Labour Law in Nepal (2026): Labour Act 2074, Wages & SSF

Nepal's labour law moved into a modern, contributory framework in 2017 (2074 BS) — and 2026 is the year most employers finally feel its full weight. The Labour Act 2074 replaced the older 1992 Act with a single statute covering wages, hours, overtime, leave, social security, termination and dispute resolution. The Social Security Fund (SSF) under the Contribution-Based Social Security Act 2074 then layered a mandatory 31% contribution on top of every formal employment relationship. The minimum wage was revised to NPR 19,550 per month from Shrawan 1, 2082 BS (mid-July 2025), and remains the floor for 2026. The compliance reality is that running a Nepal-based team without a labour-law audit invites both regulatory penalty and constructive-termination claims — and most of the gaps are easy to close once the framework is mapped.

For comprehensive labour and employment law representation in Nepal — covering Labour Act 2074 compliance, SSF and gratuity remittance, terminations, and Labour Court advocacy — see Alpine Law Associates' Labour & Employment Law practice.

This guide is the 2026 (2083 BS) practitioner's view of labour law in Nepal: the Labour Act 2074 architecture, the five recognised employment types, the working-hours and overtime rules, the minimum-wage components, the SSF contribution split, leave entitlements, lawful termination grounds, and the Labour Office and Labour Court dispute-resolution chain. Whether you are an employer building HR policy, an HR head running a labour audit, or an employee with a claim, this is the file your lawyer will work from.

Alpine Law Associates — Nepal Bar Council-registered employment-law team handling HR policy, contract drafting, SSF compliance, terminations and Labour Court disputes for 1,000+ clients.

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What is the Labour Act 2074 and what does it govern?

The Labour Act 2074 (2017), enacted in Bhadra 2074 BS and effective from 4 Bhadra 2075 (September 2018), is the principal employment-law statute in Nepal. It replaced the older Labour Act 2048 (1992) and consolidated wages, hours, leave, termination, occupational safety, and dispute resolution into a single framework. The Act applies to every formal employer-employee relationship in the country, with limited exclusions for the public service, military, police, and certain regulated professions covered by their own service rules.

The companion Labour Rules 2075 (2018) operationalise the Act. Together with the Contribution-Based Social Security Act 2074 (which set up the Social Security Fund), the Bonus Act 2030, and the Trade Union Act 2049, they form the complete labour-law stack. Sectoral statutes — for media, finance, transport — supplement these with industry-specific provisions. The Department of Labour (under the Ministry of Labour, Employment and Social Security) administers the framework; Labour Offices in each district handle inspections and disputes, and Labour Courts hear contested matters at the appellate level.

What are the five employment types under the Labour Act 2074?

The 2074 Act recognises five distinct employment categories. Misclassification — typically calling a regular employee "casual" or "consultant" to avoid SSF and termination obligations — is one of the most common compliance gaps and one of the most-litigated issues at Labour Courts.

• Regular employment. The default, full-scope employment relationship. Indefinite duration, full benefits, full SSF coverage, full termination protections. After a probation period (up to six months), an employee in any other category typically converts to regular if the work continues.
• Work-based employment. Engagement for a specific defined work or project; the relationship ends when the work is completed. Used for project-based engagements (construction, software builds, event execution).
• Time-based employment. Engagement for a fixed period — typically used for seasonal hire, fixed-term contracts, or cover for parental leave. Renewal beyond the originally fixed term may convert the employment into regular.
• Casual employment. Engagement of fewer than seven days at a stretch, with daily or short-term work patterns. Limited SSF and termination protections; misuse of "casual" labels for ongoing work is a frequent violation.
• Part-time employment. Working hours less than the full statutory week. Pro-rata wages and benefits; SSF coverage applies.

What is the minimum wage in Nepal in 2026?

The current minimum wage, effective from Shrawan 1, 2082 BS (15 July 2025) and in force throughout 2026, is NPR 19,550 per month. The wage is structured in two components prescribed by the Ministry of Labour:

• Basic salary: NPR 12,170 per month — the foundational pay element on which SSF, gratuity, provident fund, and bonus calculations are based.
• Dearness allowance (DA): NPR 7,380 per month — a cost-of-living component added to the basic.
• Daily-wage equivalent: NPR 754 per day for daily-wage workers — usually applied to construction, agriculture, and casual labour.
• Hourly-wage equivalent: NPR 101 per hour for part-time and hourly workers.

