Table of Contents
Basic Labor Law Provision in Nepal
Labor Act has provisioned for the following fundamental principles of Labor Law in Nepal:
Minimum Labor Standards
If an employment contract is made between an employer and a laborer with provisions for payment or benefits lower than specified, such a contract will be considered invalid and in contradiction with this Labor Act.
Prohibition of Forced/Child Labor
Either Direct or Indirect Forced Labor has been prohibited by the Labor Act of Nepal. It refers to work performed by laborers against their will due to financial, physical, or mental consequences.
Moreover, no one has been allowed to employ a child in Work against the Law in Nepal.
Prohibition of Discrimination
Employers cannot discriminate against laborers based on religion, color, sex, caste, tribe, origin, or other similar grounds.
Prohibition of Discrimination in Remuneration
Laborers must not face discrimination in remuneration based on their gender when performing work of equal value.
Right to Form and Participate in Trade Unions
Laborers have the right to form and operate a trade union and become a member or affiliate with such union. Moreover, they can engage in other activities related to Trade Unions as subject to this Act and other Laws.
Right to Legal Remedy
Laborers have the right to seek legal remedies in Nepal in accordance with applicable laws.
Types of Employment in Nepal
Following are the Types of Employment in Nepal:
- Regular Employment,
- Task-Based Employment,
- Time-Based Employment,
- Casual Employment,
- Part-Time Employment.
| Type | Description |
|---|---|
| Regular Employment | Employment of any type other than those specified below |
| Task-Based Employment | Employment where the employer specifies a particular task or service for the laborer to perform. |
| Time-Based Employment | Employment where the employer specifies a certain period during which the laborer must provide a service or perform work. |
| Casual Employment | Employment where the laborer is required to provide a service or perform work for seven days or less within one month. |
| Part-Time Employment | Employment where the laborer works for thirty-five hours or less in a week. |
Obtaining a Work Permit in Nepal
No employer can hire a foreign citizen as a laborer without obtaining a work permit from the Department. However, if the required skilled labor is absent in Nepal, the employer may employ a foreign laborer.
Before employing a foreign laborer, the employer must advertise the job in a national daily newspaper to seek qualified Nepali candidates.
If, despite the advertisement, no Nepali applicant meets the requirements or is selected, the employer can then apply to the Department for a work permit to employ a foreign laborer.
The Department may issue a work permit for employing a foreign skilled laborer after evaluating the application and evidence submitted. Employers who hire foreign laborers with work permits must plan to train Nepali citizens in the required skills and gradually replace foreign laborers.
Labor Act 2074 Regulations and Remunerations
Working Hours
Section 28 of the Labor Law in Nepal has provided that no Employer can employ labor to work more than eight hours a day and forty-eight hours a week. Moreover, Laborers must be ensured half an hour’s rest after five hours of Continuous Work.
A laborer can also work Overtime for work not exceeding Four Hours a Day and Twenty-Four Hours a Week. For Overtime, extra payment must be made to the labor at a rate of 1.5 Times the Basic remuneration.
Further, transportation must be arranged for Female Laborers with Early or Late Working Hours.
Remuneration
Every Worker is entitled to receive reasonable remuneration and benefits from the date on which the work was started as per the Collective Agreement. Any Labor who has completed one year of service is further entitled to an annual increment in Remuneration (Grade) equal to at least half a day of remuneration.
The Minimum Wage in Nepal is NPR 17,300 per month whereas it is NPR 13,890 for Tea-Estate Workers.
Further, each laborer is entitled to an amount equal to the basic remuneration of one month as Festival Expenses each year for the festival. If an application isn’t provided, the Festival Expense should be provided at the time of the Dashain Festival every year.
Leave
Following is a Table to highlight the Leave Provisions in Nepal:
| Leave Type | Description |
|---|---|
| Weekly Leave | Laborers are entitled to one day of weekly leave each month. |
| Public Leave | Laborers receive thirteen paid public leave days each year, including May Day, and fourteen days for female laborers, including International Women’s Labor Day. Public holidays may vary based on enterprise type or employer’s determination. |
| Substitute Leave | Laborers engaged in continuous work on a day of weekly or public leave receive substitute leave within twenty-one days. |
| Home Leave | Laborers get paid home leave at the rate of one day for every twenty days worked, except for educational or seasonal leave. |
| Sick Leave | Laborers receive twelve paid sick leave days each year, proportional to those employed for less than a year. A medical certificate is required for leave beyond three consecutive days due to illness. |
| Maternity Leave | Pregnant female laborers have a total of fourteen weeks of maternity leave, with mandatory leave two weeks before and six weeks after delivery. Compensation varies during this period. |
| Mourning Leave | Laborers receive thirteen days of mourning leave in case of personal or family mourning, with full remuneration. |
Fund and Insurance
Employers are required to deduce ten percent salary of each laborer’s basic salary, add an equal amount, and deposit the total into the provident Fund. All types of Provident Funds must be provided in Retirement or transferred to the Social Security Fund.
