What Employers and Employees Need to Know About Working in Nepal

Nepal’s employment landscape is defined by one of the most structured and employee-protective labour frameworks in South Asia. Governed by the Labour Act 2017 and Labour Rules 2018, the system places significant obligations on employers — particularly around social security contributions, insurance, and termination — while providing workers with a comprehensive set of statutory entitlements. For businesses operating in Nepal and for professionals building careers here, knowing the framework in detail is not optional. It is the starting point for every compliant employment relationship.

The Framework

Standard working hours in Nepal are eight hours per day and 48 hours per week. Global Squirrels Overtime is capped at four additional hours per day and 24 hours per week, paid at one and a half times the regular salary. Skuad The minimum monthly wage has been revised to NPR 19,550 effective July 15, 2025. Multiplier Probation periods run for an initial six months, during which employment may be terminated if performance is found unsatisfactory.

What Employees Need to Know

Annual Leave – Employees in Nepal are entitled to one day of paid home leave for every 20 days worked. Skuad For a full year of continuous employment, this generates approximately 18 days of earned leave. At the time of termination, employees can encash up to 90 days of unused annual leave and 45 days of unused sick leave. Multiplier

Sick Leave – Every employee is entitled to 12 days of fully paid sick leave per year. Skuad Any worker seeking more than three consecutive days of sick leave must submit a medical certificate issued by a certified physician. Prime Law Associates In cases of sudden illness, the employee must inform the employer immediately through any available means of communication.

Public and Festival Holidays – Every worker is entitled to 13 fully paid public holidays per year, with female workers entitled to 14, the additional day being International Women’s Day. Prime Law Associates Every worker is also entitled to one festival allowance equivalent to one month’s basic salary per year, to be used for the celebration of a festival of their own religion, culture, or tradition. Prime Law Associates

Maternity and Paternity Leave – Female employees are entitled to up to 14 weeks of maternity leave, with the first 60 days fully paid. Male employees are entitled to 15 days of fully paid paternity leave. Skuad

Bereavement Leave – Employees are entitled to up to 15 days of fully paid bereavement leave for the observance of funeral rites and rituals. Skuad This reflects the cultural and religious significance of mourning practices in Nepal and is a statutory obligation, not a discretionary benefit.

Social Security Fund — Provident Fund and Gratuity – Nepal’s Social Security Fund is one of the most important statutory mechanisms for employee welfare. Employers must contribute 20 percent of an employee’s basic salary to the SSF: 10 percent for the provident fund, 8.33 percent for gratuity, and 1.67 percent for medical insurance. Employees contribute 11 percent: 10 percent to the provident fund and 1 percent as social security tax. Uninepal These contributions are mandatory from the first day of employment. Employees can take loans against their provident fund of up to 50 percent of the total accumulated value. Skuad

Insurance – Employers must provide each employee with annual medical insurance of at least NPR 100,000, with the premium shared equally between employer and employee. Accident insurance of at least NPR 700,000 must also be provided, fully funded by the employer. Multiplier If an employer fails to arrange this insurance, they are required to pay the equivalent benefits directly to the worker or their dependents.

Severance – Under the Labour Act, employees are entitled to one month’s salary per year of service as severance pay. Skuad For employees with tenure of less than one year, severance is calculated proportionately.

What Employers Need to Know

Every employer in Nepal must sign a written employment agreement with each hire from day one. A fine of NPR 10,000 to NPR 500,000 applies to employers who engage employees without providing an appointment letter or employment agreement. Vidhilegal Employers must also register with the Social Security Fund and make monthly contributions by the required deadlines. Failure to deposit provident fund, gratuity, or insurance contributions requires the employer to pay double the unpaid amount as compensation to the affected employee. Vidhilegal

For foreign nationals, employers must advertise for Nepali workers first. Only if no qualified local candidates are found may a foreign national be hired, and a valid work permit from the Labour Department is required before employment commences. Employment contracts for foreign nationals must be in English or a language the individual understands.

Nepal’s professional talent pool is growing rapidly, particularly in finance, IT, and management — and the organisations that engage it compliantly and professionally are the ones building teams that last.

Formix in Nepal

Formix operates in Nepal as an enterprise-grade recruitment and HR solutions partner — bringing the same standards that have made us the top-ranked firm in our home region to every search and placement we run here. Whether the requirement is a C-suite appointment, a senior management search, or a structured volume hire, we deliver with the rigour, speed, and local market knowledge that professional hiring in Nepal demands.

Nepal is a market we are committed to. And the organisations that hire through us know what that commitment looks like in practice.

To discuss recruitment or workforce solutions in Nepal, visit formix.live