Nepal has made important changes to its labor laws in recent years to make workplaces fairer and more efficient. The Labor Act, 2074 (2017) is the main law that looks after the rights of workers and the duties of employers. Along with other rules and guidelines, this law sets the basic standards for how people should be treated at work.
Every employer in Nepal needs to follow these labor laws to stay within the rules and avoid legal trouble. Some of the most important areas include making proper job contracts, paying fair wages, providing safe working conditions, giving benefits, and solving disputes in the right way. The Ministry of Labor, Employment and Social Security is responsible for making sure these rules are followed.
Following labor laws is not just about avoiding penalties it also helps create a better and more respectful work environment. It can lead to happier employees, better teamwork and higher productivity.
The Labor Act, 2017 outlines the following mandatory compliances for employers in Nepal. Breach of these provisions may result in legal and financial consequences.
A. Written Agreement
According to Section 11 of the Labor Act, 2074, it is mandatory for every employer in Nepal to enter into a written employment agreement before hiring any worker. This agreement must clearly outline the employee’s remuneration, benefits, terms of employment, and other legally prescribed conditions.
The only exception to this rule applies to casual workers, for whom a written agreement is not required. The provision ensures legal clarity and safeguards the rights and obligations of both the employer and employee.
In this context, it is important for every organization to assess whether all categories of workers permanent, contractual, or part-time have been provided with formal appointment letters or employment agreements. If any employees have not received such documentation, the organization must clearly state the number of such cases and provide valid reasons, such as the nature of employment or administrative delay. Ensuring compliance with this requirement not only fulfills legal obligations but also promotes transparency and accountability in workplace relationships.
B. Foreign National Employment Approval
When employing foreign nationals, it is mandatory to obtain a labor permit in accordance with Chapter 6 of the Labor Act and Chapter 3 of the Regulations on Employing Foreign Nationals. Organizations must ensure that they have secured valid permits for all foreign employees before commencement of work. If labor permits have not been obtained, the reasons for non-compliance should be clearly stated, such as pending application processes or exemptions. Additionally, the article should specify the number of foreign nationals currently employed with valid permits to demonstrate transparency and adherence to legal requirements.
B. Employment of Minors and Compliance with Child Labor Laws
According to Nepali labor law, employing children below the age of 18 is strictly regulated, with total prohibition on engaging those under 14 in any form of work. If any individuals below 18 years of age have been employed, the nature of their work, the conditions under which they are working, and their age must be clearly stated. It is essential to ensure that such employment, if permitted under exceptional conditions, does not involve hazardous work and strictly complies with the law. If no children under 18 have been employed, this should also be clearly mentioned to demonstrate compliance with child labor regulations.
D. Trainee Workers
If trainees or apprentices are employed, it is essential to ensure compliance with Sections 16 and 17 of the Labor Act, 2074. According to these provisions, an establishment may engage apprentices only under a valid agreement with a recognized teaching or training institution and in line with an approved curriculum. Apprentices working strictly under such a curriculum are not considered regular workers under the Act. However, if they are assigned tasks outside of the agreed training scope, they will legally be treated as regular employees.
Furthermore, Section 17 stipulates that apprentices must not be made to work more than 8 hours per day or 48 hours per week. All occupational health and safety standards applicable to regular workers must also be provided to apprentices. In the event of an accident during training, unless otherwise agreed, the employer must ensure medical treatment and provide compensation in case of disability, as per the law.
If apprentices have been engaged in your organization, you should state:
- Whether their employment follows the approved curriculum,
- If a formal agreement exists with the training institution,
- And confirm adherence to working hours, safety measures, and accident liability provisions.
If a trainee has been employed, it is important to ensure that the provisions of Section 18 of the Labor Act, 2074 are fully complied with. This section allows employers to engage individuals as trainee workers for the purpose of training them while also teaching job-specific skills. The training period should not exceed one year, unless a longer period is prescribed by law for a particular occupation.
