Nepal Labor Act 2074 (2017): Highlights of Changes
1. Introduction
- The Labor Act, 2074 was enacted on Bhadra 19, 2074 (September 4, 2017).
- It replaces the Labor Act, 2048.
- Framed under Section 296(1) of the Constitution of Nepal.
- Focuses on rights, interests, benefits, and safety of workers across various sectors.
2. Applicability
- Labor Act 2048: Applied to entities with 10 or more employees.
- Labor Act 2074: Applicable to all entities regardless of the number of employees.
3. Hiring Provisions (Section 10)
The new law introduces multiple modes of employment:
- Regular Employment
- Work-Based Employment – for specific tasks/services.
- Time-Bound Employment – for a fixed period.
- Casual Employment – up to 7 days/month.
- Part-Time Employment – up to 35 hours/week.
Internship (Sections 16 & 17)
- Introduced the concept of interns under approved syllabi.
- Interns working beyond the syllabus scope are treated as regular employees.
4. Hiring of Foreign Nationals (Sections 22 & 23)
- Prohibited to hire non-Nepalese for general roles.
- Allowed only if no Nepali is available for skilled technical posts after advertisement.
- Exemptions:
- Foreign nationals with diplomatic immunity.
- As per bilateral treaties or agreements.
5. Worker Representation
Collective Bargaining Committee (Section 116)
- Mandatory for entities with 10+ employees.
Safety and Health Committee (Section 74)
- Required for entities with 20+ employees.
Strike Provision
- Secret ballot not required anymore.
- Workers can strike with a notice to management and security bodies.
6. Working Hours (Section 28–31)
| Provision | Labor Act 2048 | Labor Act 2074 |
|---|
| Daily Hours | 8 hrs/day | 8 hrs/day |
| Weekly Hours | 40 hrs/week | 48 hrs/week |
| Overtime Pay | 1.5x basic rate | Same |
| Max Overtime | 20 hrs/week | 24 hrs/week |
7. Outsourcing (Section 58)
- Newly introduced.
- Only allowed for non-core work.
- Subject to approval and gazette publication.
8. Probation Period
| Act | Duration |
|---|
| Labor Act 2048 | 1 year (240 days) |
| Labor Act 2074 | 6 months |
9. Leave and Holidays
| Type | Labor Act 2048 | Labor Act 2074 |
|---|
| Weekly Holiday | 1 day/week | Same |
| Public Holidays | 13 days | 13 + 1 (for women) |
| Annual Leave | 1 day per 20 worked days | Same |
| Sick Leave | 12 days full/15 half (based on service) | Same |
| Mourning Leave | 13 days | Same |
| Leave in Lieu | Not available | Yes for work during holidays |
| Maternity Leave | 52 days fully paid | 98 days (60 days paid) |
| Paternity Leave | Not provided | 15 days fully paid |
| Special Leave | 30 days unpaid (max 6 months service) | Removed |
10. Benefits
Provident Fund
- Employer & Employee: 10% of basic pay each.
- 2048 Act: Enterprise-level fund (permanent staff).
- 2074 Act: Social Security Fund (from day one).
Gratuity
| Labor Act 2048 | Labor Act 2074 |
|---|
| Based on service years | 8.33% of monthly basic salary |
| Minimum 3 years service | Eligible from day one |
| Enterprise Fund | Social Security Fund |
Leave Encashment
- 2048 Act: Annual leave up to 60 days.
- 2074 Act: Annual leave up to 90 days + 45 days sick leave.
Severance Compensation
| Labor Act 2048 | Labor Act 2074 |
|---|
| 30 days/year (permanent staff) | 1 month/year (proportionate) |
| Only for permanent employees | Not if eligible for unemployment benefit |
11. Other Benefits
| Benefit | Labor Act 2048 | Labor Act 2074 |
|---|
| Festival Expense | Not mentioned | 1-month salary/year (proportional if <1 year) |
| Housing Fund | 5% of gross profit | Removed |
| Injury Compensation | Full treatment cost by employer | Covered by insurance |
| Disability Compensation | Up to 5 years’ salary | Based on insurance and disability % |
| Death Compensation | 3 years’ salary to heir | Based on accident insurance |
| Medical Insurance | Not provisioned | Coverage: Rs. 1 Lakh/year (50-50 by employer/employee) |
| Accident Insurance | Not provisioned | Coverage: Rs. 7 Lakh, paid by employer |
| Bonus | 10% of net profit | Same |
