Labour Law Compliance Checklist in Nepal: A Practical Guide for Employers (2026)

Labour Act, 2074 (BS)

Governs employer-employee relations in the non-governmental sector, including employment, remuneration, leave, employee conduct, occupational safety and health, and termination.

Labour Rules, 2075 (BS)

Prescribes the detailed procedures, forms, and compliance requirements for implementing the Labour Act.

Contribution-Based Social Security Act, 2074 (BS)

Governs the contribution-based social security system applicable to the non-governmental sector, including social security coverage and benefits for employees.

Contribution-Based Social Security Rules, 2075 (BS)

Prescribes the procedures and requirements for implementation of the contribution-based social security scheme.

Bonus Act, 2030 (BS)

Governs payment and distribution of bonus from net profit, including applicable bonus threshold and allocation rules.

Trade Union Act, 2049 (BS)

Prescribes the formation, operation, and rights of trade unions in the non-governmental sector.

Sector-Specific Laws / Gazette Notices

Prescribes labour-related requirements for certain industries, including those operating under special legal regimes such as Special Economic Zones.

Judicial Pronouncements

Interprets the application of labour laws through decisions of the Supreme Court of Nepal and other competent courts.

Nature of Employment

(Act, Section 10; Rules, Rule 3)

The Labour Act recognises regular, work-based, time-based, casual, and part-time employment. Classification must reflect the actual nature, duration, and hours of work.

Determine the correct employment category before hiring. Record the employment type in the appointment letter or employment contract and retain the classification basis in the employee file.

Employment Contract

(Act, Sections 11 and 12; Rules, Rule 4)

Contracts must be in writing and consistent with the nature of employment. They must include remuneration, benefits, employment conditions, employment type, main duties, position, workplace, date and place of agreement, effective date, and other service conditions.

Issue a written employment contract covering all required particulars listed in the Act.

Probation

(Act, Section 13)

Probation may be applied only where permitted by law and must not exceed

6 months

. If employment is not ended during probation, the employment relationship continues automatically.

Clearly state the probation period in the employment contract. Ensure it does not exceed 6 months.

Internship

(Act, Sections 16 and 17)

Interns may be engaged through an educational institution under an approved curriculum. They must not work beyond 8 hours per day or 48 hours per week. Interns used as regular employees may be reclassified as such.

Maintain internship agreement, curriculum, attendance record, safety record, and payment record. Do not use interns as regular employees without proper legal classification.

Traineeship

(Act, Section 18)

Trainee employees may be engaged for learning with training, generally not exceeding

one year

. They must receive minimum remuneration and applicable benefits. If retained by the same employer, probation does not apply again.

Engage trainees through proper arrangements, provide minimum legal remuneration and benefits, monitor the training period, and do not impose fresh probation if trainees are later retained as employees.

Managerial Employees

(Act, Section 171)

Managerial employees include those appointed at manager level or above with authority to evaluate, supervise, control, or manage others. Separate employment conditions may be prescribed.

Classify managerial employees based on actual authority and responsibility. Maintain separate employment agreements or role descriptions covering designation, authority, duties, remuneration, benefits, confidentiality, and termination conditions.

Labour Permit

(Act, Sections 22–24; Rules, Rules 7–9, 13)

An employer must obtain a labour permit from the Department of Labour and Occupational Safety before engaging any foreign national. A foreign national may be employed only where the required skilled employee is unavailable among Nepali citizens. Foreign employees must not exceed

5% of total employees

except in exempted cases. Before applying, the employer must publish a vacancy notice in a national daily newspaper (except in specified projects).

Obtain a labour permit from the Department before engaging any foreign national. Publish a vacancy notice in advance (unless legally exempt). Ensure foreign employees do not exceed 5% of total employees unless a specific legal exemption applies.

Employment Conditions

(Act, Section 27)

Remuneration, service conditions, and benefits of a foreign employee must be set out in a time-based or work-based agreement and must not fall below the statutory minimum.

Use a time-based or work-based contract and ensure compliance with minimum legal standards.

Language of Agreement

(Act, Section 25)

The employment agreement must be in a language understood by the foreign employee, or in English.

Prepare the foreign employee agreement in English.

Contract Duration

(Act, Section 27; Rules, Rules 11–12)

If no period is specified, a foreign employment agreement is valid for up to

3 years

. Highly skilled technical employees may receive approval for up to

5 years

.

State a clear contract duration aligned with the work permit issued by the Department.

Licensed Labour Supplier

(Act, Sections 58–60; Rules, Rules 27–29)

Labour supply must be made through a licensed supplier.