During the training period, the employer must provide the trainee with minimum remuneration and essential facilities, similar to other employees. These include social security benefits, sick leave, gratuity, provident fund contributions, and insurance coverage. Failure to provide these may constitute non-compliance with the law.
It should also be clearly stated:
- Whether any trainees are currently employed,
- Whether they have received the required benefits and facilities during their training period, and
- Whether an agreement has been made with an educational institution, if applicable.
Although the employer is not obligated to retain the trainee after the training ends, all benefits during the training period are legally required.
E. Employment of Part-Time Workers
If part-time workers are employed in the organization, it is important to ensure compliance with the provisions under Chapter 5 of the Labor Act, 2074, which governs employment types and associated benefits. The Act requires that part-time workers though working fewer hours than full-time staff are still entitled to proportionate remuneration, facilities, and social security benefits as per the law.
In this context, the organization should clearly state:
- Whether any individuals are currently working part-time,
- If yes, whether they are receiving proportionate facilities such as minimum wage, leave, insurance, provident fund, and other applicable benefits, and
- If no part-time workers are engaged, that should also be explicitly mentioned to reflect transparency and legal awareness.
Ensuring compliance with Chapter 5 not only fulfills legal obligations but also promotes fair treatment of all categories of workers within the workplace.
F. Working Hours
As per Section 28 of the Labor Act, 2074, employees in Nepal should not be required to work more than eight hours per day and forty-eight hours per week under normal conditions. Any work beyond these limits is considered overtime and must be compensated accordingly.
In this context, it is important for the organization to mention:
- Whether any workers are currently working beyond these legal time limits, and
- If so, whether proper overtime pay and rest provisions are being provided as per the law.
If no workers are made to exceed the daily or weekly working hour limits, this should be clearly stated to reflect full compliance with labor standards. Adhering to these provisions is essential for protecting worker health, ensuring productivity, and maintaining legal accountability.
G. Rest Breaks and Overtime Benefits
According to Section 31 of the Labor Act, 2074, every worker is entitled to a minimum of half an hour of rest after five continuous hours of work. This provision ensures physical and mental well-being in the workplace. Additionally, if employees work beyond the standard working hours, they must be provided with overtime remuneration or equivalent facilities, as prescribed by law.
In this regard, the organization should confirm:
- Whether workers are given the required half-hour break after every five hours of continuous work, and
- If any workers perform duties beyond regular hours, whether they receive proper overtime pay or compensatory benefits.
H. Safety and Support Measures for Women Working at Night
Under Section 33 of the Labor Act, 2074, if women employees are required to work before sunrise or after sunset, employers are legally obligated to ensure safe transportation and adequate security arrangements. These measures are crucial for protecting the rights, dignity, and well-being of female workers during non-standard working hours.
In this context, the organization should clearly state:
- Whether any women are currently working night or early morning shifts, and
- If so, whether proper arrangements such as safe transport, escort services, or on-site security have been made to comply with legal requirements.
Implementing these provisions not only ensures legal compliance but also reflects a responsible and gender-sensitive workplace culture.
I. Minimum Wage Standards
As per the prevailing labor laws of Nepal, every worker must be paid at least the government-declared minimum wage, regardless of their job type, contract nature, or working hours. Paying less than the minimum wage is a direct violation of the Labor Act, 2074 and can result in legal penalties for the employer.
In this regard, the organization should clearly report:
- Whether all employees, including part-time, contractual, daily-wage, and support staff, are receiving wages equal to or above the legal minimum, and
- If any worker is being paid less than the minimum wage, the number of such cases and the reason for non-compliance (e.g., administrative error, misclassification, or other justification) must be clearly stated.
Ensuring minimum wage compliance is not only a legal obligation but also a reflection of ethical employment practices that contribute to worker dignity, productivity, and long-term institutional credibility.
J. Annual Salary Increment Practices and Legal Compliance
According to Section 36 of the Labor Act, 2074, every worker who has completed one year of continuous service is legally entitled to an annual salary increment (grade). This increment must be equivalent to at least half a day’s wage based on the employee’s basic monthly remuneration. The purpose of this provision is to ensure steady financial growth and recognize employee loyalty and service.
