The Labor Act, 2074 is the central statute governing employment relationships in Nepal. It applies to most private sector employers and prescribes minimum standards for contracts, working hours, leave, termination, and social security.
Written employment contracts
Employers must provide a written contract or appointment letter to every employee. The document should set out the nature of work, remuneration, working hours, and the grounds and procedure for termination.
Working hours and leave
The standard working week is limited to 48 hours, with overtime payable for additional work. Employees are entitled to annual leave, sick leave, and public holidays, together with maternity and paternity leave as prescribed by the statute.
Termination and severance
Termination must follow the procedure in the Labor Act. Employees whose services are terminated, other than for misconduct, are entitled to notice or pay in lieu, together with gratuity and leave encashment where applicable.
Social security
Registered employers must contribute to the Social Security Fund on behalf of their employees. Contributions cover medical, accident, dependency, and pension benefits, and late or non-payment attracts penalties.
Practical compliance steps
Employers should maintain proper attendance records, payroll documentation, and statutory registers, and ensure that workplace policies comply with anti-discrimination and occupational safety obligations.
Our labor and employment team assists employers with contracts, workplace policies, termination procedures, and Social Security Fund compliance. Explore our labor practice or reach out for advice.