Social security scheme in East Timor

Social security scheme is a scheme imposed and controlled by the government to provide social benefits to the members of the community. From 1st January 2018, social security contribution has become mandatory for all workers and employers in Timor-Leste, and opinional for:

1. Individual entrepreneurs

2. Self-employed

3. Managers and administrators of companies

4. Domestic service workers

Foreign workers, who work temporally in Timor-Leste, are also covered by the social security scheme, except the workers can prove that they are covered or contributed to the social security scheme in another country. In that case, they are exempt for a period of 10 years.

Obligation

Employer	Enroll the institution and its workers (standard forms or online)
	Providing and updating information (standard forms or online)
	Submit Monthly Remuneration Statements (standard forms or online)
	Pay monthly contributions (cash or bank transfer)
Worker	Meet warranty periods in order to access the benefits
	Provide and update personal information
	Deliver documents
	Submit requests for benefits (standard forms or online)

Calculation

Formula: Contributory incidence basis * Contributory rate = Contribution to pay

*Contributory incidence basis = Basic remuneration + Other permanent monthly remunerations

*Contributory rate = 10% (employers pay 6% on top of employees’ salary and employee pay 4% on their salary) (the rate can be revised from 2020)

Case study

ABC International employs Mr. Smith as a manager with a gross monthly salary of US$700. The calculation is shown below:

Contributory basis incidence	700
Employer @ 6% = (700 * 6%)	42
Employee @ 4% = (700 * 4%)	28

Employer contributes USD$42 monthly to the social security scheme.

Employee contributes USD$28 monthly to the social security scheme.

Employer pays a gross salary of USD$742 per month.

Worker receives a net salary of USD$672 per month.

Transitory norm for private sector

Until 2026, the employers from the private sector with 10 or fewer workers, provided 60% of the workers are Timorese nationals, are entitled to a % of reduction to the contributory rate.

• 2017 and 2018 - 70%

• 2019 and 2020 - 50%

• 2021 and 2022 - 30%

• 2023 and 2024 - 20%

• 2025 and 2026 - 10%

Case study

From 1st January 2021 to 31st December 2021, ABC International employs Mr. Smith as a manager with a gross monthly salary of US$700. More than 60% of the workers at ABC International are Timorese nationals. The calculation is shown below:

Contributory basis incidence	700
Contributory rate @ 30% reduction for 2021	7%
Employer @ 4.2% = (700 * 4.2%)	29.4
Employee @ 2.8% = (700 * 2.8%)	19.6

Employer contributes USD$29.4 monthly to the social security scheme during 2021.

Employee contributes USD$19.6 monthly to the social security scheme during 2021.

Employer pays a gross salary of USD$729.4 per month.

Worker receives a net salary of USD$680.4 per month.