Employment & Labour Law
Employment and labour law in Nepal governs employer-employee relationships under the Labour Act 2074 and Social Security Act 2074. It affects businesses, foreign investors, and employees across all sectors. Without specialist guidance, employers face SSF penalties, wrongful termination claims, and labour audit sanctions. Sunshine Law Firm provides comprehensive employment legal services across Nepal.
What does employment and labour law cover in Nepal?
Employment and labour law in Nepal governs the legal relationship between employers and employees, establishing rights, obligations, and standards for workplace conduct. Under the Labour Act 2074 (2017) and Social Security Act 2074 (2017), this area regulates employment contracts, working conditions (8 hours daily, 48 hours weekly), wages, leave entitlements, social security contributions, and termination procedures. The Department of Labour and Occupational Safety (DoLOS) enforces compliance through inspections and work permit administration.
The scope encompasses regular, fixed-term, casual, and part-time employment classifications; Social Security Fund (SSF) contributions totaling 31% of basic salary (20% employer, 11% employee); foreign worker permits requiring local unavailability demonstration; and collective bargaining with trade unions. The Labour Court adjudicates disputes including wrongful termination, discrimination, and benefit claims. Employers must provide gratuity (8.33% monthly), provident fund (10% monthly), and accident insurance (NPR 700,000 minimum).
This area of law affects businesses of all sizes, foreign investors, and employees in Nepal and requires specialist legal guidance from a qualified lawyer.
Who needs employment and labour legal advice in Nepal?
Anyone who employs staff, manages workplace disputes, or seeks to ensure compliance with labour regulations in Nepal needs employment and labour legal advice.
- Businesses and employers
- Foreign investors and multinational companies
- Employees facing workplace issues
- Companies undergoing restructuring
Failure to secure proper legal guidance can result in SSF non-compliance penalties, reinstatement orders for unlawfully terminated employees, double indemnity for wrongful deductions, and criminal liability for bonded labour or safety violations causing death.
Key laws governing employment and labour in Nepal
Employment and labour in Nepal are governed by the Labour Act 2074 (2017), along with related legislation and regulations.
- • Labour Act 2074 (2017)
- • Social Security Act 2074 (2017)
- • Labour Rules 2075 (2018)
- • Foreign Investment and Technology Transfer Act 2075 (2019)
- • Evidence Act 2031 (1974)
The Labour Court adjudicates employment disputes, while the Supreme Court of Nepal establishes precedents through appellate review. The Nepal Law Commission reviews legislative updates affecting labour standards.
Why clients choose Sunshine Law Firm for employment and labour law
Our lawyers have advised clients on SSF compliance, foreign work permit applications, labour disputes, and termination matters across manufacturing, technology, hospitality, and development sectors in Nepal.
Sunshine Law Firm maintains active standing with the Nepal Bar Council and maintains professional relationships with the Department of Labour and Occupational Safety and Social Security Fund officials. Our team has specific expertise in Labour Act 2074 compliance, SSF contribution structuring, and foreign worker permit procedures under the Foreign Investment and Technology Transfer Act.
We serve a diverse client base including domestic startups establishing HR frameworks, multinational corporations navigating foreign executive permits, and employers defending against wrongful termination claims. Our approach emphasizes proactive compliance—preventing labour audits, disputes, and penalties through proper documentation and policy implementation.
We prioritize practical workforce solutions that balance employer operational needs with employee rights protection, ensuring sustainable employment relationships and regulatory compliance.
Frequently Asked Questions
A business needs an employment lawyer when establishing HR policies, drafting employment contracts, facing labour audits, managing employee terminations, applying for foreign work permits, or defending against labour disputes. Early engagement ensures SSF compliance and prevents costly penalties.
Under the Labour Act 2074, all employment contracts must be in writing and specify position, job responsibilities, remuneration, working hours, leave entitlements, probation period (maximum 6 months), and termination terms. Verbal agreements are legally insufficient and expose employers to penalties.
The SSF requires total contributions of 31% of basic salary: employees contribute 11% (10% provident fund + 1% social security tax), and employers contribute 20% (10% provident fund + 8.33% gratuity + 1.67% medical insurance). Contributions are mandatory from the first day of employment.
Employers must first advertise vacancies nationally to demonstrate local unavailability, then apply to DoLOS for work permits. Foreign-invested companies can "record" up to 3 executive positions without full permit procedures. Short-term technical experts (under 3 months) qualify for expedited recording. Work visas are issued by the Department of Immigration after permit approval.
Termination requires valid grounds (misconduct, incompetence, redundancy) and written notice: 1 day for employment up to 4 weeks, 7 days for 4 weeks to 1 year, and 30 days for over 1 year. Severance pay equals one month's salary per year of service. Retrenchment requires 30-day notice to the Labour Office and trade unions.
Employees are entitled to: 14 weeks maternity leave (60 days fully paid by employer, 38 days funded by SSF); 15 days paternity leave; 12 days annual sick leave (accumulable to 45 days); home leave (1 day per 20 days worked, accumulable to 90 days); 13 days public holidays; and 13 days mourning leave for family bereavement.
Gratuity is calculated at 8.33% of basic monthly salary, deposited monthly into the SSF from the employee's first day of work. Upon separation after completing 5 years of service, employees receive accumulated gratuity plus interest. Employees with less than 5 years service receive proportional amounts. Gratuity is payable upon resignation, retirement, termination (except misconduct), or death.