Labour Law in Nepal

Published Date: 2023-10-04

Lawyer of Labour Laws of Nepal/ Labor Laws in Nepal/ Laws related to Employment in Nepal
The Labour Act 2074  has made key changes to employment law in Nepal. The preamble of the Act says that laws relating to labor is enacted to make provisions for the rights, interests, and benefits of workers and make clear provisions relating to the rights and duties of employers in order to promote good industrial relation and end all forms of labour exploitation for the growth of productivity. It was passed by the Parliament on 11 August 2017 (27 Shrawan, 2074). Section 2 (j) of Labour Act, 2074 define Enterprise as any company or private firm or partnership firm or cooperative organization or association, or any other organization established or incorporated or formed or operated pursuant to the prevailing laws with an objective to carry on any industry or occupation or service with or without any motive to make a profit. It has also defined an Employment Contract means any agreement entered into between an employer and a worker regarding his/her employment service, conditions, and benefits and it shall also mean an appointment letter given to workers by the employer.

1.  Types of employment

  1. Regular employment
  2. Task-based employment
  3. Time-based employment
  4. Casual employment
  5. Part-time employment
  1.  “Regular employment” means any employment other than those (b), (c), and (d)
  2. “Task-based employment” means employment to be given or given in which a particular task or service specified by the employer is required to be accomplished.
  3. “Time-based employment” means employment to be given or given in which a worker is required to provide a service or accomplish a task within a period fixed by the employer.
  4. “Casual employment” means employment to be given or given in which a worker is engaged for seven or less than seven days within a period of one month to provide any service or accomplish a task given by the employer.
  5. "Part-time employment" means employment to be given or given in which a worker is engaged by the employer for thirty-five hours or lesser than thirty -ive hours in a week to accomplish any work.

2.   Provision relating to probation

Any employer when executing an employment contract with a worker may keep him/her in probation for a period of six months and the contract with such worker may be terminated if his/her work is not satisfactory. The employment contract with such worker, if not terminated, shall be deemed valid automatically after the ending of the probation period of such worker.

3.   Provisions Relating to Working Hours /over time

  1. No workers shall be employed to work more than 8 hours a day and 48 hours a week by an employer.
  2. Workers shall be provided with half an hour of rest after five hours of continuous work.
  3. Where the work needs continuity without any break, workers shall be provided rest time turn by turn.
  4. Where an employer requires a worker to work for more than the prescribed hours within the scope of section 28, such work may be made to work not exceeding four a day and 24 hours a week.
  5. The work performed by any worker without any arrangement for stitute leave under section 42 shall not be deemed to be overtime work.

4.   Right to receive festival allowance

Every worker shall be entitled to receive an amount equivalent to one month's basic salary in a year as a festival allowance for the celebration of any festival based on his/her own religion, culture, and tradition.

5.     Provisions Relating to Leave

Weekly holiday
Every worker shall be entitled to receive one weekly holiday.
Public holiday
Every worker shall be entitled to fully paid13public holidays including May Day and 14 public holidays including International Women's Day in case of women workers.
stitute leave
  1. Any worker involved in the work requiring continuity shall be entitled to receive stitute holiday if he/she works during any weekly or public holiday.
  2. Any worker, if required to work in the weekly or public holiday, shall be provided stitute leave within 21 days from the date of engagement in such work.
Home leave
  1. Every worker is entitled to receive fully paid home leave at the rate of one day for 20 days for the period he works.
  2. Workers employed in educational institutions or workers who get summer or winter holidays shall not be entitled to take home leave.
Sick leave
  1. Every worker is entitled to paid12 days of sick leave annually.Provided that any worker who has worked for one or lesser than one year shall be entitled to receive sick leave proportionately.
  2. Any worker seeking more than three days of sick leave continuously may require to submit a medical certificate issued by a certified physician.
  3. Where there is a need to take sick leave because of sudden illness, such worker must inform the employer or the person specified by the employer immediately through available means of communication.
Maternity leave
  1. A female worker is entitled to receive a total of 14 weeks of maternity leave with a provision to take before and after the date of confinement.
  2. such worker must take at least two weeks to leave compulsorily before the expected date of confinement and at least six weeks leave after the date of confinement.
  3. The female worker seeking maternity leave shall be entitled to 60 days of fully paid maternity leave and for the remaining period, it shall be unpaid.
  4. Where a certified physician recommends that the concerned female worker and/or the child need rest for their good health, the employer, in continuity with the maternity leave, shall give approval to one-month unpaid leave or with an arrangement to be adjusted with other leave in addition to the maternity leave .
  5. Where a female worker in a state of seven months pregnancy or more than seven months gives birth to a deceased child or suffers miscarriage, the provision relating maternity leave shall apply.
  6. Where a mother dies before the completion of sixty days from the day her child is born, the worker whose wife has died may take paid maternity care leave for the remaining number of days from the employer for whom he is working.
  7. Every male worker, during the confinement of his wife, shall be entitled to 15 days fully paid maternity care leave.

