Introduction

The Nepalese Labour Act 2074 (2017) is the primary law governing labor-related matters in Nepal. Effective from 4th September 2017, it replaced the previous Labour Act of 1992 and establishes updated regulations for employers and employees.

Applicability of Nepalese Labour Act 2074

The new labor act applies to:

• Companies, private firms, cooperatives, and other organizations operating under Nepalese company laws.
• Foreign-registered entities engaged in business, sales, or promotional activities in Nepal.

Non-Applicability

The Act does not apply to:

• Civil Service
• Nepal Army, Nepal Police, Armed Police Force
• Working Journalists (unless specified in the contract)
• Entities under special economic zones (SEZs) with separate provisions

Headcount Requirement

The Nepalese Labour Act 2074 applies to all entities, regardless of the number of employees. However, a minimum of 10 employees is required for forming a collective bargaining committee or a labour relations committee.

Types of Employment under Nepalese Labour Act 2074

• Regular Employment: Hired for ongoing work and services.
• Work-Based Employment: Hired for a specific task or service.
• Time-Bound Employment: Hired for a fixed period.
• Casual Employment: Hired for 7 days or fewer in a month.
• Part-Time Employment: Hired for 35 hours or less per week with pay based on hours worked.

Employment Restrictions

The act strictly prohibits:

• Forced labor under coercion or threats.
• Employment of children (under 18 years).
• Discrimination based on gender, caste, religion, or other grounds.
• Unequal pay for equal work based on gender.

Provisions for Interns and Trainees

• Interns: Work as per educational institution guidelines, limited to 8 hours/day, 48 hours/week, entitled to safety and medical compensation.
• Trainees: Maximum 1-year training period, entitled to social security benefits.

Probation Period

The probation period lasts up to 6 months, after which the employment contract continues automatically if performance is satisfactory.

Working Hours and Overtime

• 8 hours/day, 48 hours/week
• Overtime: Maximum 24 hours/week, paid at 1.5 times regular pay
• Breaks: 30-minute break after 5 hours of work
• In-lieu leave for working on holidays

Wages and Remuneration

• Minimum Wage: NPR 17,300/month (as of August 18, 2023); NPR 13,893/month for tea estate workers.
• Annual Increment: Half-day salary for employees working at least 1 year.

Payment Terms:

• Within 3 days for short-term work
• At month-end for regular employees

Holidays and Leave

• Weekly Off: 1 day
• Public Holidays: 13 days (14 for women)
• Annual Leave: 1 day per 20 days worked
• Sick Leave: Fully paid for 12 days
• Maternity Leave: 14 weeks (60 days paid)
• Paternity Leave: 15 days paid
• Mourning Leave: 13 days
• Leave Accumulation: 90 days home leave, 45 days sick leave

Social Security Fund Contribution

Employers must contribute 20% of basic salary to the Social Security Fund, replacing the previous 18.33% requirement.

Disciplinary Actions

Penalties for misconduct include:

• Warning
• Deduction of one day’s pay
• Withholding promotion or increment
• Termination for serious offenses

Termination of Employment

Employees may be terminated due to:

• Voluntary resignation
• Completion of work-based contract
• Poor performance
• Health issues
• Retrenchment due to business downsizing or closures

Employee Retrenchment Compensation

Employers must compensate retrenched employees one month’s salary per year of service.

Settlement of Labour Disputes

• Individual claims: Settled through employer negotiation or via the Labour Office.
• Collective claims: Submitted by a bargaining committee or trade union.
• Mandatory Arbitration: Required for essential services and SEZ entities.

Right to Strike

Employees may strike if disputes remain unresolved after arbitration. A 7-day prior notice is mandatory.

Labour Authorities in Nepal

• Labour Office: Handles complaints and disputes.
• Labour Department: Supervises compliance.
• Labour Court: Deals with serious violations like forced labor, workplace injuries, and disputes.

Labour Court Jurisdiction

• Cases must be resolved within 90 days.
• Appeals can be made to the Supreme Court within 35 days.

Disclaimer

S & S Jurists, a leading corporate law firm in Nepal, provides this article for informational purposes only. It does not constitute legal advice. For professional legal assistance regarding the Nepalese Labour Act 2074, please contact us.