Hire Employees in Nepal

Two routes exist. Registering a Nepali company gives you direct employment and permit sponsorship, and is quicker than much of the region at one to three months, but commits you to corporate tax and annual filings.

An Employer of Record removes that lead time. The EOR is the legal employer in Nepal, runs payroll, SSF contributions, tax withholding and festival expense, and carries the employment liability, while day-to-day direction stays with you.

Engaging someone as a contractor is a third option, but only where the work is genuinely independent. A contractor sits outside the SSF entirely, so reclassification brings back contributions on both sides, see the risk check further down this page.

Nepal has consolidated what most markets keep separate. The Social Security Fund replaced the provident fund, gratuity and accident insurance with one contribution. An enrolled employer runs SSF or the legacy PF arrangement, never both, and existing balances must transfer, provident fund within six months of enrolment and gratuity within two years.

The decision that actually drives cost is the pay structure. SSF runs on basic salary, and so do festival expense, overtime and severance. A CTC package with basic set at 10% to 15% of gross looks efficient but simultaneously under-funds four separate entitlements, and it is the most common finding in Nepali labour disputes.

Break-even rule of thumb: EOR fees begin to exceed the running cost of a small Nepali company somewhere between 15 and 20 employees. Model both before committing, see EOR vs Entity for the full comparison, and plan any later migration so employees keep seniority.

The Social Security Fund takes 31% of basic salary. 20% from the employer and 11% from the employee. The employer share breaks down as 10% to the pension fund, 8.33% as gratuity and 1.67% as an additional contribution. That single payment funds four schemes: medical, health and maternity at 1%, accident and disability at 1.4%, dependent family protection at 0.27%, and old-age protection at 28.33%.

Contributions run on basic salary, not gross. Allowances are excluded. This is the structural point that governs Nepali payroll: the same headline package produces very different employer cost depending on how much of it is designated basic.

And the effect is not limited to SSF. Festival expense, overtime rates and severance are all calculated on basic too. Setting basic at a low share of a CTC package therefore under-pays SSF, festival expense, overtime and severance at the same time, four exposures created by one decision.

Festival expense is effectively a 13th month and is often missed by foreign employers. Every regular employee receives one month of basic remuneration a year, regardless of whether the business is profitable. That is distinct from the bonus under the Bonus Act 2030, which is 10% of net profit and applies only to profit-making enterprises.

SSF contributors are exempt from the 1% social security tax that forms the first income tax band, because the SSF contribution already covers what that band funds.

Gross monthly salaries for full-time roles in Kathmandu. Employer cost depends on the basic component of each package rather than the gross figure shown.

Benchmarks below are gross monthly salaries in Nepalese rupees for full-time roles in Kathmandu. Employer cost depends on how much of that gross is structured as basic salary, since SSF runs on basic only.

Payroll is monthly, normally paid within a few days of the end of the Nepali month. SSF contributions are deposited through the SSF portal by the 15th of the following Nepali month, with employee-wise detail and the bank voucher uploaded for tracking.

The fiscal year runs from Shrawan 1 to the last day of Ashad, roughly mid-July to mid-July, and dates follow the Bikram Sambat calendar. Aligning a Nepali payroll calendar to a foreign parent’s December year-end requires deliberate mapping.

Income tax is withheld monthly under TDS. Rates and bands depend on marital status, with separate schedules for individuals and couples. SSF contributors are exempt from the 1% first-band social security tax.

Employees enrolled in SSF have no separate provident fund deduction; the 11% and 20% replace the 10% plus 10% that a non-SSF employee would run.

Nepal applies separate schedules for individuals and married couples. The first band is a 1% social security tax from which SSF contributors are exempt; bands above the first apply normally.

Labour Act 2074 (2017) is the governing statute, supported by Labour Rules 2075 and the Contribution-Based Social Security Act 2074.

The standard working week is 48 hours over six days, capped at 8 hours a day. Overtime is limited and paid at a premium calculated on basic remuneration.

Annual leave accrues at one day for every twenty days worked, giving roughly 18 days a year, and may be accumulated up to a statutory limit. Public holidays are additional.