6.   Provisions relating to Provident Fund, Gratuity ,and Insurance/Medical Insurance

  1. Every employer shall deduct 10 percent of the basic salary of each worker, add 100% amount equivalent to that and deposit the total amount for the purpose of a provident fund.
  2. Every employer shall deduct an amount equivalent to 8.33 % of the basic salary of each worker every month and deposit it for the purpose of gratuity
  3. Every employer must make a provision for annual medical insurance of at least one hundred thousand rupees for every worker.
  4. The premium required for the medical insurance under shall be shared by both the employer and worker equally.
      Accidental insurance
  1. Every employer must make a provision for accidental insurance of at least seven hundred thousand rupees covering all kinds of accidents for every worker.
  2. The total premium required for the accidental insurance shall be borne by the employer.
  3. If a worker dies or is completely incapacitated mentally or physically as a result of the accident, such worker or his/her legal heir pursuant to the prevailing law shall receive the 100 % of the amount of the insured sum.
  4. In case, a worker is injured or incapacitated in an accident, compensation shall be provided pursuant to the percentage prescribed in proportion to the injury or incapacity caused.

7. Provisions Relating to Conduct and Punishment

Misconducts and punishment
Warning may be given for the following misconducts by any worker:
  1. act of being absent in the work without approving the leave ;
  2. act of leaving the workplace without taking permission of the management;
  3. act of reaching the workplace frequently late without taking permission of the management;
  4. act of disobeying the order given by the employer or any employee above his/her level in relation to the work; or
  5. act of doing any other misconduct as specified in the by-law.
Maximum of one-day remuneration may be deducted for the following misconducts by any worker:
  1. act of refusing to accept any letter or notice issued by the employer or officer having the authority to punish;
  2. act of taking part in an illegal strike or forcing others to do so or adopting go slow tactic collectively;
  3. act of causing loss to the enterprise by decreasing the production or service negligently or carelessly;
  4. act of attempting to take benefits by submitting false documents;
  5. act of not using safety equipment by the worker responsible for using such equipment; or
  6. act of doing any other misconduct of similar nature specified in the by-law.
Annual salary increment for one year or promotion may be withheld for the following misconducts by any worker:
  1. act of taking and using or causing to use any property outside the enterprise without the permission of a person entrusted with such authority;
  2. act of attempting to misappropriate the fund in the business of the employer;
  3. act of damaging the property of the employer negligently or carelessly;
  4. act of stopping the supply of food, water, telephone, electricity or obstructing the movement in and out of the workplace;
  5. An intentional act of misusing or causing damage or loss to the objects or provisions kept for the benefit or safety and health of the workers:
  6. act of committing any other misconduct of similar nature prescribed in the by-law.
  Employee may be dismissed for any of the following misconducts:
  1. act of assaulting or injuring an employer or any worker or customer or any person concerned with the workplace or act of keeping in captive or causing unrest or damage in the premise of the enterprise with or without the use of any weapon;
  2. act of taking or giving a bribe;
  3. act of stealing the property of others in the workplace;
  4. act of financial misappropriation in the enterprise;
  5. the intentional act of damaging the property of the employer under his/her control or which is being used by the employer;
  6. act of being absent from the work continuously for more than 30 days without approving the leave;
  7. act of divulging production-related formula or any confidential information relating to special technology with an intention to cause loss or damage to the enterprise where he/she is employed;
  8. act of working in collaboration with a competitive employer in a similar nature of the business or carrying any competitive business on his own or providing confidential information about the enterprise where he is employed to any other competitive employer;
  9. if convicted by the court for any  immoral or criminal activity during the period of employment;
  10. act of submitting forged or false educational certificates for the purpose of appointment;
  11. act of taking drugs or liquor during working hours or coming to the workplace in a drunken state;
  12. act of being punished for more than two times for misconducts within a period of three years; or
  13. act of committing any misconduct for which any prevailing law prescribes dismissal as punishment.

