Labour Law to Follow After Company Registration in Nepal

Introduction

After registering a company in Nepal, employers must comply with applicable labour laws and regulations. The Labour Act, 2074 BS (2017 CE) and related legislation establish mandatory requirements for employment relationships, worker protection, and workplace standards. Compliance with these laws protects both employers and employees while ensuring legal operation of the business. This article outlines the labour law obligations that registered companies must follow in Nepal.

Legal Framework for Labour Compliance

Nepal’s labour law framework comprises several statutes that regulate employment relationships and workplace conditions. The Labour Act, 2074 BS serves as the primary legislation governing employment contracts, working hours, wages, and worker rights. The Social Security Act, 2074 BS mandates employer contributions to social security schemes. The Occupational Safety and Health Act, 2074 BS establishes workplace safety standards. The Employment Relationship Act, 2074 BS defines the nature of employment relationships. Registered companies must adhere to all applicable provisions within these statutes to maintain legal compliance and avoid penalties.

Employment Contract Requirements

Mandatory Contract Elements

Employers must execute written employment contracts with all employees as per the Labour Act, 2074 BS. The contract must specify the position, salary, working hours, leave entitlements, and termination conditions. Contracts must be prepared in the Nepali language or a language mutually agreed upon by both parties. The contract must clearly define the probation period, which cannot exceed three months for general positions. Both employer and employee must retain signed copies of the employment contract for reference and dispute resolution purposes.

Key Provisions to Include

Contract Element	Requirement
Job Description	Clearly define duties, responsibilities, and reporting structure
Salary and Benefits	Specify base pay, allowances, incentives, and other benefits
Working Hours	Maximum 48 hours per week as per Labour Act, 2074
Leave Entitlements	Include annual leave, sick leave, maternity/paternity leave, and other statutory leaves
Termination Clause	State notice period, severance pay, and conditions for ending employment
Dispute Resolution	Outline mechanisms for resolving conflicts, including mediation or labor office procedures

Wage and Salary Compliance

Minimum Wage Requirements

The Government of Nepal establishes minimum wage rates for different sectors and regions. Employers must pay wages at or above the prescribed minimum wage rates. Wage payments must occur regularly, typically on a monthly basis. Employers cannot deduct wages except for statutory contributions and court-ordered deductions. The Labour Act, 2074 BS prohibits wage deductions for disciplinary purposes without proper legal procedures.

Wage Payment Standards

Employers must pay wages in cash or through bank transfer as agreed with employees.
Wage payment must occur within seven days after the end of the payment period.
Employers must provide wage slips detailing gross salary, deductions, and net payment.
Overtime compensation must be paid at a rate of 1.5 times the regular wage for hours exceeding 48 per week.
Employers must maintain accurate wage records for at least three years.

Working Hours and Rest Periods

Standard Working Hours

The Labour Act, 2074 BS establishes a maximum of 48 working hours per week. Daily working hours cannot exceed 8 hours unless otherwise agreed in writing. Employers must provide at least one rest day per week, typically Sunday or a mutually agreed day. Night shift workers are entitled to additional rest periods and compensation. Employers must maintain records of working hours for all employees.

Overtime Regulations

Overtime work must be voluntary and compensated at 1.5 times the regular wage rate.
Overtime hours cannot exceed 20 hours per week under normal circumstances.
Employers must obtain written consent from employees before assigning overtime work.
Overtime compensation must be paid along with regular wages.
Employers must ensure adequate rest periods between overtime shifts.

Leave Entitlements and Management

Types of Leave

Leave Type	Entitlement	Provisions
Annual Leave	15 days per year	Paid leave for rest, recreation, or personal well-being
Sick Leave	15 days per year	Paid leave for medical treatment or recovery
Maternity Leave	60 days	Paid leave for female employees; may include provisions for childcare support
Paternity Leave	15 days	Paid leave for male employees for childbirth support
Casual Leave	10 days per year	Paid leave for urgent personal matters or events

Leave Management Procedures

Employees must submit leave requests in advance whenever possible.
Employers must maintain leave records for each employee.
Unused annual leave cannot be carried forward beyond one year without mutual agreement.
Leave cannot be denied arbitrarily; employers must provide valid reasons for denial.
Employers must pay leave encashment upon termination of employment.

Social Security Contributions

Mandatory Social Security Enrollment

The Social Security Act, 2074 BS requires employers to register employees with the Social Security Fund. Employers must contribute 11 percent of the employee’s salary to the social security scheme. Employees contribute 10.5 percent of their salary to the scheme. Employers must deduct employee contributions from wages and remit both employer and employee contributions to the Social Security Fund. Registration must occur within 30 days of employment commencement.

Contribution Compliance

Employers must maintain accurate records of social security contributions.
Contributions must be remitted monthly to the Social Security Fund.
Employers must provide contribution statements to employees.
Failure to remit contributions results in penalties and legal action.
Employers must ensure all eligible employees are registered with the social security scheme.