Written contracts are strongly advised and are the document a Labour Court reads first. Where the employee’s category, hours, remuneration, leave and termination terms meet the statutory floor in writing, most disputes do not progress past the Labour Office.

Employment may be regular, work-based, time-bound, casual or part-time, and the category must be stated. Written contracts are the norm for formal-sector employment.

Probation is limited to six months for regular employment. During probation the employer may terminate where performance is unsatisfactory, but the process should still be documented.

Get the basic-to-allowance split right at contract stage. Because SSF, festival expense, overtime and severance all key off basic remuneration, a structure agreed at hiring determines cost and exposure for the life of the employment.

Normal hours are 8 a day and 48 a week. Overtime is capped by the Labour Act and paid at a statutory premium on the basic rate.

Employees are entitled to at least one weekly rest day, normally Saturday.

Because overtime is calculated on basic remuneration, a low basic share reduces overtime pay as well as SSF, which is precisely why the split attracts scrutiny at the Labour Office.

Nepal observes 13 public holidays in 2026 under the Bikram Sambat calendar, confirmed annually by government notice. Several move year to year, so the calendar should be reconfirmed rather than carried forward.

Nepal observes 13 paid public holidays in 2026, set on the Bikram Sambat calendar and confirmed annually by government notice. Dates that fall at a weekend and any substitution rules are set out below; entitlement is separate from annual leave.

Maternity protection sits inside the SSF. Contributors receive maternity care coverage and a partial salary payment at 60% of basic pay for extended maternity leave, subject to a qualifying contribution period.

Medical benefits under the SSF are capped at NPR 100,000 a year for hospitalised treatment and NPR 25,000 for outpatient care, with a 20% co-payment by the contributor and waiting periods of at least three months for basic medical cover and twelve months for some benefits.

Sick leave is provided under the Labour Act in addition to SSF medical cover.

Termination requires valid grounds under Labour Act 2074, misconduct, poor performance after written warnings, or redundancy. Nepal does not recognise at-will employment.

Severance on redundancy or restructuring is one month of basic salary per completed year of service. It is separate from gratuity, outstanding salary, leave encashment and festival expense, and does not apply to misconduct dismissals.

Gratuity now sits inside the SSF at 8.33% of basic deposited monthly, replacing the old lump-sum arrangement. Employees enrolled in SSF receive it through their fund balance on separation.

The most common wrongful termination findings involve employers who skipped the written warning process or failed to give notice. Verbal warnings carry no weight at the Labour Office.

Foreign nationals need two documents: a work permit from the Department of Labour and Occupational Safety, and a non-tourist visa from the Department of Immigration.

Permits are granted where the role cannot be filled by a qualified Nepali, and the employer is expected to support skill transfer to local staff over time. Processing typically runs four to eight weeks for the pair.

Structuring basic too low is the dominant risk. A 10% to 15% basic share in a CTC package under-pays SSF, festival expense, overtime and severance simultaneously. Labour Office findings commonly reconstruct the correct basic and assess all four together with interest.

Do not assume a size threshold. Some commentary states SSF is mandatory only at ten or more employees. The prevailing position is that it applies to every formal-sector employer regardless of size, including a business with a single employee. Confirm before relying on an exemption.

A missed contribution month now carries personal exposure. Under the July 2025 amendment, if an employer fails to deposit on time and an employee suffers an accident or dies in that period, the employer must pay benefits equivalent to what the SSF would have covered. Non-compliance also attracts a fine of up to NPR 100,000 or imprisonment of up to one year.

Note also that an employee concluding contracts in Nepal for a foreign entity can create a taxable presence for that entity.

Work backwards from the start date. For a local hire through an EOR, two to three weeks is realistic once identity documents, the written contract and SSF registration are in hand. For a foreign national, add four to eight weeks for the work permit and non-tourist visa.

Settle the basic-to-allowance split before making the offer. It determines SSF cost, festival expense, overtime rates and severance for the whole employment, and it cannot be quietly corrected later without back exposure.

Register the employee with the SSF and obtain a social security number before the first payroll runs, and confirm portal access ahead of the deposit deadline on the 15th of the following Nepali month.