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Hiring in Nepal? Read on to find out the employment norms (like taxes, payroll and benefits) and EOR (Employer on Record) norms in Nepal.
Employment norms in Nepal
Introduction: Nepal is a small country located in South Asia, bordered by India to the south and China to the north. The capital city of Nepal is Kathmandu, which is also the country's largest city. Nepal's labor market is governed by a set of laws and regulations that define the rights and obligations of workers and employers. This guide provides an overview of the employment norms in Nepal.
General Information:
- The currency of Nepal is the Nepalese Rupee (NPR).
- Kathmandu is the capital city of Nepal.
- Nepali is the official language of Nepal. Other recognized languages include Maithili, Bhojpuri, Tharu, Tamang, Newari, Magar, Awadhi, and many more. Documents can be legally drafted in Nepali and English languages.
- As of 2021, the GDP of Nepal was reported to be approximately USD 36.3 billion.
Nepal's labor laws regulate minimum wage, working hours, leave entitlement, social security, and occupational safety and health standards.
Table of Contents
- Agreements
- Onboarding Process
- Visa
- Minimum Wage
- Payroll Cycle
- Annual Bonus
- Health Benefits
- Working hours and overtime
- Leaves
- Social Security
- Taxes for Employers
- Taxes for employees
- Probation
- Termination
- Severance pay
- Employees or Contractors
- Final Words
AgreementsOnboarding ProcessVisaMinimum WagePayroll CycleAnnual BonusHealth BenefitsWorking hours and overtimeLeavesSocial SecurityTaxes for EmployersTaxes for employeesProbationTerminationSeverance payEmployees or ContractorsFinal Words
Agreements
Agreements can be made in Nepali or English languages. It is recommended to have an agreement in writing to avoid future disputes in Nepal. Some of the common types of agreements in Nepal include:
- Employment agreements: specify the terms and conditions of employment, such as job responsibilities, working hours, compensation, benefits, and termination clauses.
- Service agreements: outline the terms and conditions for the provision of services, such as the scope of work, payment terms, and deadlines.
- Partnership agreements: define the terms and conditions of a partnership, such as the rights and obligations of partners, profit-sharing arrangements, and dispute resolution mechanisms.
- Rental agreements: specify the terms and conditions of a lease, such as the rent amount, duration, and maintenance responsibilities.
- Sale and purchase agreements: outline the terms and conditions of a sale or purchase, such as the price, payment terms, and delivery obligations.
Onboarding Process
Best practices for employee onboarding in Nepal include:
- Welcoming new employees and introducing them to their team and workplace.
- Orienting new employees about company policies, values, and culture.
- Providing training and development opportunities to help new employees acclimate to their roles.
- Collecting and verifying the mandatory documents for employment, such as citizenship certificates, educational certificates, and tax identification numbers.
Visa
Nepal offers various types of visas to foreign nationals, including:
- Tourist Visa: for those visiting Nepal for tourism purposes, valid for up to 150 days per calendar year.
- Business Visa: for those visiting Nepal for business purposes, valid for up to 5 years.
- Work Visa: for those employed by a Nepalese company or organization, valid for up to 1 year.
- Study Visa: for those studying in Nepal, valid for up to the duration of the course.
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Minimum Wage
The minimum wage in Nepal is NPR 15,000 per month as of 2023.
Payroll Cycle
In Nepal, the payroll cycle is typically monthly.
Annual Bonus
For employees who have serviced for more than 6 months, there is a customary 13th-month pay as an annual bonus in Nepal.
Health Benefits
There is no legislation in Nepal mandating employers to provide health benefits to their employees. Common health benefits offered in Nepal include:
- Medical insurance coverage for hospitalization and medical treatment
- Group accident insurance for employees
- Annual health check-ups and wellness programs
- Paid sick leave for employees who are unable to work due to illness or injury
- Access to on-site medical facilities or reimbursement for medical expenses.
Working hours and overtime
- Work hours: The standard workday is 8 hours, and the standard workweek is 6 days.
- Break: Employers are required to provide a 1-hour break during a standard workday.
- Overtime: Overtime pay must be at least 150% of the regular hourly wage and at least 200% on public holidays.
Leaves
Sick leaves
- Employees are entitled to 12 days of paid sick leave per year.
- If an employee is unable to work due to illness, they must notify their employer and provide a medical certificate.
Parental leaves
- Female employees are entitled to 52 days of maternity leave, paid by social security.
- Male employees are entitled to 15 days of paternity leave paid by social security.
- Employees may also be entitled to leave for adoption with the same maternity and paternity leave laws.
Annual leaves
- Employees are entitled to 18 days of annual leave per year.
Other leaves
- Employees who have been working for at least a year are entitled to 13 bereavement leaves.
Public Holidays (for the Calendar year 2023)
- 1 Jan: New Year's Day
- 22 Jan: Sonam Losar
- 30 Jan: Martyrs' Day
- 21 Feb: Gyalpo Losar
- 8 Mar: International Women's Day
- 14 Apr: Nepali New Year
- 22 Apr: Ramjan Edul Fikra
- 1 May: Labor Day
- 5 May: Buddha Jayanti
- 7 Sep: Nijamati Sewa Diwas
- 23 Oct: Maha Navami
- 24 Oct: Vijaya Dashami
- 14 Nov: Laxmi Puja
- 25 Dec: Christmas Day
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Taxes for Employers
Employers in Nepal are responsible for paying several taxes, including:
- Provident fund: The employer contribution rate is 10% of the employee's salary.
- Value Added Tax (VAT): VAT is at a standard rate of 13%.
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Taxes for employees
Income tax:
The income tax rate varies based on the employee's income level and marital status, with rates ranging from 1% to 36%.
- For single individuals
- Upto 4,00,000: 1%
- Next 1,00,000: 10%
- Next 2,00,000: 20%
- Next 13,00,000: 30%
- Above 20,00,000: 36%
- For Married individuals:
- Upto 4,50,000: 1%
- Next 1,00,000: 10%
- Next 2,00,000: 20%
- Next 12,50,000: 30%
- Above 20,00,000: 36%
Provident fund:
The employee contribution rate is 10% of their salary.
Probation
The probation period for employees is typically six months.
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Termination
In Nepal, an employee can be terminated under various conditions and circumstances. These include:
- Mutual agreement between the employer and employee
- Completion of the contract period or project
- Poor performance or incompetence
- Misconduct or violating company rules and regulations
- Ill health or incapacity
- Closure of the company or redundancy
- Criminal conviction
- Retirement or reaching the age of 58 years (60 years for government employees).
Severance pay
The law provides for a minimum severance payment of 30 days' wages for each year of service.
Employees or Contractors
In Nepal, misclassifying employees as contractors can result in penalties for the employer. Employers who misclassify employees as contractors may be subject to fines and legal action from the government, as well as liability for unpaid taxes, social security contributions, and other benefits owed to the employee. Additionally, employees who are misclassified as contractors may be entitled to back pay and other benefits that they were previously denied.
Final Words
Nepal has a set of employment norms that are designed to protect workers' rights and ensure a fair and equitable workplace. From minimum wage laws to parental leave provisions, there are regulations in place to protect the interests of employees. While there are still areas for improvement, such as the need for stronger laws around discrimination and harassment, Nepal is working towards ensuring better working conditions for all. For businesses looking to expand their operations, Nepal offers a growing market with a diverse range of opportunities across various sectors.
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