The organization should clearly state:
- Whether this mandatory annual increment is being provided to all eligible employees, and
- If not, the reasons for non-compliance and the number of workers affected.
Ensuring this increment not only fulfills a legal requirement but also boosts employee motivation, retention, and satisfaction, reflecting a responsible and compliant wage policy
K. Festival Allowance
According to Section 37 of the Labor Act, 2074, every worker who has completed at least one year of continuous service is entitled to receive a festival allowance once a year. This allowance must be equal to one month’s basic remuneration and should be provided in connection with a major festival observed by the worker.
The organization should clearly state:
- Whether festival allowances are being provided to all eligible workers as required by law, and
- If not, the number of workers who have not received it and the reasons for non-compliance.
Providing this allowance reflects both legal compliance and cultural sensitivity, contributing to employee morale and workplace harmony
L. Leave Policy :
The Labor Act, 2074 mandates specific types of paid and unpaid leave entitlements to ensure employee welfare. The organization should ensure the following leave provisions are being complied with:
- Weekly Leave: One paid day off per week for all workers.
- Public Holidays: 13 days annually (14 for female workers), including May Day and International Women’s Day.
- Compensatory Leave: Must be provided within 21 days if employees work on weekly rest days or public holidays.
- Home Leave: One day paid leave for every 20 days worked, except for those receiving academic/winter breaks.
- Sick Leave: 12 paid days annually; proportionate if employed for less than a year. Medical proof required for more than 3 days.
- Maternity Leave: 14 weeks total (at least 2 weeks pre- and 6 weeks post-delivery); full wages provided for part of this period.
- Paternity Leave: 15 days of paid leave for male workers whose wives give birth.
- Kiriya (Mourning) Leave: 10 days of paid leave for death of close family members.
- Leave Accumulation: Home leave can be accumulated up to 90 days; sick leave up to 45 days. Payout is required upon termination or death.
The employer must also comply with documentation requirements (e.g., birth registration certificate for maternity leave) and cannot reduce maternity wages if covered by the Social Security Fund. Except for sick, maternity, and mourning leave, all other leaves may be adjusted or denied by the employer based on workplace needs.
M. Provident Fund and Gratuity Contributions
As per Chapter 10 section 52, of the Labor Act, 2074, employers must contribute to the Provident Fund by deducting 10% of each worker’s basic remuneration and adding an equal amount, which is then deposited in the Social Security Fund (SSF) from the start of employment. If the SSF is not yet operational or applicable, employers must follow transitional provisions or pay an additional 10% directly to workers.
For workers without prior provident fund deposits before the Act’s commencement, contributions must begin from the effective date of the law. Any existing provident fund amounts held under previous schemes must be transferred to the SSF.
Employers are responsible for ensuring timely and accurate deposits to comply with legal requirements and protect workers’ social security rights.
As per Section 53, employers are required to deposit 8.33% of each worker’s basic monthly remuneration as gratuity in the Social Security Fund (SSF) from the date of employment. If the SSF is not yet operational or applicable to the employer, the gratuity must still be deposited accordingly or managed as per the law.
For workers hired before the Act’s enforcement and not previously entitled to gratuity, the contribution must begin from the Act’s commencement date. Any gratuity amount already accumulated in other retirement funds must be transferred to the SSF as specified.
The organization should confirm whether:
- Gratuity contributions are regularly deposited in the SSF, and
- Older gratuity balances have been transferred as per the law.
N. License of Labor Supply Companies
As per Section 59 of the Labor Act, 2074, any company intending to supply laborers must obtain a valid license from the concerned government office by submitting a prescribed application, fee, and documents. The license, issued within 15 days upon approval and deposit of a bank guarantee, specifies the permitted scope of labor supply, limited to a maximum of two types of work or services.
Existing labor suppliers had to register as companies and obtain licenses within six months of the Act’s commencement to ensure legal operation.
