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The Labour Act 2074 (the "new Act") has made key changes to employment law in Nepal. Compared to the previous law, employers are now imposed with various additional obligations. We discuss some issues below. Please note that the list below is non-exhaustive.

1.   Employment agreements

Employment contracts are mandatory irrespective of the type of employees. Employers should conclude the agreement before deploying any individual in work and revise the existing employment agreements in a way to address the requirements under new Act.

2. Provident fund and gratuity

Employers are now mandated to deposit provident fund and gratuity funds into the Social Security Fund after its establishment. Unlike previously, all types of employees should be provided provident fund and gratuity from the first day of appointment. Employees should be provided with such benefits from the date of the enactment of the new Act. The rate of gratuity fund as also been changed to 8.33% of base salary per month.

3. Insurance obligations

Employers are now required to obtain accidental and health insurance policies for all employees. This is a requirement that was not in place previously. Employers should consult their insurers to obtain comprehensive coverage to avoid any future risks. Medical insurance should cover annual medical costs up to NPR 100,000 and accidential insurance should at least be of NPR 700,000. 

4. Committees

Employers with over 10 employees is required to form a Laour Relation Committee and in enterprises where over 20 people work are also required to form Helath and Saftey Committees.  

5. New leave and holiday structure

Employees are eligible for 18 days of annual leave per year which accumulates 1 day of every 20 days worked. The new Act also introduces 15 day paternity leave for new fathers. 


Please note that this guide is published for information only and should not be considered as legal advice. You are requested to seek legal advice for specific factual situations. If you need further information on this matter please Contact Us