The Labor Act 2074 Nepal (also referred to as the Labour Act 2017 Nepal) serves as the principal legislation governing employment relationships, workplace rights, and employer obligations across the country. Enacted to modernize Nepal's labour framework, this statute establishes comprehensive standards for employment contracts, working conditions, wage payments, leave entitlements, and dispute resolution mechanisms.
The legislation matters significantly for employers and employees alike. For employers, compliance with Labor Act 2074 Nepal requirements prevents costly penalties, operational disruptions, and legal disputes. For employees, the Act guarantees fundamental workplace rights, fair treatment, and social security protections. The regulatory objective centers on balancing economic development with worker welfare while ensuring standardized labour practices across all sectors.
Compliance value extends beyond legal obligation. Organizations adhering to Labour Act 2017 Nepal provisions demonstrate corporate responsibility, attract quality talent, and maintain sustainable operations. The Act applies to commercial enterprises, industrial establishments, and service sectors, making it essential knowledge for business owners, human resource professionals, and legal practitioners operating within Nepal's jurisdiction.
The Labor Act 2074 Nepal establishes the foundational legal framework for all employment relationships within the country. Promulgated in 2017, this statute consolidates and modernizes previous labour legislation, addressing contemporary workplace realities while aligning with international labour standards. The Act contains 121 sections organized into chapters covering employment creation, employment management, working conditions, wages, leave, safety, welfare, special provisions for women and disabled persons, dispute resolution, and penalties.
The Labour Rules, 2075 serve as the procedural companion to the primary Act, operationalizing statutory provisions through detailed implementation guidelines. These Rules specify administrative procedures, documentation requirements, timeframes for compliance actions, and specific forms for various labour processes. Employers and legal practitioners must consult both instruments simultaneously, as the Rules provide the "how" to the Act's "what."
The Constitution of Nepal 2015 guarantees fundamental rights relevant to labour regulation, including the right to employment (Article 33), right to labour (Article 34), right to social security (Article 43), and rights of women (Article 38). Labor Act 2074 Nepal operationalizes these constitutional guarantees, translating broad rights into enforceable statutory obligations. Any provision contradicting constitutional labour rights may be challenged as unconstitutional.
Company laws, primarily the Companies Act 2063, govern the formation and operation of employer entities. While company law establishes business structures, Labor Act 2074 Nepal regulates the employment relationships those entities create. All companies registered under the Companies Act must additionally comply with labour legislation when hiring personnel, creating dual compliance obligations.
The Social Security Act 2074 and Social Security Rules 2075 coordinate with labour legislation to create comprehensive worker protection. Labor Act 2074 Nepal mandates employer registration with the Social Security Fund, while the Social Security Act establishes contribution mechanisms and benefit structures. Together, these instruments ensure income security, medical benefits, and accident coverage for Nepal's workforce.
Labour Offices operate at district levels across Nepal, serving as primary administrative bodies for labour regulation implementation. These offices handle employment contract registrations, process work permit applications for foreign nationals, conduct workplace inspections, receive and investigate worker complaints, and enforce compliance with Labor Act 2074 Nepal provisions. The Department of Labour coordinates national labour policy, maintains labour statistics, and provides technical guidance to district offices.
The Ministry formulates national labour policy, proposes legislative amendments, and coordinates with international labour organizations. This ministry oversees the Department of Labour, sets enforcement priorities, and represents Nepal in international labour conventions. Policy directives issued by the Ministry guide interpretation and application of Labour Act 2017 Nepal standards across all sectors.
Labour Courts possess exclusive jurisdiction over employment disputes arising under the Act. Established under the Labour Act, these specialized tribunals handle wrongful termination claims, wage disputes, discrimination complaints, and safety violations. Labour Court procedures emphasize speedy resolution, with cases typically resolved within 90 days. Appeals from Labour Court decisions lie with the Supreme Court of Nepal on questions of law.
Labour inspectors conduct periodic and surprise inspections of workplaces to verify compliance with working conditions, safety standards, and documentation requirements. Inspectors possess authority to issue improvement notices, impose on-the-spot fines for minor violations, and recommend prosecution for serious offenses. The Social Security Fund operates parallel compliance mechanisms for contribution-related enforcement.
Labor Act 2074 Nepal applies to all "enterprises" defined broadly to include factories, companies, firms, associations, organizations, and any entity employing workers for economic purposes. Coverage extends to:
An "employee" or "worker" under the Act means any person employed for remuneration in any capacity, including:
The definition emphasizes the employment relationship rather than job title, meaning individuals labeled "consultants" or "contractors" may still qualify as employees if they work under employer direction and control.