The minimum wage is the legal floor. Sectoral collective agreements, individual contracts, and industry custom often set higher wages — and the basic-DA split matters because some statutory benefits (gratuity, SSF) are computed on basic alone or basic-plus-DA depending on the head. The minimum is reviewed periodically by a Minimum Wage Determination Committee under the Ministry of Labour, which publishes revisions in the Nepal Gazette. Employers paying below the minimum face penalties and back-pay liabilities running into substantial sums.

Working hours, overtime and rest periods under the Labour Act 2074

Standard working hours are eight hours per day and forty-eight hours per week, typically over six days. Workers must receive at least one weekly rest day. The Act mandates a meal/rest break of at least thirty minutes after five continuous hours of work. Night-shift work attracts additional safeguards under the Labour Rules and is restricted for certain categories (women in specified industries, young workers).

Overtime — work beyond the standard hours — must be voluntary and is capped at four hours per day and twenty hours per week. Overtime wages are paid at 1.5 times the regular hourly rate. Employers must maintain daily attendance and overtime records that survive labour-office inspection. Working on a public holiday or the weekly rest day attracts a higher premium under collective agreements where applicable.

Social Security Fund — what is the 31% really for?

The Contribution-Based Social Security Act 2074 (2017) established the Social Security Fund (SSF) and made employer participation mandatory for most formal-sector workplaces. The combined 31% contribution — 11% deducted from the employee's wage and a further 20% paid by the employer — funds five social-security schemes that progressively cover the workforce: medical and health, accident and disability, dependants on death of a contributor, old-age (pension), and maternity protection. The SSF is administered by the Social Security Fund secretariat at ssf.gov.np and accepts contributions on a monthly cycle.

For employers, SSF compliance has three operational layers: registering the establishment with SSF, registering each employee, and remitting the 31% within fifteen days of the wage cycle. Late remittance attracts interest and penalties, and persistent non-compliance can trigger investigation by the Labour Office and the SSF secretariat. For the employee, the SSF is the primary safety net that replaces the older Provident Fund and gratuity arrangements; service before SSF rollout retains its old-regime entitlements, but new service flows into SSF benefits.

What leave entitlements does an employee have in Nepal?

• Annual leave: 13 days of paid leave per year, typically accruing at one day per month of service. Unused annual leave can be carried forward up to a cap or encashed at year-end depending on the contract.
• Sick leave: 12 days per year, fully paid. Medical certification may be required for absences beyond a defined threshold.
• Public holidays: The Government of Nepal publishes the list of public holidays each year; employees are entitled to paid leave on these days. Working on a public holiday triggers additional pay.
• Maternity leave: 98 days total, of which a minimum of 60 days is fully paid. The leave can be split before and after delivery as the employee elects, with at least the immediate post-delivery period taken consecutively.
• Paternity leave: 15 days fully paid for the male employee on the birth of a child.
• Bereavement leave: 13 days for funeral and mourning rituals on the death of a close family member, fully paid.
• Festival allowance: Equivalent to one month's basic salary, paid annually around the major festival (Dashain or as designated by the contract).

What are the lawful grounds for terminating an employee in Nepal?

The Labour Act 2074 codifies a closed list of permissible termination grounds. Termination on any ground outside this list — or termination on a permitted ground without following the prescribed procedure — is unlawful and exposes the employer to reinstatement orders, back-wages, and damages.

1. Mutual agreement. Employer and employee both agree to end the relationship; documented in writing and typically with a separation package.
2. Resignation by the employee. With notice as prescribed in the contract or the Act (typically 30 days), unless the employer waives the notice period.
3. Completion of work or fixed term. For work-based and time-based employees, the engagement ends naturally on completion or expiry. Renewal patterns can convert this into regular employment.
4. Probation termination. During probation (up to six months), termination is permitted with shorter notice and no severance. Beyond probation, full termination protections apply.
5. Redundancy. Where the role is genuinely no longer needed (business closure, restructuring, technological change). Notice and severance are mandatory; selection must be reasonable and non-discriminatory.
6. Misconduct. Grave or repeated misconduct as defined in the Act and the employer's HR policy — fraud, theft, violence, repeated insubordination, breach of confidentiality. A disciplinary procedure (notice, hearing, decision) must be followed; summary dismissal without process is rarely upheld.
7. Continued absence. Unauthorised absence beyond the threshold (typically 30 consecutive working days) following notice.
8. Health-related termination. Medical incapacity to perform the role with no reasonable accommodation, certified by a medical board.