Engage supplied employees only through a licensed labour supplier. Retain the supplier's licence copy, licence number, validity period, and permitted work category in the employment file.

Written Labour Supply Agreement

(Act, Sections 61–62; Rules, Rules 28, 31)

The arrangement must state the work category, number of employees, work location, remuneration, benefits, social security, insurance, safety, and payment responsibility.

Execute a written labour supply agreement before engagement, with all obligations clearly allocated.

Minimum Remuneration and Benefits

(Act, Sections 61–62; Rules, Rule 31)

Supplied employees must receive at least minimum remuneration, benefits, and legal facilities.

Verify attendance, wage sheets, overtime payment, and benefit payment before approving supplier invoices.

Internal Transfer

(Act, Section 109)

Internal transfer must not be unfair, contrary to law, contrary to service by-laws, or result in unlawful reduction of remuneration, benefits, work level, or work nature.

Make internal transfers only for genuine business reasons. Document the transfer and verify that no statutory benefit or grade is reduced.

Transfer to Another Establishment

(Act, Section 109; Rules, Rule 59)

Requires written employee consent and a transfer agreement covering post, remuneration, benefits, social security, leave balance, accrued benefits, original joining date, and service continuity.

Obtain written consent. Execute a written transfer agreement that fully documents service continuity provisions.

Transfer Benefits

(Act, Section 109; Rules, Rule 60)

Where an employee is transferred to a workplace outside their existing place of work or permanent residence, they are entitled to travel, transport of personal goods, accommodation support, and applicable transfer-related facilities.

Provide all applicable transfer-related facilities and maintain records.

HR Manual

(Act, Sections 3 and 108)

The HR Manual must cover appointment, employment categories, working hours, overtime, leave, remuneration, increment, festival allowance, social security, transfer, grievance, misconduct, disciplinary action, suspension, resignation, termination, retrenchment, and final settlement. It must not provide standards lower than the Labour Act, Labour Rules, or applicable collective agreement.

Issue and maintain an updated HR Manual covering all required matters.

Registration and Circulatios

(Act, Section 108; Rules, Schedule 10)

The HR Manual must be registered with the concerned Labour Office and made available to employees.

Register the HR Manual with the Labour Office. Circulate it to employees via physical copy, email, HR portal, or notice board.

Working Hours

(Act, Section 28; Rules, Rule 16)

Working hours, including a 30-minute break after every 5 continuous hours, must not exceed

8 hours per day

and

48 hours per week

.

Fix normal working hours at not more than 8 hours per day and 48 hours per week. Provide 30 minutes' rest after 5 continuous hours of work.

Overtime

(Act, Sections 30 and 31)

Overtime may be required only up to

4 hours per day

and

24 hours per week

. Overtime must be paid at

1.5 times the basic remuneration

. A lawful substitute facility may be agreed upon in the employment agreement instead.

Limit overtime to 4 hours per day and 24 hours per week. Pay overtime at 1.5 times basic remuneration, unless a lawful substitute is expressly stated in the employment agreement.

Minimum Remuneration

(Act, Section 34)

Every employee must receive at least the government-prescribed minimum remuneration.

Pay every employee at least the latest minimum remuneration prescribed by the Government of Nepal. Review payroll whenever minimum remuneration is revised.

Payment Timeline

(Act, Section 35)

Remuneration must be paid at the time specified in the employment agreement. Where no time is specified, the employer fixes the payment date. Employees engaged for less than one month must be paid within 3 days of completing work. Casual employees must be paid immediately. The payment interval must never exceed one month.

Pay within the contractually or employer-fixed time. Ensure the payment interval does not exceed 1 month. Pay casual employees immediately upon completion of work.

Annual Increment

(Act, Section 36)

Upon completing one year of service, a monthly-paid employee is entitled to an annual grade increment equivalent to

one-half day's basic remuneration

per year. Proportionate increment applies for service less than one full year, where applicable.

Provide annual grade increment as required and calculate proportionately for eligible periods of less than one year.

Festival Allowance

(Act, Section 37)

Festival allowance equivalent to

one month's remuneration

is payable annually, generally at Dashain or at another festival chosen by the employee.

Pay festival allowance equal to one month's remuneration once per year to eligible employees.

Deductions

(Act, Section 38; Rules, Rule 19)

Remuneration may be deducted only for legally permitted reasons: tax, social security contribution, court or authority order, absence, approved facilities, loss caused by bad faith or negligence, union fee, or advance or loan.

Make deductions only for legally permitted reasons and maintain a deduction register.

Weekly Leave

(Act, Section 40)

1 paid weekly leave day every week.

Provide 1 paid weekly leave day every week.