Certain categories fall outside standard Labour Act 2017 Nepal coverage:
Special provisions apply to tea estates, carpet factories, and construction sectors regarding working hours and safety standards.
All companies registered in Nepal, including foreign-invested enterprises, must comply with Labor Act 2074 Nepal provisions regardless of size. Even single-employee establishments must maintain employment contracts, wage records, and safety standards. Multinational companies operating in Nepal must adapt global HR policies to meet local statutory requirements, which often exceed minimum standards required in other jurisdictions.
Labor Act 2074 Nepal recognizes four primary employment categories:
Permanent Employment: Open-ended employment continuing until lawful termination by either party. Permanent employees enjoy full statutory benefits including leave accrual, severance entitlements, and procedural protections against dismissal.
Time-Bound Employment: Fixed-term contracts for specific durations not exceeding one year initially, renewable under certain conditions. Common for project-based work, seasonal operations, or maternity leave coverage. Time-bound employees receive proportional benefits but may have limited termination protections.
Work-Based Employment: Task-specific contracts terminating upon completion of defined work or achievement of specified objectives. Prevalent in construction, consulting, and project-based industries. Benefits calculated based on contract duration and terms.
Casual/Part-Time Employment: Irregular engagement for intermittent work not exceeding specified hourly thresholds. Casual workers receive pro-rated benefits but generally lack job security protections afforded to permanent staff.
Each classification triggers distinct compliance obligations:
Employers misclassifying permanent employees as casual or contract workers face significant legal exposure. Labour authorities may reclassify arrangements based on actual working relationships rather than contractual labels. Consequences include:
Proper classification requires analyzing control, integration, exclusivity, and economic reality rather than relying solely on contractual terminology.
Every employment contract under Labor Act 2074 Nepal must contain:
An appointment letter serves as initial documentation confirming employment offer and basic terms, typically issued before employment commencement. The formal employment contract, required within 15 days of joining, provides comprehensive terms and conditions. Both documents carry legal weight, but the contract must contain all statutory elements. Best practice involves issuing detailed appointment letters followed by comprehensive contracts incorporating company policies.
Labor Act 2074 Nepal permits probationary periods up to six months for technical positions and three months for non-technical roles. During probation:
Confirmation should be documented in writing, specifying the effective date of permanent status and any changed terms.
Employers must maintain employment records for 5 years post-termination, including:
HR policies must align with statutory minimums while addressing company-specific requirements. Policies falling below Labour Act 2017 Nepal standards are unenforceable, while exceeding statutory requirements creates binding obligations.
Labor Act 2074 Nepal limits standard working hours to 8 hours per day and 48 hours per week for adult workers. For factories operating continuous processes, weekly averages may balance daily variations, provided no single day exceeds 10 hours and weekly totals remain within 48 hours. Office-based enterprises typically observe 9 AM to 5 PM schedules with one hour for meal breaks, which do not count toward working hours.
Overtime refers to work performed beyond standard daily or weekly limits. The Act mandates:
Employers cannot compel overtime through contract clauses or disciplinary threats. Refusal to work overtime (except genuine emergencies) cannot justify termination.
Every worker is entitled to one full rest day per week, typically Sunday in Nepal. For continuous process industries, rotating rest days are permitted provided each worker receives 26 rest days quarterly. Work on rest days requires:
Effective compliance requires:
Labor Act 2074 Nepal mandates wage payments at regular intervals not exceeding one month. Monthly-paid employees must receive salaries by the 7th day of the following month; daily or weekly workers must be paid within 3 days of the wage period's end. Wage payments must be made on working days during working hours at the workplace or through banking channels.
Minimum wage rates are prescribed by government notification and revised periodically. Current minimum wages vary by sector and skill level, with unskilled workers entitled to approximately NPR 13,450 monthly (subject to revision). Employers must display wage rate notices in conspicuous workplace locations.
Beyond basic wages, employers commonly provide:
While some allowances are discretionary, others become binding through custom, contract, or collective agreement.
Permissible wage deductions under Labour Act 2017 Nepal include:
Total deductions cannot exceed 50% of monthly wages except for tax obligations.
Employers must provide itemized payslips showing:
Payroll records must be maintained for 5 years and produced during labour inspections.
Annual Leave: Workers accrue 1 day per 20 days worked (approximately 18 days annually for full-time employees). Leave must be utilized within 2 years of accrual; unused leave is forfeited unless contract/policy provides otherwise. Employers may require leave scheduling based on operational needs but cannot unreasonably deny requests.
Sick Leave: 12 days annually for illness or medical treatment. Medical certificates required for absences exceeding 2 consecutive days. Unused sick leave accumulates up to maximum limits specified in employment contracts.
Maternity Leave: 14 weeks (98 days) for female employees, with 60 days paid by employer and 38 days through social security benefits. Leave must include 14 days pre-natal and 84 days post-natal. Additional unpaid leave available for pregnancy-related complications.
Paternity Leave: 15 days for male employees following childbirth or miscarriage of spouse.
Bereavement Leave: 13 days for death of immediate family members (spouse, child, parent, sibling).
Special Leave: Additional categories may include menstrual leave (1 day monthly in certain sectors), study leave, and unpaid personal leave per company policy.
Nepal observes numerous public holidays based on lunar calendar and national significance, typically 16-18 days annually including:
Weekly holidays (usually Sunday) are separate entitlements. Work on public holidays requires compensatory leave or double wage payment.
Annual leave generally must be utilized within the accrual year plus one additional year. Sick leave accumulation limits depend on company policy but cannot be less than statutory minimums. Maternity and paternity leave cannot be carried forward or commuted to cash.
Compliant leave policies should:
Labor Act 2074 Nepal imposes comprehensive safety obligations on employers, requiring safe workplaces free from hazards likely to cause injury or health impairment. Specific duties include:
Written safety policies must address identified workplace hazards, emergency procedures, and worker responsibilities. Training programs must cover:
Safety committees comprising employer and worker representatives meet monthly to review incidents, inspect premises, and recommend improvements.
Workplace accidents require immediate medical attention and thorough documentation including:
Fatal accidents trigger mandatory Labour Office notification and potential criminal investigation if negligence is suspected.
Proactive compliance involves:
Labor Act 2074 Nepal recognizes misconduct warranting disciplinary action, including:
Disciplinary actions must follow fair procedure:
Complete disciplinary records must include:
Unlawful disciplinary practices include:
Employer-initiated termination is permitted for:
Termination procedures require:
Employees may resign by providing written notice:
Employers cannot unreasonably refuse resignation acceptance but may enforce notice period requirements. Immediate departure without notice may result in forfeiture of pending benefits or liability for replacement costs.
Upon termination or resignation, employers must provide:
Labor Act 2074 Nepal mandates employer registration with the Social Security Fund within 3 months of establishment or Act commencement, whichever is later. Post-registration obligations include:
Labour compliance and social security compliance intersect in several areas:
Social security documentation requirements include:
Frequent compliance failures include:
Comprehensive compliance requires:
Frequent Labour Act 2017 Nepal violations include:
Penalty structures under Labor Act 2074 Nepal include:
General Violations: Fines from NPR 10,000 to NPR 50,000 for first offenses; doubled for repeats within 2 years.
Wage-Related Violations: NPR 20,000 to NPR 100,000 for wage payment delays, unauthorized deductions, or overtime violations.
Child Labour: NPR 50,000 to NPR 200,000 for employing children under 14; NPR 100,000 to NPR 300,000 for hazardous work by adolescents.
Safety Violations: NPR 30,000 to NPR 100,000 for safety standard breaches; criminal liability for accidents causing death or serious injury due to negligence.
Documentation Failures: NPR 10,000 to NPR 30,000 for record-keeping violations or failure to display required notices.
Effective compliance programs include:
Legal practitioners specializing in Labour Act 2074 Nepal provide essential guidance on interpreting statutory requirements in specific business contexts. Advisory services encompass classification of workers, contract drafting, policy development, and compliance strategy formulation tailored to industry sectors. Regular legal consultations ensure employers remain current with legislative amendments and judicial interpretations affecting workplace obligations.
Professional legal support includes preparation of employment contracts, employee handbooks, disciplinary procedures, and safety policies meeting statutory standards while addressing organizational needs. Law firms represent employers during Labour Office inspections, responding to inquiries, negotiating settlements, and defending against enforcement actions. Documentation review ensures personnel files, termination records, and wage registers withstand regulatory scrutiny.
Preventive legal services identify compliance gaps before they generate disputes. When conflicts arise, legal counsel assists in negotiating settlements, conducting domestic inquiries, and representing employers in Labour Court proceedings. Alternative dispute resolution mechanisms, including mediation through Labour Offices, often resolve conflicts efficiently without litigation.
