Hiring guide in Nepal

What should I know about hiring in Nepal?

Legal framework

Types of employment contracts

The labour law of Nepal recognises a few types of employment.

Regular employment or indefinite-term contracts are most commonly used among employment contracts. These contracts include any type of employment that doesn’t fall under work-based, time-bound, or casual employment. Regular employees in Nepal enjoy full-time employment benefits such as social security, health benefits, and other statutory entitlements. 

Work-based employment involves hiring employees for specific tasks or projects. The employment relationship terminates upon the completion of the designated work or service, and as such, this type of employment is suitable for project-based roles where the job duration is linked to the completion of a task. 

Time-bound employment includes a predetermined end date within the contract. This type of employment is used for temporary projects or seasonal positions where the work is required for a specific period. 

Casual employment is designed for short-term work engagements, which typically don’t exceed seven days in a month. Casual employees are generally hired on an as-needed basis and receive fewer benefits compared to other employment categories. 

Part-time employment involves working fewer than 35 hours per week. Part-time employees are entitled to benefits based on their hours of work, which allows both parties to have the flexibility of accommodating various work schedules while ensuring statutory benefits.

Content of an employment contract

Employment contracts are formal agreements between the employer and the employee, defining the terms and conditions of the employment. According to Nepal’s labour law, employment contracts must include a few key elements, such as job title and description, remuneration, employment duration, working hours, location, leave entitlements, and others.

Download a free employment contract for Nepal through Native Teams.

Oral, written or electronic employment contracts

Employment contracts in Nepal can be oral, written, or electronic, each with its own set of legal frameworks and implications.

Oral employment contracts are less formal but still a legally recognised form of contract in Nepal. They’re based on verbal agreements between the employer and the employee. Although they’re valid, they pose challenges for proving the terms of the agreement in cases of disputes, as they don’t provide tangible evidence. 

Written contracts are the most common and legally preferred form, as they provide a clear and tangible record of the terms agreed upon. According to Nepal’s labour law, all employees must sign a written contract to ensure clarity and protection and reduce the risk of misunderstandings. 

Electronic contracts are also commonly used as they offer convenience and efficiency in remote working setups. They’re considered legally valid if they comply with the procedures outlined in the Electronic Transactions Act 2006, including certified digital signatures to authenticate the document.

Working hours

The maximum working hours in Nepal are eight hours per day or 48 hours per week. For employees under the age of 18, the maximum working hours are restricted to six hours per day or 36 hours per week, and protections are also included for younger workers.

Breaks and types of leave

The Nepalese labour law provides a comprehensive framework for workers’ rest periods, breaks, and various types of leave. 

Employers must provide workers with a 30-minute break after every five hours of continuous work. Female employees who are pregnant or have children below the age of three are entitled to an additional 30-minute break, while minor employees must receive breaks every three hours. The law also mandates a weekly rest of at least one full day off every week. 

Employed individuals in Nepal are also entitled to various types of leave, including sick leave, maternity/paternity leave, bereavement leave, public holidays, casual leave, compensatory leave, and others.

Annual leave

Annual leave provisions in Nepal mandate that every employee is entitled to paid home leave at the rate of one day for every 20 days worked. An exception is employees of educational institutions or those who receive summer or winter leave, which are not eligible for additional home leave unless the leave period is less than the mandated home leave. 

Employees are entitled to an amount equal to their basic monthly remuneration for festivals celebrated according to their religion, culture, and tradition. If an employee has not completed a full year of service by the time of the festival, the expense is proportionally adjusted based on the service period completed.

Public holidays

Public holidays in Nepal ensure that employees have the necessary breaks to observe cultural, religious, and national events. According to the labour law, employees are generally entitled to 13 days of paid public holidays per year.

Salary

Nepal’s labour law outlines detailed regulations regarding employee remuneration to ensure fair and consistent compensation across all sectors.

The Government of Nepal periodically sets the minimum salary. According to the latest update, the minimum monthly salary is NPR 17,300, including a basic salary of NPR 10,820 and a dearness allowance of NPR 6,480. 

