FAQ on Nepalese Labor Law (Labor Act 2074)
1. What is the Labor Act 2074 and who does it apply to?
The Labor Act 2074 governs employer-employee relations in Nepal, ensuring fair treatment, safe working conditions, and rights protection. It applies to companies, private firms, partnerships, cooperatives, associations, and foreign-registered entities operating in Nepal. The Act ensures no discrimination, prohibits child and forced labor, guarantees equal pay for equal work, and protects trade union rights. It applies across all sectors except those excluded by special regulations, like government jobs and domestic employment unless otherwise specified.
2. Is a written employment contract necessary in Nepal?
Yes, a written employment contract is mandatory under Nepal’s Labor Act 2074 for all employees except casual workers. It outlines duties, salary, working hours, benefits, and termination terms, ensuring legal clarity for both parties. Employers are not permitted to engage staff without such agreements. This contract helps avoid disputes and ensures workers understand their rights and responsibilities from the beginning of employment. However, casual employees (those working less than 7 days a month) may be hired without a formal written contract.
3. What types of employment are recognized under Nepalese labor law?
Nepal’s Labor Act 2074 recognizes five employment types: regular, time-based, work-based, part-time, and casual. Regular employment involves ongoing work with consistent hours and benefits. Time-based employment is for a fixed period. Work-based is project-specific. Part-time employees work 35 hours or less per week. Casual employment is occasional, not exceeding 7 days a month. Each type has different entitlements and obligations, helping employers and workers engage appropriately based on the nature of the job or project requirements.
4. What are the legal working hours and break rules in Nepal?
Nepal’s Labor Act sets the maximum working hours at 8 hours per day and 48 hours per week. Employees must receive a 30-minute break after 5 continuous working hours. Overtime is permitted up to 4 hours daily and 24 hours weekly, with extra pay. Additional breaks are mandated for pregnant employees or those with children under 3 years old. These provisions are designed to ensure employee health, productivity, and fair compensation for extended work.
5. What types of leave are employees entitled to under the Labor Act?
Employees in Nepal are entitled to various leaves: one day of weekly leave, 13 days of public holidays, 12 days of paid sick leave annually, home leave (1 day for every 20 days worked), 14 weeks of maternity leave, and 13 days of mourning leave. Male employees also get 15 days of paternity leave. Some leave types can accumulate—home leave (up to 90 days) and sick leave (up to 45 days). Excess leave is paid annually or upon job termination.
6. What is the Social Security Fund and what are the contribution rates?
The Social Security Fund (SSF) is a mandatory program under Nepal’s Labor Act for long-term employee welfare. Employers must contribute 20% of an employee’s basic salary: 10% for provident fund, 8.33% for gratuity, and 1.67% for medical insurance. Employees contribute 11%: 10% to provident fund and 1% as social security tax. This pooled contribution ensures access to retirement, medical, and insurance benefits. Both employer and employee must deposit their respective shares monthly.
7. How do foreign employees obtain a work permit in Nepal?
To work legally in Nepal, foreign employees must obtain a work permit unless exempt under diplomatic or treaty terms. The process involves: employers advertising for Nepali workers first, applying to the Labor Department if no local candidates apply, obtaining a no-objection letter from the Ministry of Home Affairs, and then the permit is issued. Permits are granted for chief executives, technicians, or experts. Permits are valid for up to 5 years, with possible 2-year extensions for nationally beneficial roles.
8. What happens if an employer doesn’t comply with labor laws in Nepal?
Non-compliance with the Labor Act can result in serious penalties. The Labor Department may impose fines up to NPR 500,000 for not issuing contracts or hiring without permits. Discrimination, illegal deductions, and unauthorized foreign employment may result in additional penalties. The Labor Office may also demand compensation, like double repayment of illegal deductions. Repeat violations increase fines. Both fines and imprisonment can be imposed, depending on the severity. Authorities conducting investigations include Labor Courts, Offices, and Departments.
