Employment in Nepal is governed by the Labour Act 2017 (2074 BS), with provident fund, gratuity and other benefits paid through the Social Security Fund under the Contribution-based Social Security Act. Here is what employers need to know about leave, pay, tax and ending employment.
The Labour Act sets minimum leave for all employees. Home leave and sick leave can be accumulated, and any accumulated balance is paid out when employment ends.
1 day of paid home leave for every 20 days worked. Can be accumulated up to 90 days.
Paid each year, pro rata in the first year. A medical certificate is needed for more than 3 consecutive days. Can be accumulated up to 45 days.
Before or after the birth, with 60 days on full pay. Up to 1 more month can be granted on medical advice.
Paid leave for a male employee when his wife gives birth.
Set up home leave, sick leave and mourning leave in IceHrm, each with its own accrual, carry forward and approval rules, such as the 90 and 45 day accumulation caps. Employees see their live balance before they apply, and managers see who is away on a shared calendar. Leave management →
The minimum wage is set every two years by the Ministry of Labour, Employment and Social Security on the recommendation of the Minimum Remuneration Fixation Committee. It is made up of a basic wage and a dearness allowance.
From 1 Shrawan 2082 (mid-July 2025): NPR 12,170 basic plus NPR 7,380 dearness allowance. NPR 754 a day or NPR 101 an hour. Separate rates apply to tea estate workers.
With a half-hour break after 5 hours of continuous work, which counts as working time.
Of the basic wage. Overtime is limited to 4 hours a day and 24 hours a week.
Every employee is entitled to a festival allowance (chad parva kharcha) equal to one month's basic wage each year, paid for their main festival, or at Dashain if they don't ask otherwise. Employees with less than a year's service receive a pro-rata amount. After a year of service, employees also receive an annual grade increment of at least half a day's basic wage per month.
Capture attendance and overtime in IceHrm and feed the hours straight into payroll, so overtime is paid on what was actually worked and stays within the daily and weekly limits. Time & attendance →
Nepal taxes individuals at progressive rates under the Income Tax Act 2058, as amended each year by the Finance Act. Employers withhold tax from salaries and deposit it with the Inland Revenue Department. The income year runs from mid-July to mid-July.
| Taxable income | Rate |
|---|---|
| Up to NPR 1,000,000 | 1% |
| NPR 1,000,001 – NPR 1,500,000 | 10% |
| NPR 1,500,001 – NPR 2,500,000 | 20% |
| NPR 2,500,001 – NPR 4,000,000 | 27% |
| Over NPR 4,000,000 | 29% |
The 1% first-band tax does not apply to people contributing to the contribution-based Social Security Fund, sole proprietors or pension income. Women with only employment income get a 10% rebate on the tax payable.
Contributions to the Social Security Fund (SSF) are calculated on the employee's basic salary. The Labour Act's provident fund and gratuity obligations are deposited with the SSF.
Of basic salary. It covers the 10% employer provident fund contribution and the 8.33% gratuity required by the Labour Act.
Of basic salary, withheld by the employer, including the employee's 10% provident fund share.
Medical insurance of at least NPR 100,000 a year (premium shared 50/50) and accident insurance of at least NPR 700,000 (paid by the employer).
Build Nepali pay the way you already structure it, with your own salary components, deductions and formula columns, such as basic salary, dearness allowance and SSF contribution columns. Want to know how well IceHrm handles payroll calculations for Nepal? Contact us or see Payroll →
Employment can be ended only as allowed by the Labour Act, and the employer must give an appropriate and adequate reason. Final dues must be paid within 15 days of employment ending.
| Length of employment | Notice |
|---|---|
| Up to 4 weeks | 1 day |
| 4 weeks to 1 year | 7 days |
| More than 1 year | 30 days |
A resignation must be accepted within 15 days, or it is treated as accepted automatically. Accumulated home and sick leave is paid out at the last basic wage.
Every employee gets 13 days of paid public holidays a year, including May Day. Women get 14, including International Women's Day. The specific days are set by the employer, or by the regulator where one applies. Most festivals follow the lunar calendar, so their dates change every year.
The list above shows commonly observed holidays; employers choose the rest of their 13 days, often including festivals such as Holi, Maha Shivaratri, Buddha Jayanti and Chhath. Employees who work on a public holiday in continuous operations are entitled to a substitute day off.
Leave groups let you publish each year's holiday calendar, and give women employees the extra Women's Day holiday, so the right days are blocked out automatically. Holiday calendars →
No one may be employed without an employment contract, except in casual employment. The contract must set out the wages, benefits and terms of employment, and cannot provide less than the Labour Act.
Send employment contracts for e-signing, store them on the employee's record, and track onboarding and probation end dates with task lists so nothing is missed. Documents & e-signing →
This guide is general information to help you plan HR processes, not legal, tax or financial advice. Employment law and rates change regularly and awards, enterprise agreements and state rules may give employees more than the minimums shown here. Always confirm current requirements with the official sources or a qualified adviser.
Configure leave types, accrual rules and public holidays for Nepal, keep employee records and contracts in one place, and run payroll with your own salary components. Want to know how IceHrm handles payroll calculations for Nepal? Talk to us.
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