Occupational Safety and Health Standards

Workplace Safety Obligations

The Occupational Safety and Health Act, 2074 BS mandates employers to maintain safe working conditions. Employers must conduct risk assessments and implement control measures. Employers must provide personal protective equipment at no cost to employees. Employers must establish safety committees in workplaces with 50 or more employees. Employers must report workplace accidents to relevant authorities within 24 hours.

Safety Compliance Requirements

Employers must provide safety training to all employees upon employment.
Employers must maintain first aid facilities and trained personnel.
Employers must conduct regular safety inspections and maintain records.
Employers must ensure proper ventilation, lighting, and sanitation in workplaces.
Employers must establish emergency procedures and conduct regular drills.

Termination and Severance Procedures

Lawful Termination Grounds

Employers may terminate employment only on grounds specified in the Labour Act, 2074 BS. Valid termination grounds include misconduct, incompetence, redundancy, and mutual agreement. Employers must provide written notice of termination with clear reasons. The notice period varies based on employment duration and termination type. Employers must pay all outstanding wages and benefits upon termination.

Severance and Final Settlement

Employers must pay severance compensation based on years of service as per the Labour Act.
Severance compensation is calculated at one month’s salary per year of service.
Employers must settle all outstanding wages, leave encashment, and benefits.
Employers must provide a termination letter and final settlement statement.
Employers must return all company property and documents to the employee.

Workplace Discrimination and Harassment Prevention

Anti-Discrimination Obligations

The Labour Act, 2074 BS prohibits discrimination based on caste, gender, religion, ethnicity, and disability. Employers must ensure equal treatment in recruitment, promotion, and compensation. Employers must establish policies preventing sexual harassment and discrimination. Employers must investigate complaints promptly and take corrective action. Employers must maintain confidentiality during investigation processes.

Harassment Prevention Measures

Employers must establish a code of conduct prohibiting harassment and discrimination.
Employers must designate a responsible officer to handle harassment complaints.
Employers must conduct awareness training on workplace conduct and respect.
Employers must maintain records of complaints and investigation outcomes.
Employers must ensure no retaliation against employees who report violations.

Record Keeping and Documentation

Required Employment Records

Employers must maintain comprehensive employment records for all employees. Records must include employment contracts, wage statements, attendance records, and leave records. Records must be retained for at least three years after employment termination. Records must be made available to employees upon request. Employers must maintain records in a secure and organized manner.

Documentation Requirements

Employers must maintain employee personal information files.
Employers must keep records of performance evaluations and disciplinary actions.
Employers must document all training and development activities.
Employers must maintain records of social security contributions and tax deductions.
Employers must preserve records of workplace accidents and safety incidents.

Compliance Monitoring and Penalties

Government Inspection and Enforcement

The Department of Labour conducts inspections to ensure labour law compliance. Inspectors verify employment contracts, wage payments, working hours, and safety standards. Non-compliance results in warnings, fines, and legal action. Employers must cooperate with inspectors and provide requested documentation. Repeated violations may result in business closure or criminal prosecution.

Penalties for Non-Compliance

Violation Type	Penalty Range	Remarks
Wage Non-Payment	Fine up to NPR 50,000 or imprisonment	Failure to pay wages on time
Contract Violation	Fine up to NPR 25,000	Breach of employment terms
Safety Violation	Fine up to NPR 100,000	Non-compliance with workplace health & safety standards
Social Security Non-Compliance	Fine up to NPR 50,000 plus interest	Failure to contribute to SSF or register employees
Discrimination	Fine up to NPR 100,000 plus compensation to affected employee	Unequal treatment based on gender, caste, religion, or disability

Frequently Asked Questions

What is the minimum wage in Nepal? The minimum wage varies by sector and region. The Government of Nepal updates minimum wage rates periodically. Employers must verify current rates with the Department of Labour before setting employee compensation.

Can employers deduct wages for disciplinary purposes? No, the Labour Act, 2074 BS prohibits wage deductions for disciplinary reasons. Employers may only deduct statutory contributions and court-ordered amounts.

What is the maximum working hour limit? The Labour Act establishes a maximum of 48 working hours per week. Daily working hours cannot exceed 8 hours unless otherwise agreed in writing.

Are all employees entitled to social security benefits? Yes, all employees must be registered with the Social Security Fund. Employers must contribute 11 percent of salary while employees contribute 10.5 percent.

What happens if an employer fails to comply with labour laws? Non-compliance results in fines, legal action, and potential business closure. The Department of Labour enforces compliance through inspections and penalties.

Conclusion

Registered companies in Nepal must comply with comprehensive labour law requirements established under the Labour Act, 2074 BS and related legislation. Compliance obligations include executing employment contracts, paying minimum wages, maintaining safe working conditions, providing social security coverage, and preventing discrimination. Employers must maintain accurate records and cooperate with government inspections. Adherence to labour laws protects employees, reduces legal risks, and ensures sustainable business operations. Companies should consult legal professionals to ensure full compliance with all applicable labour regulations.