Employees are entitled to an annual increment in their basic salary, which is calculated as a minimum of half a day’s basic salary. Employers are allowed to deduct amounts of employees’ salaries, including those for tax obligations, social security contributions, and salary for absenteeism.

To calculate the salary and taxes in Nepal, click here.

Sick leave

Every employed individual in Nepal is entitled to 12 days of paid sick leave annually. For employees who have worked for less than a year, sick leave is granted on a proportional basis, meaning that their entitlement is calculated based on the duration of their employment within the year. 

In cases where the employee needs more than three consecutive days of sick leave, the law requires the submission of a medical certificate from a doctor.

Maternity and paternity leave

The labour law of Nepal mandates that pregnant female employees are entitled to 14 weeks of maternity leave, which can be taken before or after childbirth. The maternity leave must be taken at least two weeks before the expected delivery and six weeks after the birth of the child. 

Employees on maternity leave are entitled to full remuneration for the first 60 days, while for the remaining period, they are not entitled to any remuneration. 

Male employees are entitled to 15 days of paid paternity leave to allow fathers to support their spouses and bond with their newborns.

Methods of employment termination

The labour law of Nepal outlines the general provisions for terminating employment, emphasising job security and legitimate reasons for termination. According to these provisions, there are several types of employment termination, each with specific conditions and procedures.

Time-based employment contracts specify a fixed duration of employment and end naturally upon the expiration of the agreed period. However, if the employment is linked to a specific project and the project duration is extended, the employment continues until the project is completed.

Work-based employment contracts are tied to the completion of specific tasks or projects, and as such, the employment ends once the assigned task is completed. 

Casual employment contracts can be terminated at the discretion of either the employer or the employee, with no long-term commitment from either party.

Ordinary dismissal by the employer

The labour law of Nepal outlines several grounds for ordinary dismissal, including direct termination due to misconduct, termination based on incompetence, and termination due to health reasons. 

Employers in Nepal can directly terminate an employee if they commit specific acts of misconduct. This includes causing bodily harm to other employees, giving or accepting bribes, engaging in financial misappropriation, intentionally damaging the employer’s property, and remaining absent from work for more than 30 days without sanctioned leave. 

Employment can also be terminated if an employee is found to be incompetent, including unsatisfactory performance for three or more evaluations. In this case, employers must provide a seven-day period for the employee to offer clarification before proceeding with the termination. 

Termination on health grounds can occur if the employee becomes incapable of working due to physical or mental incapacitation that requires prolonged medical treatment. However, the labour law provides several protections, including prohibiting termination during hospital treatment for work-related injuries and ensuring full remuneration during the treatment period unless the employee is entitled to benefits from the Social Security Fund.

Challenging the dismissal

According to Nepal’s labour law, employees who are dismissed have the right to seek redress either through the Labour Office or the Labour Court.

The Labour Office can grant reimbursement equal to ten month’s worth of the employee’s remuneration, based on the rate during their final year of employment. In some cases, the Labour Office may order the employer to reinstate the employee to their previous position.

Alternatively, an employee can file a petition with the Labour Court. The Labour Court then schedules hearings where both parties present their cases, including evidence and legal arguments. After evaluating the case, the court renders a decision, which serves as the final resolution to the dispute.

Notice period

According to Nepal’s labour law, the notice period applicable for a specific employee depends on the length of their employment. 

For employment up to four weeks, a minimum of one day’s notice is required. For employment from four weeks to one year, a minimum of seven days’ notice is required. Finally, employment that exceeds one year imposes a notice period of 30 days. 

In cases where the employment is terminated without the required notice, the party failing to provide the notice must compensate the other party.

Severance pay

The labour law of Nepal mandates that employers must provide severance pay to employees whose employment is terminated, whether due to misconduct or other reasons. 

Employers must pay all due amounts, including remuneration and benefits, within 15 days of termination. Employers must also assist employees in obtaining any amounts or benefits receivable from the Social Security Fund, insurance, or other bodies.

