Bridging the Coverage Gap: Supporting Workers Through Subsidized Social Security Contributions – Global Compendium | International Social Security Association (ISSA)

Contributory social security systems face various barriers to participation, especially in low- and middle-income countries. Chief among these obstacles is the low contributory capacity of workers and small enterprises to contribute to social security systems on a regular basis. 

One modality for supporting participation is the use of contribution subsidies to lower this financial barrier. Contribution subsidies are financial mechanisms that reduce the cost of social contributions for workers and employers, particularly for those operating in informal or vulnerable employment conditions. They can be an important policy tool to aid in the transition from informal to formal employment, making social security more affordable and attractive while aiming to sustain long-term coverage. These subsidies can take various forms, including fixed contributions, percentage reductions in the applied contribution rate, tax-integrated schemes, or targeted financial incentives for specific groups of workers or enterprises, such as self-employed individuals, low-income earners, small enterprises or employers hiring disadvantaged workers. 

Despite their widespread use in different contexts around the world, knowledge about the motivations, design and effectiveness of contribution subsidies remains scarce. Recognizing this knowledge gap, the International Social Security Association (ISSA) collaborated with the International Labour Organization (ILO) in 2024 to carry out a global review to identify, analyse, and synthesise national experiences with social security contribution subsidies. 

The objective of the exercise was to develop a structured yet accessible framework that respects the complexity of these schemes while providing policymakers and practitioners with practical insights to inform their decisions around whether and how to design and implement these mechanisms in their own contexts.