Labour Law in Nepal
Labour Law in Nepal
Labour Law in Nepal
2017
1. Introduction
The Labour Act, 2017 (“Labour Act“) came into effect on 04 September 2017 (2074-05-19)
replacing the Labour Act, 1992 (“Previous Act“), Industrial Trainee Training Act, 2039 and
Retirement Fund Act, 2049. The major provisions of the Labour Act are briefly set out below:
Applicability of the Labour Act
Note: The Labour Act is applicable to all entities regardless of headcounts. The Previous Act
was only applicable to entities where 10 or more employees were engaged.
2. Types of employment
The Labour Act has categorized different types of employment as explained in the below table:
3. Term of probation
The Labour Act provides for a maximum of 6 (six) months of probation period to evaluate the
work of an employee. If the work is not found satisfactory, the term of such employee can be
terminated. The employment contract with the employee under probation, if not terminated, shall
be deemed automatically valid after the end of provided probation period.
b) The interns should not be engaged at work exceeding 8 (eight) hours a day and 48 (forty-
eight) hours a week.
c) They are entitled to health and safety arrangements, medical expenses and compensation in
case of an injury at work and deemed as a regular employee if engaged in work other than
prescribed in the agreement between educational institution and entity.
4.2 Trainee
a) A trainee employee may be appointed for a period of training not exceeding 1 (one) year
unless otherwise prescribed by law.
b) All trainees shall be entitled to social security benefits including provident fund, gratuity and
minimum remuneration.
c) The employer is not obliged to appoint the trainee as a regular employee upon the completion
of the training period. However, if such trainee is appointed for work, probation period will not
be applicable.
5. Working hours
Note: 30 minutes’ break must be provided after 5 (five) hours of work where such break is also
considered as working hour.
6. Remuneration
6.1 Minimum remuneration/wage: The minimum remuneration was revised by the Ministry of
Labour, Employment and Social Security on 03 May of 2021. The new minimum remuneration
applicable from 16 July 2021 is NPR 15,000 per month. Overtime remuneration must be 1.5
times the regular remuneration.
6.2 Increment of the remuneration: Annual increment is applicable to an employee who has
worked for at least 1(one) year and must be at the rate of half-day salary of the monthly basic
remuneration.
6.3 Payment of the remuneration:
The payment of the remuneration must be done on the following basis:
The major provisions of the Social Security Act, Social Security Regulations and Social Security
Scheme Operational Directives are as follows:
Warning;
Deduction of one day’s remuneration;
Withholding of Annual Salary Increment for one year or Withholding Promotion for
one year;
Withholding of Annual Salary Increment for one year or Withholding Promotion for
one year;
Termination upon misconduct; or
Employment termination based on the seriousness of the offence.
If due to the harsh economic conditions, there is a problem in the operation of the
industry as usual;
If there is an increment in the number of employees as a result of the merger; or
If, due to any other situations/circumstances, the enterprise has to be a closed party or
wholly.
11.2 Process of retrenchment
The employer should provide the details of retrenchment prior to 30 (thirty) days by specifying
the reasons for retrenchment, possible date of retrenchment and number of employees to be
provided to the Labour Office and authorized trade union or labour relation committee (if any).
Witness examination;
Seek necessary explanation from respondent treating it as a written statement;
The Labour Court, based on application or nature of the case, suo moto may give an
order to summon any party during the hearing even though such party has been made
neither defendant nor respondent in the case and if necessary make him a party to the
case;
Inspect places of work relating to the dispute;
If an application filed by any party to the case to keep a case sub judice in the Labour
Court in pending or give continuity till it is finally decided and disposed is found
reasonable, notwithstanding the state of the case, the Labour Court may issue an
interlocutory order against any of the parties to stop any act for a specified time or
give continuity to any activity with or without fixing a period;
Confirm or invalidate or alter any directive or decision or order given by the Labour
Office or an employer;
The Labour Court, when carrying out the court proceeding and disposing of the case,
shall be the powers as prescribed over the matters specified in the Labour Act or the
Regulations made thereunder and in other matters, it shall have the powers equivalent
to that of any other District Court.
13.3 Enforcement of decision
The case must be resolved within 90 (ninety) days of filing the application in the Labour Court.
The Government of Nepal is responsible for enforcing the decision provided by the Labour
Court.
14.1 Labour Department can impose the following sanctions to the Employer on the
following nature of non-compliance:
14.2 Labour Office can impose the following sanctions to the employer on the following
nature of non-compliance:
14.3 Labour Court can impose the following sanctions to the Employer on following nature
of non-compliance: