The Labour Act 2074 applies to almost every employer in Nepal, from a two-person shop to a multinational's Kathmandu office. Unlike the 1992 Act it replaced, it covers workers on every type of contract, including casual and part-time workers, and it brought in the contribution-based Social Security Fund. Yet many employees still do not know what they are entitled to, and many small employers do not know what they owe. This guide covers the provisions that come up most often in our practice.
Types of employment recognised by the Act
The Act recognises regular, work-based, time-bound, casual and part-time employment. A written employment contract is mandatory for every worker except casual workers engaged for fewer than seven days a month, and the contract must state the type of employment, the remuneration and the benefits. If an employer cannot produce a contract, the labour office will normally treat the worker as a regular employee, which is the most protected category.
| Category | Definition | Key protection |
|---|---|---|
| Regular | Ongoing work with no fixed end | Full termination protection and benefits |
| Work-based | Hired for a specific task or project | Ends when the work ends |
| Time-bound | Fixed period stated in contract | Ends on the date stated |
| Casual | Up to 7 days a month | Paid per day; no written contract required |
| Part-time | Up to 35 hours a week | Pro-rated benefits |
Working hours, overtime and leave
The standard working week is 48 hours across six days, with a 30-minute break after every five hours. Overtime is capped at 24 hours a week and must be paid at 1.5 times the regular hourly rate. Every employee is entitled to one weekly rest day, 13 days of public holidays, 18 days of home leave accrued at one day for every 20 worked, and 12 days of paid sick leave a year. Female employees receive 98 days of maternity leave, 60 of them fully paid, and male employees receive 15 days of paternity leave.
Social Security Fund contributions
Every employer must enrol its employees in the Social Security Fund (SSF) and deposit 31% of basic salary each month: 11% deducted from the employee and 20% contributed by the employer. The 20% replaces the old provident fund and gratuity obligations, and it funds medical, accident, dependent and pension benefits. Employers who have not enrolled are exposed to back-payment orders from the Labour Office, and employees can check their own contribution record on the SSF portal using their SSF number.
Dismissal and your remedies
A regular employee can be dismissed only for misconduct following a written charge and a chance to respond, for poor performance after documented warnings, or for redundancy following the retrenchment procedure. Notice of one month is required for employees who have served more than a year, or pay in lieu. An employee who believes the dismissal was unlawful can file a complaint at the Labour Office within a set period, and the Labour Court in Kathmandu can order reinstatement or compensation if the procedure was not followed.
- Ask for the dismissal reasons in writing; an employer must give them
- Collect your contract, pay slips and any warning letters
- Check that your final settlement includes accrued leave, notice pay and SSF contributions
- File your complaint at the Labour Office promptly; delay weakens your case
- Keep communication in writing where possible