Organizations involved in labor supply must comply with these licensing requirements to operate lawfully.
O. Compliance with Occupational Safety and Health Policy
Under Section 68 of the Labor Act, 2074, every employer is required to formulate and implement a workplace safety and health policy to protect workers and others present at the workplace. This policy must be:
- Prepared in accordance with the Act and related directives,
- Registered with the relevant labor office, and
- Monitored regularly by the authorities to ensure proper implementation.
Employers must also follow prescribed standards and make additional arrangements to uphold health and safety, reflecting a commitment to legal compliance and a safe working environment.
P. Formation and Function of Safety and Health Committee
According to Section 74 of the Labor Act, 2074, every establishment employing 20 or more workers (including those hired through labor suppliers) must form a Safety and Health Committee with worker representation.
The committee is responsible for:
- Advising the employer on workplace safety and health arrangements,
- Evaluating and recommending improvements in existing safety measures,
- Notifying authorities if the employer fails to act,
- Reviewing the safety and health policy annually, and
- Carrying out other duties as prescribed.
This committee plays a vital role in ensuring compliance with occupational health and safety standards and fostering a safe working environment.
Q. Internal Management Bylaws and Policy
As per Section 108 of the Labor Act, 2074, every establishment may create its own internal management bylaws. However, such bylaws must:
- Not violate the minimum standards set by the Labor Act or any collective agreement,
- Be registered with the labor office and made accessible to workers upon request,
- Be developed in consultation with trade unions, where available.
If any part of the bylaws conflicts with the law or collective agreement, the court can nullify such provisions. Establishments must ensure that their internal rules align with national labor standards to remain legally compliant.
Registration and Distribution of Internal Management Regulations
In accordance with the Labor Act, establishments that formulate internal management regulations or bylaws must ensure these are registered with the Labor Office. This registration formalizes the bylaws and ensures legal recognition.
The organization should provide details such as:
- The registration date of the regulations with the Labor Office,
- The registration number assigned by the office, and
- Confirmation that copies of the registered regulations have been distributed or made accessible to all workers.
Making the regulations available to workers promotes transparency and enables employees to understand their rights and obligations. Proper registration and distribution are essential steps for legal compliance and fostering a cooperative workplace environment.
R. Formation and Functioning of Labor Relations Committee
According to Section 111 of the Labor Act, 2074, every establishment is required to form a Labor Relations Committee to promote constructive dialogue between management and workers. This committee plays a key role in addressing workplace issues, improving communication, and fostering a harmonious work environment.
For compliance, the organization should specify:
- Whether a Labor Relations Committee has been formally established within the establishment,
- The composition of the committee, including representation from both employer and worker sides,
- The frequency of meetings held, ensuring that meetings occur regularly as stipulated by law or internal policies, and
- Examples of issues discussed or actions taken by the committee to resolve workplace concerns.
Regular functioning of the Labor Relations Committee demonstrates the organization’s commitment to maintaining positive labor-management relations and adhering to legal requirements.
S. Employee Performance Evaluation Regulations
According to Section 112 of the Labor Act, 2074, establishments may conduct annual performance evaluations of their employees based on fair and reasonable criteria and procedures. These criteria must be clearly communicated to employees before the evaluation period begins.
After the evaluation, the employer or designated person must discuss the employee’s strengths and weaknesses and provide an opportunity to improve. If an employee disagrees with the evaluation, they must be allowed to record their disagreement on the performance evaluation form and sign it. The establishment is then required to arrange a review of the evaluation to address the disagreement.
Additionally, the establishment should ensure that the performance evaluation regulations are registered with the Labor Office, including the registration date and registration number. Copies of these regulations must be distributed or made accessible to workers to maintain transparency and compliance.
Following these procedures ensures that the performance evaluation system complies with the Labor Act, supports fair employee treatment, and fosters organizational development.
T. Individual Dispute Resolution
As per Section 113 of the Labor Act, 2074, employees with individual claims related to their rights under the Act, rules, laws, or collective agreements must submit a written application to the employer. Upon receipt, the employer is required to accept the application and provide a receipt to the employee.
