What does Basic Remuneration mean?

Basic remuneration refers to the salary that a worker receives for their employment. This term also encompasses any salary increments awarded after the completion of one year of employment. The basic remuneration is defined in the section 2 (a) of Labour Act, 2074.

Labour Remuneration Rights

The Constitution of Nepal, article 34 (a) and the Labor Act, 2074 chapter 8 ensures the right of laborers to appropriate remuneration, facilities and contributory social security. Every worker has the right to receive payment and benefits starting from the day they begin their employment. The payment and benefits a worker is entitled to must be clearly stated in the employment contract and cannot be less than the minimum standards set by the relevant law and its regulations. Unless there is a collective agreement between the employer and the worker that states otherwise, the worker’s current payment and benefits cannot be reduced.

Rules for Timely Payment of Labour Remuneration

Section 35 of the Labour Act, 2074 states about the payment of remuneration as follows:

• Employers must pay workers according to the schedule set in the employment contract. If the contract does not specify a payment time, the employer decides when payment is made.
• For workers employed for less than a month, payment must be made within three days after the work is finished.
• For casual workers, payment must be made immediately after the completion of their work.
• Regardless of these rules, the maximum interval between wage payments must not exceed one month.

Right to Annual Salary Increment

Any worker who has completed one year of service is entitled to receive an annual increase in their salary (grade). This increment must be at least equal to half a day’s basic monthly wage.

In simple terms, after every year of continuous service, employees must get a yearly raise in their pay, with the minimum increase set by law.

Right to annual salary increment is ensured by section 36 of the Labour Act, 2074.

Entitlement to Festival Allowance for Labour

The Labour Act, 2074 ensures festival allowance in section 37.

• Every worker is entitled to receive an amount equal to one month’s basic salary each year as a festival allowance, which corresponds to the festival celebrated according to their religion, culture, or tradition.
• A worker can submit a written request to receive this festival allowance once in a fiscal year, timed with their main religious or cultural festival. If no such request is made, the allowance will be paid during the Dashain festival by default.
• Workers who have not completed a full year of service by the payment date will receive a proportionate amount of the festival allowance based on the length of their service.

Deductions from Employee Remuneration

Salary of an employee can be deducted only as per section 38 of the Labour Act, 2074.

Employers are generally prohibited from deducting any amount from a worker’s pay except in specific situations. Deductions are allowed only for:

• Legally required taxes and fees
• Contributions to provident funds, insurance, or other social security schemes
• Amounts ordered by courts, quasi-judicial bodies, or arbitration
• Charges for services or facilities provided by the employer, as prescribed
• Pay for periods when the worker is absent from work
• Loss or damage to the employer’s property caused intentionally or recklessly by the worker, up to the recorded or production cost
• Deductions specified in collective agreements
• Trade union membership fees
• Repayment of loans or advances given by the employer

When making deductions for reasons other than taxes and social security contributions, these should be taken from the remaining pay after the mandatory deductions for tax and social security have been made.

The law also sets out limits and procedures for these deductions, which must be followed as prescribed. If a worker leaves or passes away before all deductions are made, the outstanding amounts can be recovered from any money owed to them. If the amount still cannot be recovered after this, the employer must notify the worker’s legal heir, and if unpaid after the notice period, the employer may seek court recovery within a set timeframe.

Payment During Reserve Period

Even when a labor is held in reserve period, they are entitled to remuneration pursuant to section 39 of the Labour Act, 2074.

If a worker is placed on reserve status under the law meaning their work is temporarily suspended due to special circumstances the employer must pay them half of their usual salary until they return to work. The worker is not required to be present at the workplace during this reserve period unless the notice about being held in reserve specifically asks for attendance.

In simple terms, employees put on reserve must receive 50% of their regular pay and generally do not need to come to work unless told otherwise.

Basic Wage

The Ministry of Labour, Employment and Social Security, Government of Nepal, pursuant to Section 106 of the Labour Act, 2017 (2074), has determined the minimum wages for workers other than those employed in tea estates, effective from 1 Shrawan 2082. Accordingly, the minimum monthly wage has been fixed at NPR 19,550 as prescribed below:

Other employee rights related to remuneration:

a. Right to Equal Remuneration for Work of Equal Value

Employees performing the same job or work of equal value shall be entitled to equal remuneration. Employers shall not discriminate in remuneration on grounds of sex, gender, caste, ethnicity, religion, disability, political opinion, national origin, or any other protected characteristic. Any difference in pay between employees performing comparable work must be objectively justifiable, documented, and made available to the competent authority on request. This is ensured by section 7 of the Labour Act, 2074.

b. Right of Trainee Labour to Minimum Remuneration and Social Security

Pursuant to section 18 (3) of Labour Act, 2074 trainees are entitled to minimum remuneration and social security benefits. The right of trainee to minimum remuneration A person engaged as a trainee shall be entitled to at least the statutory minimum remuneration applicable to comparable work. In addition, employers must ensure that trainees receive statutory social-security entitlements to which they are eligible under prevailing law, including to the extent prescribed by law sick leave, gratuity, provident fund contributions, and insurance coverage. Any training arrangement that purports to waive or diminish a trainee’s statutory entitlements shall be void to the extent inconsistent with applicable law.

c. Right of Part-Time Workers to Pro-Rata Remuneration and Benefits

Remuneration for part-time workers shall be calculated on a pro-rata basis according to hours actually worked or as otherwise specified in the employment contract. In no event shall the hourly or aggregate pay of a part-time worker performing the same type and level of work be less than the hourly equivalent paid to full-time workers performing comparable duties. Part-time workers shall also receive proportionate social-security benefits and other statutory entitlements unless a different scheme is lawfully prescribed. This is ensured by section 63 of the Labour Act, 2074.

d. Prohibition of Agreements below Statutory Minimum

No person may lawfully enter into an employment contract that provides remuneration below the statutory minimum prescribed by the Ministry. Any term of an agreement that seeks to reduce or exclude an employee’s entitlement to the minimum wage or statutory social-security benefits shall be void and unenforceable. Section 3 of the Act provides that remuneration and benefits must not be lower than those prescribed by the Act, the Rules, or the directives issued by the Government of Nepal.

e. Employer Obligations: Documentation and Transparency

Employers shall provide every worker, at the time of engagement and with each pay, a written appointment letter and pay slip respectively, showing the breakdown of remuneration (basic wage, dearness allowance, hours worked where applicable), and any statutory or contractual deductions or contributions. Employers must maintain accurate records of wages, hours worked, and contributions for the period required by law and make such records available to competent authorities and the worker on request.

f. Remedies and Enforcement

If the rights relating to remuneration are infringed by the employer, the employee have right to remedies under section 9 of the Act. Workers who believe their remuneration or entitlements have been withheld or reduced in contravention of law may bring a complaint to the competent labor authority or pursue remedies provided under the Labour Act and related regulations. The competent authority may investigate, order arrears of wages and benefits, and impose such penalties as are provided by law.

g. Additional remuneration for overtime work

When a labourer is required to work overtime, the employer must pay them at a rate of 1.5 times their basic remuneration for regular working hours. (This provision is applicable to part-time workers as well.) This is ensured by section 19 (for part-time workers) and 31 of

However, this provision does not prevent a collective agreement or an employment contract for managerial-level employees from providing alternative benefits instead of the additional overtime pay.

h. Maternity Leave Remuneration for Female Workers

Pursuant to section 45 of the Act, a female worker taking maternity leave will receive full pay for the first sixty days of leave, but will not be paid for any additional leave beyond that period.