life. Even prior to these crises, the end-of-service indemnity system fell short in providing protection in old age. The value of these indemnities has plummeted as a result of the collapse of the Lebanese Pound leaving those insured without any source of income and forcing many of them to continue working into old age.
The new pension benefits will be calculated taking into account two guaranteed minimum amounts: the first is 80 percent of the minimum wage after 30 years of contribution, the second is 1.33 percent for each year of the insured’s revalorized average wage. Benefits will be paid in case of disability and will be transferred to survivors in case of the death of the insured member or the pensioner. Pension values will also be indexed to inflation through a yearly adjustment process.
“This is one of the most important socioeconomic reforms Lebanon has achieved in the past 30 years.” commented Mohammed Karaki, Director General of the NSSF “We have worked hard to completely revise the social security law, so as to ensure a decent retirement lto the Lebanese population. We are grateful for the support received from the ILO, especially in relation to the actuarial and legal standards advice and the continuous and close accompaniment on this project, and we look forward to continuing the partnership to develop solid systems for its delivery”, he added.
Bilal Abdallah, member of parliament and head of the parliamentary committee on Health, Labour, and Social Affairs said “The law passed by Parliament, based on the proposal put forth by the subcommittee and endorsed by the joint committees, is comprehensive and aligns with essential international standards. Tailored to the unique Lebanese context and realities, it strikes a delicate balance between redistribution and capitalization, and streamlines the fund’s management and investment, ensuring the sustainability of its benefits.” In fact, as a key aspect of the reform, the law introduces an entirely new governance structure for the NSSF. The current board of directors will be replaced by a smaller board of ten members, four representing workers, four representing employers and two representing the government. Notably, six of the members will be required to be specialized experts on matters of social protection. Overseeing the funds will be an independent committee of investment, comprised of specialized experts, along with a dedicated investment arm. The NSSF is also mandated to institute a system for the electronic payment of contributions and benefits, and a digital platform for workers and employers to access information on their social security rights.
“The new system will improve the well-being of Lebanese who reach retirement age and strengthen social solidarity which is very important for Lebanon these days,” said Luca Pellerano, Senior Social Protection Specialist who has led technical engagement on the project from the ILO Regional office in Beirut. “This has fundamental importance, not only for reducing social vulnerabilities, but also for ensuring the proper functioning of the entire social security system. The new law should encourage employers to declare full salaries to the NSSF, from which other branches of the system – most importantly the health insurance branch – will in turn benefit.”
The reform was hailed by all social partners, who actively engaged in a series of social dialogue over the past years ultimately reaching a consensus on the final outcome of the reform. In his remarks, Bchara el Asmar, the head of the General Confederation of Workers (CGTL), deems this law “a fundamental turning point in the interests of the insured, serving as a guarantee for the continuity of salary post-retirement.” Emphasizing the urgency of swift implementation, he underscores the necessity of promptly issuing the required implementation decrees to “establish a minimum guarantee of social security for workers which they have been without for over two decades – a reality that was further exacerbated by the suffocating crisis and the erosion of the value of indemnities, savings, and deposits.”
On the other hand, the Association of Lebanese Industrialists, through its President Salim Zeenni, welcomed this reform as a “blessed step resulting from a long struggle and close cooperation between the private sector, CGTL, and the Lebanese state, with the unwavering support of the International Labour Organization, who worked tirelessly and made tremendous efforts to develop the key parameters for this law and contributed to its successful conclusion.”
The reform represents a critical component of a broader national social protection strategy which was recently adopted by the Council of Ministers, with financial support to the process from the European Union. The ILO will now shift its focus towards supporting the NSSF and social partners in its successful and timely implementation – the next significant challenge in this endeavour.