For redundancy and most non-misconduct terminations, severance pay is calculated on length of service — typically half a month's basic salary per completed year of service, subject to the Act's specifics. Notice of one month or pay in lieu is the standard minimum; senior or specialised roles often have longer notice in their contracts.

How are labour disputes resolved in Nepal?

The dispute-resolution chain runs through a structured ladder under the Labour Act 2074. Internal resolution comes first: the employer's grievance procedure or works committee should be the first port of call. If the dispute cannot be resolved internally, the parties move to the Labour Office at the relevant district. The Labour Office mediates and may issue directions; either side dissatisfied with the outcome can appeal to the Labour Court.

The Labour Court is a specialised tribunal with three members hearing contested matters — unlawful termination, unpaid wages, SSF disputes, working-condition grievances. Labour Court decisions are binding and execution-enforceable. A further appeal lies to the Supreme Court on substantial questions of law. Most labour disputes in 2026 settle at the Labour Office stage; the Labour Court receives the residual hard cases. For corporate clients, the cost-effective approach is preventive — clean contracts, documented HR policy, and procedurally correct terminations rarely produce Labour Court files.

Bonus, gratuity, provident fund — the historical entitlements

The Bonus Act 2030 requires profitable enterprises to distribute 10% of net profit as employee bonus, capped per the Act's formula. Eligibility kicks in after a defined service period, typically half a year. The gratuity and provident fund regimes that previously sat outside SSF have largely been folded into the SSF framework for new entrants since 2074, though pre-existing entitlements continue under the older arrangements. Employers running mixed workforces — some pre-SSF, some SSF — need careful payroll segmentation to avoid double counting or under-payment.

Trade unions and collective bargaining in Nepal

The Trade Union Act 2049 (1992) governs the formation, registration, and operation of trade unions. An enterprise with ten or more workers may have an enterprise-level union; sector-wide federations operate at the national level. The Labour Act 2074 recognises collective bargaining and protects the right to strike, subject to procedural pre-conditions — notice, attempt at negotiation, and Labour Office referral. Lockouts by employers are similarly regulated. In practice, large industrial sectors (manufacturing, transport, hospitality, banking) have active union activity; the formal SME sector typically does not.

Common labour-law compliance gaps in Nepal in 2026

• Misclassification. Calling a regular employee a "consultant" or "contractor" to avoid SSF and termination exposure. Substance-over-form analysis at Labour Court usually unwinds the misclassification with retrospective liability.
• SSF non-registration or short remittance. Employers paying only take-home wages without registering for SSF or remitting the 31% expose themselves to interest, penalties, and potential prosecution under the Contribution-Based Social Security Act 2074.
• Probation extended beyond six months. Continuing the probationary status to keep an employee in lower protection — Labour Court treats post-six-month service as regular employment regardless of label.
• Termination without process. Summary dismissal for misconduct without a written notice, hearing, and reasoned decision is routinely set aside on Labour Court appeal.
• Below-minimum wages. Splitting "take-home" packages in ways that make the basic-DA combination fall below NPR 19,550 — the Labour Office checks the basic-plus-DA combination, not just the take-home.
• No written contract. The Labour Act requires a written employment agreement for every employee. Verbal arrangements are presumed against the employer in disputes.

How can Alpine Law Associates help with labour-law matters in Nepal?

Alpine Law Associates handles labour and employment law work across four engagement types. The first is HR architecture for new and growing companies — employment-contract templates, HR policy / employee handbook, SSF onboarding, leave and benefits structuring. The second is operational support — periodic labour audits, contract renewals, performance and disciplinary documentation, and post-event review of terminations to confirm Labour Act 2074 compliance. The third is dispute-side work — defending employers against unlawful termination, wage and SSF claims, and trade-union matters at Labour Office and Labour Court. The fourth is employee-side representation — for senior executives and employees with substantive claims, particularly unlawful termination, unpaid wages, and discriminatory treatment.

For corporate clients, we run labour law alongside related company registration and ongoing compliance matters in a single counsel relationship. As a full-service law firm in Nepal, we bring the corporate, contract, and dispute teams together where labour issues touch broader business questions.

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Last reviewed: April 2026