The Employer must pay an additional amount equivalent to 10% of the Laborer’s Basic Salary.
Further, the employer must deduct 8.33% of the Laborer’s Basic Salary Each month for gratuity and deposit it into the Social Security Fund. The Employer must also provide annual medical insurance of at least NPR 1,00,000 for each laborer. The Employer is also meant to ensure accidental insurance of at least NPR 7,00,000 covering all kinds of accidents for each laborer.
Employment Termination
| Type | Description of Termination |
|---|---|
| Time-Based Employment | Employment ends after the specified time in the employment contract. For project-based employment, it may extend if the project period is extended. |
| Work-Based Employment | Employment ends after the completion of the specified work in the employment contract. For project-based employment, it may extend if more work is added or the work period is extended. |
| Casual Employment | Employment may end at the will of either the employer or the laborer. |
| Voluntary Termination | Laborers can resign in writing, and the employer must accept the resignation within 15 days. If not accepted, it’s deemed accepted after this period. Resignation can be canceled by mutual consent. If a laborer continues working after a resignation’s acceptance, the resignation is considered canceled. |
| Termination for Incompetence | Employers can terminate laborers with unsatisfactory performance for three or more consecutive years, following proper performance evaluations. A seven-day notice is given for clarification. |
| Termination for Health | Employers can terminate laborers due to physical or mental incapacity, grievous injury, or extended medical treatment based on medical recommendations. Special provisions apply for accidents related to work. |
Collective Dispute/Bargaining Resolution in Nepal
The Following is the Complete Guide to Labor Dispute Settlement in Nepal:
1. Submission of Collective Claims or Demands
Any enterprise with ten or more employees must establish a collective bargaining Committee. It has the power to submit written claims or demands to the employer in labor-related issues.
2. Negotiation on Collective Claims and Demands
After collective claims and demands have been received, the employer must notify the committee within Seven days and indicate the time and place for Negotiation. If the parties reach an agreement, the dispute related to the claims is to be resolved and the agreement becomes binding.
3. Settlement through Mediation
However, if the negotiation fails or an agreement isn’t reached, either party can request mediation from the Office. The Office schedules mediation involving the parties. The Process must be concluded within 30 Days. If an agreement is reached during the mediation, it becomes binding.
4. Settlement through Arbitration
If the mediation fails, disputes can be attempted to be settled through Arbitration. The Ministry can order compulsory arbitration if a financial crisis is anticipated. An Arbitration Panel is also formed. The Process of Arbitration must be concluded within 30 Days. The Decision of the Arbitrator is binding.
Labor Court in Nepal
Labor Court has been provisioned in Nepal by Chapter 22 Section 151 by notification in Nepal Gazette and the required number of Labor Courts can be formed.
The Labor Court should consist of One Chairperson and Two Members. High Court Judges or individuals qualified/eligible to be High Court Judges in Nepal are qualified to be the Judges of the Labor Court. The Tenure for the Member and Chairperson is Four Years except for sitting High Court Judges.
The Chairperson and Members are collectively authorized to exercise the Jurisdiction of Labor Court. Further, If a chairperson or a member is absent, two of them can adjudicate the case. The Opinion of the Chairperson prevails in circumstances of conflict or differing opinions.
The following are the powers of the Labor Court:
- Examine witnesses and evidence.
- Take the defendant’s statement as needed.
- Include parties in the case if required.
- Inspect relevant workplaces or locations.
- Issue interim orders based on the nature of the case.
- Uphold, modify, or change decisions made by the Office or the employer.
Disclaimer: This article is for informational purposes only and shall not be construed as legal advice, advertisement, personal communication, solicitation or inducement of any sort from the firm or any of its members. The firm shall not be liable for consequences arising out of any action undertaken by any person relying on the information provided herein.