8. Sexual harassment is prohibited

  1. No person shall commit any act or cause to commit any act considered as sexual harassment by the law in the workplace or during the work through undue influence.
  2. The employer may even give the punishment of dismissal to the worker involved in the act of sexual harassment by giving due consideration to the condition and gravity of the such act.
  3. Where any employer or chief executive of any enterprise commits any act of sexual harassment, trade union, victim or any family member of such victim may file a complaint in accordance with the law.

9. Provisions Relating to Termination of Employment Relationship

       Termination of time based and task based employment
Time based and task based employment of any worker shall end as follows:
  1. Time based employment of any worker shall come to an end when the time specified in the contract expires.
Provided that,in case of project based employment, the employer shall not end if the period of the project gets extended or the time for the completion of the work gets extended due to the nature of such work.
  1. Task based employment of any worker shall come to an end when the specified work is completed.
Provided that, in case of project based employment, the employment shall not end if the work in the project is increased or due to the nature of the work, the work is added.
  1. Casual employment shall come to an end at the will of the employer or worker if so desired.
    Voluntary termination of employment
  1. Any worker may, by submitting a resignation in writing to the employer, terminate the employment.
  2. The employer shall approve the resignation submitted within 15 days and inform the worker accordingly.
  3. Where the resignation is not approved by the employer within the period, the resignation shall be deemed to have been approved automatically from the day after such period expires.
  4. The resignation may be cancelled through mutual consent between the employer and the concerned worker.
  5. If the worker continues working in the same enterprise, even after the day his/her resignation is approved, such resignation shall be deemed to have been canceled.
Termination of employment on the basis of poor work performance
  1. When evaluating the work performance of any worker pursuant to the provisions of the Act or the rules made under this Act or by-law, if the work performance of such worker is found unsatisfactory or poor for three or more than three years consecutively, the employment of such worker may be terminated by the employer.
  2. Before terminating the employment, the work performance evaluation must have been conducted as prescribed under the Act or the rules made under this Labor Act or the by-law.
  3. Before terminating the employment of any worker, the employer of any enterprise employing 10 or more than 10 workers shall be required to give 7 days time to the concerned worker for clarification.
Termination of employment on medical ground
  1. Where any worker becomes incapable of working as a result of physical or mental incapacitation or disablement or injury or probability of causing an adverse effect on the business of the employer because of long term medical treatment of the worker, the employer may, on the basis of a recommendation of a doctor, terminate the employment of such worker.
  2. The employer shall not terminate the employment of any worker during the period he/she is undergoing medical treatment in the hospital because of an accident or occupational disease caused while performing the work or within one year from the date of commencement of treatment at home. The employer shall give full pay during the period of such treatment.
  3. The employer shall not have right to terminate the employment of any worker for a period of six months in case such worker is not able to attend to the work in the enterprise on the ground of medical treatment.
Provided that this shall not be a constraint for the termination of the employment within the period of six months if there is a clear recommendation from the doctor about the inability of the worker to join the work again.
  1. Where there is a  possibility, the employer may engage the worker who is physically incapacitated or injured or disabled to any work suitable to the condition of his/her health.

10. Notice period

  1. Any employer or worker, while terminating an employment contract in situations other than the termination of employment on the ground of misconducts, shall serve a written notice to each other as follows:
  1. at least before one day, in case of employment for a maximum period of four weeks;
  2. at least before seven days, in case of employment for a period of four weeks to one year ;
  3. at least before 30 days, in case of employment for a period of more than one year.
  1. Where the employer terminates the employment without giving notice, the equivalent amount of remuneration in lieu of notice shall be paid to the concerned worker.
  2. Where a worker terminates the employment without giving notice, the employer may deduct an amount equivalent to the remuneration for such notice period from the remuneration of the concerned worker which he/she is entitled to receive.
To consult or get legal advice from our expert  Lawyer of Labor Laws of Nepal/ Labor Laws of Nepal/ Laws related to Employment in Nepal; Contact us at 977-01-4102849/977-9851059026, Prime Law Associates, Anamnagar, Kathmandu,,
This article is for informational purposes only and shall not be construed as legal advice, advertisement, personal communication.


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