If employers fail to pay the due amounts within the stipulated period, they must continue paying remuneration as if the employee were still in service until the amount is paid. If the employee does not appear to receive the remuneration or benefits, the employer is allowed to deposit the amount into the employee’s account or with the Labour Office.

Probationary period

The probationary period for employed individuals in Nepal is up to six months.

If the employee’s performance is deemed unsatisfactory during the probationary period, the employer can terminate the employment contract. This termination can occur without compensation and without prior notice unless other terms are applicable per the employment contract.

If the employment is not terminated during the probationary period, the employment contract is automatically deemed valid after the completion of the probationary period. This means that the employee transitions from probationary status to regular employment without the need for additional formalities.

Upon satisfactory completion of the probationary period, the employer must provide a confirmation letter, which outlines the terms of service and details about remuneration, benefits, and other employment conditions for the employee.

Intellectual property rights

Intellectual property rights in Nepal are governed by several laws and regulations that protect various forms of IP, including patents, trademarks, copyrights, and industrial designs. 

In the context of employment, intellectual property rights created within the scope of employment belong to the employer, particularly if the employee was hired to create such IP. However, the specifics can vary depending on the employment contracts and the nature of the IP involved. 

Employment contracts in Nepal usually include clauses for the creation and ownership of IP. These clauses should specify whether the IP created during employment is the property of the employer or the employee.

Employee data privacy

Nepal’s Constitution guarantees the right to privacy as a fundamental right, aiming to protect personal data from unauthorised access and misuse. 

The Privacy Act 2018 of Nepal provides comprehensive guidelines on the collection, use, and protection of personal data. This includes provisions like the right to privacy of personal information, lawful processing of personal information, obligations for data controllers to ensure data security, and provisions for consent and transparency in data collection. 

The Electronic Transaction Act 2008 addresses the broader context of electronic transactions and cybersecurity, with provisions relevant to data privacy. Under the laws of employee data privacy rights, employees are entitled to request access to their personal data held by their employer, request corrections to inaccurate or incomplete data, and have the right to be informed about the collection and use of their personal data.

Remote working policy

The concept of remote working is relatively new and not explicitly covered by existing labour laws in Nepal. The labour laws provide a general framework for employment rights and protections, but they do not address the unique aspects of remote work, such as workplace safety, monitoring, and data privacy. 

Some of the fundamental rights relevant to remote work are the right to dignity, the right to freedom, the right to equality, and the right to healthcare.

What are the advantages of hiring employees from Nepal vs other countries?

There are many advantages to hiring employees from Nepal compared to hiring from other countries. 

First and foremost, Nepal offers cost-effective labour compared to many Western and Asian countries. Alongside lower wages, the country also offers more affordable operational costs for office space, utilities, and infrastructure. 

The cost-effectiveness of the country doesn’t compromise skill, as Nepal has a growing pool of highly educated and skilled professionals. Additionally, many Nepali professionals are fluent in English, making them very well-suited for roles in global businesses and remote work environments. 

Lastly, employers who hire in Nepal can benefit from a strategic location and a constantly developing ecosystem for tech startups, freelancers, and remote professionals.

Why use Native Teams for hiring in Nepal?

Native Teams lets you employ team members “like a local”, meaning you get all the benefits of a global team wherever you are based. Here are the reasons why you should use Native Teams for hiring:

• No paperwork: We will handle all the necessary paperwork for you.
• Save on taxes: We help you handle your taxes.
• No company set up: You can expand your business using our company entitles.
• Online onboarding: We’re here to ensure your onboarding process is trouble-free.
• No accounting: We will handle all of your accounting needs, including invoicing, payroll, and more.
• Increase your profit: We assist you in growing your business and maximising your profits.
• Compliance expertise: We can assist your company in navigating the regulatory environments and ensure you meet all relevant requirements.
• Local support: We can assist you in understanding and complying with the relevant local laws.

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