Public Holidays

(Act, Section 41)

13 paid public holidays per year, including May Day, for all employees. Female employees are entitled to 14 paid public holidays, including International Women Labour Day.

Track and implement government-published holiday lists each year.

Substitute Leave

(Act, Section 42)

Employees who work on a weekly leave day or public holiday due to continuous or unavoidable work are entitled to substitute leave.

Provide substitute leave where employees work on weekly leave or public holidays due to continuous or unavoidable work.

Home Leave

(Act, Section 43)

1 day of paid home leave for every 20 days worked (subject to statutory exceptions for educational institutions).

Provide paid home leave at 1 day for every 20 days worked.

Sick Leave

(Act, Section 44)

12 days paid sick leave per year (proportionate for service of 1 year or less). A medical certificate is required if sick leave exceeds 3 consecutive days.

Provide 12 days paid sick leave per year. Obtain a medical certificate for sick leave exceeding 3 consecutive days.

Maternity Leave

(Act, Section 45; Rules, Rules 17–18)

Female employees are entitled to

14 weeks' maternity leave

, with full remuneration for

60 days

. Leave must start at least 2 weeks before the expected delivery and continue at least 6 weeks after delivery.

Ensure compliance with timing and remuneration requirements. Note SSF coverage may apply.

Maternity Care Leave

(Act, Section 46)

Male employees are entitled to

15 days' paid maternity care leave

when their wife is going to deliver a child.

Provide 15 days' paid leave to eligible male employees.

Mourning Leave

(Act, Section 47)

13 days of mourning leave with full remuneration in legally covered circumstances.

Implement mourning leave policy aligned with the Act's specified circumstances.

Accumulated Leave Payment

(Act, Sections 48–49)

Home leave may be accumulated up to

90 days

and sick leave up to

45 days

. Payment for excess accumulated leave must be made at the end of each year.

Track leave accumulation and pay for excess at year-end. Settle all eligible leave upon separation.

Social Security Contributions

The total monthly contribution is

31% of basic remuneration

: 20% employer contribution + 11% employee contribution. This must be deposited through the Social Security Fund (SSF) portal by the

15th of the following Nepali month

.

Deduct 11% of the employee's basic remuneration and add 20% employer contribution each month. Deposit by the applicable monthly deadline.

SSF Registration and Records

Employees must be registered with the Social Security Fund. Benefits are provided under applicable schemes including medical treatment, health and maternity protection, accident and disability protection, dependent family protection, and old-age protection.

Register all eligible employees with the SSF. Maintain employee-wise SSF records.

Safety and Health Committee

(Act, Section 74; Rules, Rules 34–37)

Mandatory in enterprises employing

20 or more employees

Constitute a Safety and Health Committee if 20 or more employees are employed.

Labour Relation Committee

(Act, Section 111; Rules, Rule 61)

Mandatory in enterprises employing

10 or more employees

Constitute a Labour Relation Committee if 10 or more employees are employed.

Collective Bargaining Committee

(Act, Section 116)

Mandatory in enterprises employing

10 or more employees.

Constitute a Collective Bargaining Committee if 10 or more employees are employed.

Scope of Audit

(Act, Section 100; Rules, Rule 56)

The Labour Rules require enterprises to prepare a labour audit report in the prescribed format, covering employment contracts, wages, working hours, overtime, leave, benefits, social security, insurance, labour supply, OSH, committees, and internal regulations.

Review all relevant records across the covered areas during each audit.

Labour Audit Report

(Act, Section 100; Rules, Rule 56 and Schedule 10)

The audit must be conducted by the end of

Poush

every year. While not required to be submitted routinely, it must be produced before the Labour Office or Labour Inspector when demanded or during inspection.

Complete the labour audit by the end of Poush each year. Retain the audit report and submission proof. Produce it on demand during any inspection.

Grounds for Lay-off

(Act, Section 15)

Lay-off may be applied only where the employer cannot continue work due to lawful and genuine circumstances such as interruption of operations, shortage of essential resources, or financial difficulty.

Apply lay-off only on lawful and genuine grounds. Document the reason in writing.

Lay-off Notice

(Act, Section 15; Rules, Rule 5)

Before placing employees on lay-off, the employer must issue written notice stating the reason, expected period, and affected employees' details.

Issue written lay-off notice to affected employees and maintain individual notice records.

Remuneration During Lay-off

(Act, Section 39; Rules, Rule 5)

During lay-off, the employee must be paid

50% of their remuneration

until work resumes.

Pay 50% of the employee's remuneration during the lay-off period.