The employer must then resolve the dispute through discussion with the employee within fifteen days, although this period can be extended by mutual agreement.
For compliance reporting, the organization should specify:
- Whether individual claims have been filed under Section 113,
- The number of such claims received, and
- How many of these claims have been resolved through direct discussion with management.
This process ensures timely and fair resolution of individual employee disputes in line with legal requirements.
U. Collective Claims Submission
As part of labor rights under the applicable laws, establishments must allow workers or trade unions to file collective claims related to workplace conditions, wages, or other employment terms.
For compliance reporting, the organization should clarify:
- Whether any collective claims have been submitted during the current fiscal year,
- The nature or summary of these claims (if applicable),
- The status or outcomes of these claims, including whether they were resolved, pending, or escalated to arbitration or other dispute resolution mechanisms.
Recording and addressing collective claims transparently ensures adherence to labor laws and promotes harmonious labor-management relations
Collective Bargaining Process and Status Report
In the context of collective bargaining, the organization should provide the following details to demonstrate compliance and transparency:
- The date when the collective demand letter was submitted to management,
- The current status of negotiations, specifying whether discussions are ongoing or if a formal agreement has been reached,
- If an agreement has been finalized, the date of the agreement,
- Whether any strike or lockout occurred during the bargaining process, including duration and impact,
- Any other relevant information or developments related to the collective bargaining or dispute resolution process.
Including this information helps showcase the establishment’s commitment to fair labor practices and effective resolution of collective labor issues in line with legal requirements.
V. Implementation Status of Labor Act Agreements, Decisions, and Rulings
To ensure compliance with the Labor Act, 2074, establishments must monitor and report on the status of any agreements, decisions, or rulings made under the Act. This includes:
- Whether such agreements or rulings have been fully implemented,
- If implementation is still pending, provide a clear explanation of the reasons for the delay,
- Specify the expected timeline or deadline by which the implementation will be completed.
Regular reporting on the status of these matters reflects the organization’s commitment to upholding labor rights and fulfilling legal obligations promptly and transparently.
W. Registration with Social Security Fund
As mandated by the Contribution-based Social Security Act, 2074 and the Contribution-based Social Security Regulations, 2075, establishments are required to register with the Social Security Fund to ensure social security benefits for their workers.
The article should specify whether the establishment has completed registration with the Social Security Fund. This registration is crucial for legal compliance and guarantees workers’ access to benefits such as health insurance, provident fund, and other social protections.
Compliance with Social Security Fund Contributions
In accordance with the Contribution-based Social Security Act, 2074, and related regulations, employers must regularly deposit contributions to the Social Security Fund on behalf of their workers. This ensures that employees receive the social security benefits they are entitled to, including health insurance, provident fund, and other protections.
Your article should state whether the establishment has been making timely and full contributions to the Social Security Fund as required by law. Maintaining these deposits is essential for legal compliance and safeguarding workers’ welfare.
x. Compliance with Bonus Distribution (Bonus Act, 2030 and Bonus Regulations, 2039)
- Confirm whether the establishment is required to distribute bonuses as per the Bonus Act, 2030.
- State if the bonus has been distributed properly according to the law.
- Mention if there are any outstanding bonus payments pending from the previous fiscal year.
y. Trade Union Formation and Election (Trade Union Act, 2049 and Trade Union Regulations, 2050)
- Indicate whether a trade union has been formed at the establishment level.
- Confirm if an official trade union election has taken place as required by law.
- Include any other relevant matters regarding trade union activities or worker representation.
z. Monitoring of Occupational Safety and Health Policy Implementation
- State whether there is a separate system or arrangement in place to audit and monitor the implementation of the occupational safety and health policy at the workplace.
Risks of Non-Compliance
The Labor Act, 2017 of Nepal provides a comprehensive legal framework to ensure the protection of workers’ rights and regulate employer-employee relationships. Chapter 23 of the Act lays down detailed provisions relating to complaints, enforcement mechanisms, penalties for non-compliance, and the right to appeal. Employers and workers alike must be aware of these provisions to avoid legal consequences and ensure harmonious industrial relations.
