Payroll & Employment Guide Nepal

Employment contracts in Nepal should be written and compliant with the Labour Act 2017. They must clearly outline the terms of employment, compensation, duties, and notice periods. Contracts can be permanent, fixed-term, or project-based.

Notice periods: Up to 30 days

Termination of employment: Can occur with notice, mutual consent, or on disciplinary grounds

In Nepal, employees are entitled to a mix of mandatory and common workplace benefits. Some employers also offer additional perks to retain talent in a competitive market.

Mandatory benefits: Provident fund, gratuity, medical insurance, accidental insurance, festival allowance.
Common perks: Performance bonuses, flexible working hours, professional development, transportation allowance, meal allowance, health and wellness programs, additional leave.

Leave policies: Annual leave, sick leave, home leave, bereavement leave, maternity leave, paternity leave, public holidays.

Payroll in Nepal must comply with labour and tax laws. Employers must ensure salaries are paid according to contract terms and that all applicable deductions and contributions are properly managed.

Salary payment deadline: As agreed in the employment contract

Taxes and contributions payment deadline: Aligned with monthly payroll cycles

Payroll declarations deadline: Typically by the 12th of each month

Payroll currency: Nepalese Rupee (NPR)

Nepal’s employment rules are governed by the Labour Act and the Social Security Act. These define working conditions, benefits, contributions, and termination procedures.

Total employment cost:

• Employer’s social security contributions: 18.33%, plus annual medical insurance with a minimum coverage of NPR 100,000 - premium shared equally between the employer and the employee - and accidental insurance of at least NPR 700,000, fully covered by the employer.
• Employer’s health insurance costs: Minimum coverage of NPR 100,000 - premium shared equally between the employer and the employee.
• Employees’ social security contributions: 11%
• Employee’s health insurance costs: At least NPR 100,000 in coverage - cost split between the employer and the employee.

Minimum wage: NPR 17,300/month

Probation period: Up to 6 months

Using EOR services in Nepal allows you to legally employ individuals in the country without opening legal entities there. The EOR takes over all the legal responsibilities as an official employer, including:

• Legal employment and contracts
• Payroll processing
• Tax withholding
• Benefits administration
• Onboarding/offboarding employees

Using PEO services in Nepal provides HR and administrative support, while you remain the legal employer. PEO services are ideal for employers who already have legal entities in Nepal but need support to manage their workforce operations, including:

• HR support and workforce administration
• Payroll and benefits management
• Compliance and local labour law guidance
• Employment contracts assistance

Native Teams provides a payroll calculator adjusted per Nepal’s labour laws. Estimate gross-to-net salaries, tax withholdings, and employer costs in Nepal with our localised calculator. Designed to meet all payroll and compliance requirements.