Grounds for Retrenchment

(Act, Section 145)

Retrenchment may be carried out only on lawful grounds: financial difficulty, partial or full closure, reduction of work, merger-related excess manpower, or other valid operational reason. Prior notice must state the reason, probable date, and likely number of affected employees.

Confirm a lawful ground before proceeding. Issue proper prior notice to concerned parties.

Selection of Employees for Retrenchment

(Act, Sections 145–146)

The employer must consult with the union or Labour Relation Committee on possible alternatives and selection criteria. Selection should generally consider: foreign employees first, then employees with higher disciplinary records, weaker performance, and last-appointed employees in the same work category.

Conduct consultation, prepare minutes, and maintain a documented, fair selection matrix.

Final Settlement on Retrenchment

(Act, Section 145)

A retrenched employee must receive

one month's basic remuneration for each completed year of service

(proportionate for service less than one year), unless entitled to unemployment allowance under social security law. All unpaid salary, leave encashment, and other dues must also be settled.

Check SSF unemployment allowance entitlement first. If not entitled, calculate and pay retrenchment compensation. In all cases, settle all outstanding dues.

Misconduct Categories

(Act, Sections 130–134)

Misconduct includes: unauthorised absence, repeated late attendance, refusal to follow lawful instructions, negligence, unlawful strike, misuse of employer property, theft, fraud, bribery, financial misappropriation, violence, breach of confidentiality, false documents, intoxication during work, or repeated misconduct.

Identify the specific act of misconduct and its classification before initiating action. Keep complaint records, attendance records, witness statements, and documentary evidence.

Disciplinary Process

(Act, Section 135)

The employee must be informed of the allegation and possible punishment and must be given at least 7 days to submit clarification before punishment is imposed.

Issue a written show-cause notice stating the allegation, facts, evidence, and possible punishment. Allow at least 7 days for the employee's response.

Decision-Making Authority

(Act, Sections 135 and 137)

The disciplinary decision must be made by the legally authorised person generally the chief executive or the managerial-level officer authorised under the service by-laws.

Confirm the authorised decision-maker before commencing action. Keep delegation records.

Timeline, Implementation, and Communication

(Act, Sections 137 and 138)

Action must commence within 2 months of knowledge of misconduct and be decided within 3 months of commencement. The final decision must be reasoned and communicated to the employee.

Start action within 2 months. Complete the decision within 3 months. Prepare a reasoned written decision, serve it to the employee, and retain the complete disciplinary file.

General Grounds

(Act, Sections 139–147)

Termination may occur only on lawful grounds: resignation, expiry of time-based employment, completion of work-based employment, end of casual employment, poor performance, health grounds, compulsory retirement, or serious misconduct.

Identify the correct legal ground before initiating termination.

Resignation

(Act, Section 141)

An employee may resign by giving notice as required in the employment agreement. If the employee fails to give required notice, the employer may deduct remuneration equivalent to the notice period.

Obtain written resignation. Verify the applicable notice period, issue an acceptance letter, complete handover, and maintain all records.

Poor Performance

(Act, Section 142)

Termination for poor performance must be supported by performance evaluation and the employee's opportunity to improve or clarify.

Maintain performance review records, improvement notices, show-cause notices, and responses before proceeding.

Health Grounds

(Act, Section 143)

Termination on health grounds must be based on medical recommendation and a consideration of whether suitable alternative work can be provided.

Obtain medical recommendation. Assess alternative work options. Maintain medical report, notice, and decision records.

Compulsory Retirement

(Act, Section 147)

Applies upon completion of the statutory retirement age or the retirement age fixed under approved service by-laws.

Verify the applicable retirement age, issue retirement notice, complete final settlement, collect handover, and maintain all records.

Notice Requirements

(Act, Section 144)

Except in termination for serious misconduct, notice must be given based on length of service: 1 day (up to 4 weeks' service), 7 days (4 weeks to 1 year), 30 days (1 year or more). If notice is not given, salary equivalent to the notice period must be paid in lieu.

Calculate and provide the correct notice period or payment in lieu.

Termination for Serious Misconduct

(Act, Sections 130–138)

Permitted only where the misconduct falls within the category punishable by removal from service. The full disciplinary process must be followed: show-cause notice, 7 days for clarification, action within 2 months of knowledge, decision within 3 months of commencement.

Follow the complete disciplinary process before issuing a termination order for serious misconduct.

Final Settlement

(Act, Sections 38, 52, 144, and 145)

All payable salary, benefits, leave encashment, compensation, notice pay (where applicable), and other lawful dues must be settled within

15 days of termination.

Prepare final settlement within 15 days of termination. Issue an experience certificate. Pay all outstanding dues.