1. Right to File a Complaint
Any person whether an employer, worker, or affected individual has the right to lodge a formal complaint if there is a violation of the Labor Act or its rules. Additionally, a recognized trade union may also file a complaint on behalf of an affected person, with their written consent. Such complaints must be submitted within six months of the alleged violation.
2. Authority and Powers of the Department and Labor Office
Upon receiving a complaint, the Department of Labor or the relevant Labor Office is authorized to investigate and take the following actions:
a) Unlicensed Labor Providers and Unauthorized Hiring
- A fine of up to NPR 200,000 may be imposed on any Labor provider operating without a license or any person hiring workers through such providers.
b) Employment of Foreign Workers Without Permits
- Individuals hiring foreign workers without proper work permits may face a fine of up to NPR 200,000, along with an additional fine of NPR 5,000 per worker per month for continued non-compliance.
c) Workplace Discrimination
- Discriminatory practices during hiring or employment can attract a fine of up to NPR 100,000, along with an order for equal treatment.
d) Appointment Letters and Contracts
- Employers failing to issue appointment letters or execute employment contracts may be fined NPR 10,000 per worker, up to a maximum of NPR 500,000, and be required to rectify the issue.
e) Negligence by Labor Inspectors
- Labor inspectors found guilty of negligence or misconduct may face departmental action under prevailing laws.
f) Unfair Labor Practices
- Orders may be issued to prevent unfair Labor practices, unjustified transfers, or promotions conducted in violation of internal bylaws.
g) Failure of Timely Action
- If a Labor Office fails to act within 30 days as required by law, the Department may issue necessary directives to ensure compliance.
h) Disputes Between Labor Providers and Employers
- The Department may facilitate the resolution of disputes concerning remuneration or benefits between contracted workers and the principal employer.
3. Actions by the Labor Office
The Labor Office is similarly empowered to act on specific matters:
- Underpayment and Unlawful Deductions: Employers must repay any underpaid or wrongly deducted amounts, along with twice the deducted sum as compensation.
- Obstruction of Government Duty: A fine of up to NPR 20,000 may be imposed on anyone obstructing officials, giving false information, or unduly influencing proceedings.
- Illegal Apprenticeships: Employers violating apprentice or trainee regulations may be fined NPR 10,000 per person, and ordered to offer regular employment with due remuneration and benefits.
- Failure to Provide Statutory Benefits: Employers failing to contribute to social security, pay medical expenses, or provide insurance may be fined twice the amount due as compensation.
- Unlawful Layoffs or Terminations: Directions may be issued to employers to halt discriminatory layoffs or reinstatement in cases of unlawful terminations.
4. Alternative Dispute Resolution
The Act also provides a mechanism for individual workers to resolve disputes directly with their employer through prescribed internal procedures, without needing to involve the Department or Office.
5. Role of the Labor Court
Certain serious offences fall under the jurisdiction of the Labor Court:
- Forced Labor: Engaging in forced Labor is punishable by imprisonment up to two years, a fine up to NPR 500,000, or both. The offender may also be required to pay double the unpaid wages and benefits.
- Occupational Health and Safety Violations: In cases leading to death, disability, or serious harm due to OHS non-compliance, the responsible party may face up to two years of imprisonment and be required to pay appropriate compensation.
- Corporate Accountability: Where a company is found guilty of an offence, it may be fined, and if imprisonment is warranted, the Chief Executive Officer may be personally liable.
Conclusion
Labor law compliance in Nepal is not only a legal obligation but also a crucial aspect of ethical and responsible business conduct. Chapter 23 of the Labor Act, 2017 empowers authorities to enforce compliance through rigorous penalties and provides workers with a clear avenue for seeking redress. Employers must regularly review their HR practices to ensure alignment with the law and avoid substantial financial and legal consequences.