Labor Audit in Nepal । HR Audit

Introduction to Labor Audit in Nepal

Labor Audit in Nepal is a Brief and Systematic Review of the Policy, Procedure, Record and Practice of an Organization/Company. It is conducted to compare and contrast its compliance with the Labor Laws, Regulations and Standards of Nepal.

All enterprises in Nepal, including banks, financial institutions, insurance companies, non-governmental organizations, companies, firms, and cooperatives, are responsible for conducting labor audits. It is applicable for both Profit Making and Non-Profit Organizations.

Relevant Laws Governing Labor Audit

Nepal’s Labor audits are governed by laws and regulations that promote employee fairness and rights. The Primary Legal Framework of Labor Audit in Nepal are:

Labor Act 2017

The Labor Act is the cornerstone of Labor Laws in Nepal. It has been made mandatory for enterprises and companies to conduct annual labor audits.

Labor Regulations 2017

Labor Regulations 2017 has laid down the Procedural Guide for Labor Auditing in Nepal and the due method of Labor Management.

Labor Audit Standards 2018

Labor Audit Standards have set out the procedure for conducting a labor audit in Nepal, including selecting an auditor and the precise steps of labor auditing.

Objectives of Labor Audit

The Objectives of Labor Audit in Nepal are as follows:

1. To Ensure Compliance with Labor Act, Rules, Regulations, Directives and Standards.
2. To Protect and Promote the Rights of the Labor, which consists of their Wage, Working Conditions and other Remunerations.
3. To make Companies Accountable and Transparent in their Labor Treatment Policies.

Process of Labor Audit in Nepal

The Process of Labor Audit in Nepal are:

Step 1: Determination of Labor Audit Schedule

Labor Audits are to be conducted annually, and Poush should submit the report to the relevant authority mentioned below. Therefore, Companies must schedule their Audit within November/December (Mangsir).

Step 2: Selection of Labor Auditor

Companies can select a Company/Firm offering Labor Auditing Services or appoint a Labor Auditor. They must meet the Eligibility criteria for Labor mentioned below.

Step 3: Preparation before Audit

The Company must provide the information and documents required for the Auditing Process. The Information and Documents recommended are:

1. Records of the Employee
2. Policies and Directives, if any
3. Financial Records

Step 4: Labor Audit according to Labor Audit Standards

The Labor Audit, according to the Labor Audit Standards, include:

1. Collection and Evaluation of the Above Information.
2. Physical Introspection and Assessment of Conditions.
3. Interviews with Personnel, HR Team, Employee and Management.
4. Other Appropriate Procedures as deemed Necessary.

Step 5: Preparation of Audit Report

The Labor Auditor is responsible for the Preparation of the Labor Audit Report.

Step 6: Submission of Audit Report

After the submission of the Audit Report by the auditor, the Company/Organization must submit a copy of the report to the regulatory authority mentioned below by the end of Poush.

Labor Auditor

A Labor Auditor in Nepal conducts the Labor Audit of a Company or an Organization according to the duties listed below. For an Individual to act as a Labor Auditor, they must be a Nepali with at least a bachelor’s Degree and two years of Experience working in a Managerial Role within an Industry or Enterprise.

For an entity or another company to act as the labor auditor, they must be officially registered under the existing laws of Nepal, and their working area must consist of labor-related matters. Moreover, the Individuals who represent the Company during the Audit Process must fulfil the Criteria of a Labor Auditor.

Submission Deadline of Labor Audit in Nepal

Upon completion of the labor audit, enterprises are required to submit one copy of the audit report to the following regulatory authorities based on their nature:

1. Bank and Financial Institutions: Nepal Rastra Bank.
2. Insurance Companies: Insurance Board of Nepal.
3. Non-Governmental Organizations: District Administration Office.
4. Other Enterprises: Establishment/Operational Authorities.

Duties of Auditor and Auditee Company

The Duties of the Company/Organization on the verge of being Audited are:

1. To provide accurate information and details about their operations to the labour auditor.
2. To offer remuneration and other benefits to the labour auditor.
3. Assist the labour auditor as required during the audit process.
4. Submit one copy of the labour audit report to the relevant regulatory authorities.

The Duties of the Labor Auditor are as follows:

1. To prepare the labour audit report based on accurate facts and findings.
2. To complete the audit within the stipulated timeframe.
3. To maintain the confidentiality of any sensitive information encountered during the audit.

Additional Laws

If the Labor Auditor involved themselves in the Crime of Falsifying the Labor Audit Report, the auditor will be penalized with NPR 20,000 per each Falsification of the Report.