Systematic compliance reviews examine employment practices, documentation, and policies against Labour Act 2017 Nepal requirements, producing actionable recommendations. Training programs for management and HR personnel cover lawful hiring practices, disciplinary procedures, termination protocols, and safety obligations, reducing inadvertent violations and promoting respectful workplace cultures.
Organizations seeking to establish or maintain compliant employment practices may consult qualified legal professionals for tailored guidance specific to their operational contexts and workforce structures.
What is Labor Act 2074 Nepal?
The Labor Act 2074 Nepal (2017) is the primary legislation governing employment relationships, working conditions, wages, leave entitlements, and workplace safety standards for all enterprises operating in Nepal.
Who is covered by the Labour Act 2017 Nepal?
All enterprises employing one or more workers, including companies, factories, and service businesses. Coverage extends to permanent, temporary, and casual employees across commercial, industrial, and agricultural sectors.
What are the standard working hours under Labor Act 2074?
Standard working hours are limited to 8 hours daily and 48 hours weekly. Overtime is permitted up to 4 hours daily and 24 hours weekly, compensated at 1.5 times regular wages.
Is a written employment contract mandatory?
Yes. Employers must provide written employment contracts within 15 days of hiring, specifying job description, wages, working hours, leave entitlements, and termination conditions.
What is the probation period under Labour Act 2017 Nepal?
Probation periods are limited to 6 months for technical positions and 3 months for non-technical roles. Either party may terminate during probation with 7 days' notice.
How is overtime calculated and paid?
Overtime is calculated at 1.5 times the regular hourly wage for work beyond 8 hours daily or 48 hours weekly. Employers must maintain overtime authorization records.
What leave entitlements do employees have?
Employees are entitled to annual leave (1 day per 20 days worked), 12 days sick leave, 14 weeks maternity leave (female employees), and 15 days paternity leave (male employees).
Can an employer terminate an employee immediately?
Immediate termination is permitted only during probation or for serious misconduct following domestic inquiry. Permanent employees require 30 days' notice or payment in lieu, plus severance for qualifying service.
What is gratuity entitlement under Labor Act 2074 Nepal?
Employees completing over 1 year of service are entitled to gratuity at 8.33% of basic wages for each completed year of service, payable upon termination or retirement.
Are social security contributions mandatory?
Yes. Employers must register with the Social Security Fund and contribute 11% of basic wages (matching employee contributions of 11%) for medical, accident, and pension benefits.
What safety obligations do employers have?
Employers must maintain safe workplaces, provide protective equipment, establish safety committees (20+ employees), conduct training, and report serious accidents within 24 hours.
What constitutes misconduct warranting dismissal?
Misconduct includes theft, fraud, willful damage, insubordination, habitual absenteeism, intoxication at work, sexual harassment, and criminal conviction involving moral turpitude.
What is the redundancy procedure?
Employers must provide 30 days' notice to the Labour Office, follow seniority criteria for selection, pay 30 days' notice or wages in lieu, and provide severance based on service length.
Can employees be forced to work overtime?
No. Overtime must be voluntary except in emergencies threatening life, safety, or property. Refusal to work overtime cannot justify termination or disciplinary action.
What penalties apply for Labour Act violations?
Penalties range from NPR 10,000 to NPR 200,000 depending on violation type. Child labour and safety violations carry highest penalties; repeated offenses incur doubled fines.
How are labour disputes resolved?
Disputes are filed with Labour Courts having exclusive jurisdiction. Labour Offices provide mediation services. Appeals from Labour Court decisions lie with the Supreme Court.
What records must employers maintain?
Employers must maintain employment contracts, attendance records, wage payment vouchers, leave records, safety documentation, and social security contribution records for 5 years.
Are foreign workers covered by Labor Act 2074 Nepal?
Yes. Foreign nationals working in Nepal are covered by the Act and require work permits from the Department of Labour. Their employment contracts must comply with statutory minimums.
What is the minimum wage in Nepal?
Minimum wages are prescribed by government notification and revised periodically. Current rates vary by sector and skill level, with unskilled workers entitled to approximately NPR 13,450 monthly (subject to revision).
Can employment contracts waive Labour Act protections?
No. Any contract provision providing less favorable terms than the Labour Act is void. Employees cannot waive statutory rights, and employers cannot contract out of minimum obligations.
February 26, 2026 - BY Admin