Definitive Guide to Hiring in Nepal

Hiring in Nepal

Hiring employees compliantly in Nepal means doing it yourself or using an Employer of Record like Global Expansion. You should be careful using independent contractor agreements in Nepal so that you don’t run afoul of employment laws. To hire an employee compliantly and offer them mandatory benefits and compliant agreements, you can:

(a) Establish your own new legal entity, banking, accounting and payroll service in Nepal ; or

(b) use an Employer of Record like Global Expansion who can handle all of the details for you.

Labor Laws in Nepal

Employee Probation Period

Annual Leave in Nepal

Holidays in Nepal

Maternity Leave Nepal

Paternity Leave Nepal

Sick Leave in Nepal

Working Hours in Nepal

• Unlike other countries, Nepalese rest on Saturday and work from Sunday to Friday.
• Nepal generally has a 48 hour working week

Overtime in Nepal

• If any worker or employee is engaged to work for more than eight hours in any day, or for more than 48 hours in any week, he shall be paid remuneration for such overtime work at the rate of 150 per cent of his usual remuneration.
• Thus, the maximum overtime is four hours a day and 24 hours a week.

Termination of Employment in Nepal

• The employee can terminate the employment voluntarily by submitting a resignation letter.
• The employment of the worker on work bound employment is terminated after the completion of the work provided in the employment agreement.
• If the performance of the employee is found to be unsatisfactory or below the standard in the performance appraisal for three or more times, the employment of such worker may be terminated by the employer.
• However, prior to terminating the employment the performance appraisal as per the Regulation under the Act or Bylaws should have been conduct.
• Such employee should be provided an opportunity to submit explanation giving at least seven (7) days by the employer where ten (10) or more people work.
• In case any employee is physically or mentally disabled or injured rendering him/her unable to work or requiring a long period for medical treatment effecting in the work of the entity, the employer, on recommendation of a medical practitioner may terminate his/her employment.

• The employee or employer terminating the employment should provide a notice except in the situation of termination by dismissal.
• The notice requirement is linked to the length of service which is as follows.
  • If the period of employment is up to 4 weeks, then the notice period is of 1 day
  • If the period of employment is from 4 weeks to 1 year, then the notice period is of 7 days
  • If period of employment is more than 1 year, then the notice period is of 30 days

Notice Period in Nepal

• The employee or employer terminating the employment should provide a notice except in the situation of termination by dismissal.
• The notice requirement is linked to the length of service which is as follows.
  • If the period of employment is up to 4 weeks, then the notice period is of 1 day
  • If the period of employment is from 4 weeks to 1 year, then the notice period is of 7 days
  • If period of employment is more than 1 year, then the notice period is of 30 days

Severance in Nepal

• The severance payment is of 30 days per year if an employee is not entitled to unemployment allowance under Social Security Act.
• In case of economic dismissals or retrenchment, workers are entitled to 1 month’s wages for each completed year of service.
• If the length of service is less than one year, the severance compensation is made on a proportionate basis.
• However, a worker is not entitled to severance pay in case of retrenchment if they are entitled to an unemployment allowance under the Social Security Act.
• In the case of employment termination due to misconduct/disciplinary action or any other reason, the employer must pay all amounts, including the remuneration and benefits receivable by them at the time of such termination, to the labor within 15 days of the termination of employment.

Nepal Salary and Wages

13th / 14th Month Salary in Nepal

• Yes (Mandatory)
• There is a statutory requirement to pay the 13th month salary which is paid for the festivity that each employee observes and it equates to one month salary.
• There is also a statutory requirement to pay bonus to their employees.
• This bonus comes out of the earnings of the company and only full time employees that have stayed in the company for 6 months will be entitled to it.

• The 2011 law established a Social Security Fund Secretariat to administer a social insurance program covering old-age, disability, unemployment, and other social risks. 
• Public- and private-sector employees already contribute 1% of earnings to the social insurance fund, but no benefits have been paid.
• The 2017 law established a mandatory social insurance program for private-sector employees, including daily workers. 
• The program was gradually implemented starting in May 2019. 
• Insured persons will contribute 11% of monthly earnings and employers will contribute 20% of monthly payroll.

Immigration Nepal

• Only Foreign nationals holding working visa are allowed to accept job and work in Nepal. 
• Working Visa is issued by the Department of Immigration (Non Tourist Visa section) only upon the recommendation from line agency (concerned Ministry of Government of Nepal), Labor Permit from the Department of Labor and Work Agreement (excluding few exceptions) from the Ministry of Home Affairs. 
• Applicants should go through various Government agencies and finally apply at Department of Immigration for the Visa.
• Foreign nationals undertaking paperwork and legal formalities for Work Visa with concerned institutions (Ministry/Department) of Nepal Government can stay in Nepal under 'Tourist Visas'. 
• His/her category of visa changes from 'Tourists' to 'Non Tourist' once all necessary paperwork is completed and applied for 'Working Visa' at DOI. 
• Tourist visa gets automatically cancelled when visa category is changed. Length of Working Visa is determined by the period for which work/labor permit has been obtained from the Department of Labor.

Value Added Tax (VAT) in Nepal

• The normal VAT rate is 13%
• Some goods or services are exempted from VAT.

Mandatory Benefits in Nepal

• These are mandatory benefits as postulated by law
• These include probationary period, annual leave, public holidays, sick leave, maternity leave, paternity leave, overtime pay, notice period, and severance pay
• Statutory benefits also include social security benefits

Payroll Accrual in Nepal

Country Accruals Additional Information

Provident fund

Public-sector employees, including civil servants, military and police personnel; and private-sector employees with permanent contracts, including apprentices and vocational training students. Voluntary coverage for foreign workers. Exclusions: Self-employed persons.

Payroll Accruals Additional Information

Accrued Benefits in Nepal

Why use Global Expansion to hire in Nepal

Establishing a branch office or subsidiary in Nepal can be time-consuming, expensive and complex. With such a robust labor market in place, one must pay great attention to detail when structuring employment because Nepal labor laws are complex.

The company also has a responsibility to comply with specific employment practices dictated by Nepal law to maintain its good standing as an equal opportunity employer.

Global Expansion makes it easy for you to expand into Nepal. We'll help you hire your candidate of choice, handle HR matters and payroll, and ensure that you comply with local laws without the burden of setting up a foreign branch office or subsidiary. In addition, you'll have complete control and direction over your employees.

We enable you to stay in control of everything. Our Nepal Global Professional Employer Organization (PEO) and Employer of Record (EOR) solution provides you with peace of mind to focus on running your company and the security to enter new markets.