Salary Law in Nepal 2082/83 (2026)

One month basic remuneration, not gross or CTC. Pro-rata for workers with less than a year of service.

At 1.5× the basic hourly rate, capped at 4 hours a day and 24 hours a week, with the worker's consent. Children under 18 cannot do overtime.

Three statutes work together: the Labour Act 2074 governs wage period, deductions, overtime, festival expense and severance; the Bonus Act 2030 governs the annual profit-sharing bonus; and the Income Tax Act 2058 governs salary TDS. SSF sits on top via the Contribution-Based Social Security Act 2074. A complete payroll has to reconcile across all four, not just one of them, which is why payroll set-ups built only on the Labour Act often miss tax or SSF detail.

Income-tax withholding (TDS), the employee's SSF share (11% of basic), authorised loan or cooperative repayments, court-ordered deductions, and advances already paid. Fines, damages and till-shortages cannot be deducted unilaterally — they typically require written acknowledgement and, in some cases, Labour Office approval. Total deductions cannot reduce take-home below what the Labour Act 2074 permits, which protects the worker's net pay floor.

The Bonus Act 2030 requires profit-making enterprises to allocate 10% of net profit (before bonus and tax) to a bonus fund and distribute it to eligible employees within eight months of the fiscal year-end. Eligibility requires service for at least half the working period; casual and certain shift workers are excluded. The bonus is capped at eight months' salary for workers up to twice the minimum wage and six months' salary above that, distributed in cash.

An employee who has worked for at least half of the working period in the fiscal year qualifies for bonus, subject to the Act's category exclusions. Casual workers and certain shift workers are typically outside the framework. New employees in their first year are eligible only on a pro-rata basis if they meet the half-year threshold. Where eligibility is contested — typically in mid-year joiners or leavers — the half-year test is the central question.

For workers with less than a full year of service, the festival expense is pro-rata on the basic salary based on months worked in the year — for example, five months worked gives 5/12 of one month's basic. The default payment time is around Dashain, but a worker may request payment aligned with their own main festival. The pro-rata calculation prevents a windfall for new joiners while still ensuring the entitlement scales fairly.

No. Festival expense under the Labour Act 2074 is one month's basic remuneration each year, paid by every employer to every regular employee, regardless of profit. Bonus under the Bonus Act 2030 is 10% of net profit allocated to a bonus fund by profit-making enterprises, distributed to eligible employees with caps. So festival expense is universal and profit-neutral; bonus is profit-dependent and conditional. A worker can receive both, neither, or one only.

For SSF-enrolled employers under the Contribution-Based Social Security Act 2074, the 31% SSF contribution on basic salary (11% employee + 20% employer) replaces the older statutory Provident Fund (10% + 10%) and gratuity arrangements. EPF (Karmachari Sanchaya Kosh) and CIT continue to operate for civil servants in pensionable service, voluntary contributors and employers that have not yet migrated. Hybrid arrangements exist during transition periods.

Salary TDS is progressive — withheld monthly under the Income Tax Act 2058 as an advance against annual liability, with slabs running from 1% (the social security tax band) up to a top rate around 36% under the current Finance Act, with marital-status thresholds. Female employees receive a 10% rebate on the employment-income tax computed. The employer deposits TDS and files the e-TDS return by the 25th of the following Nepali month through the IRD taxpayer portal.

The employer deducts salary TDS each month and deposits it with the IRD by the 25th of the following Nepali month, together with the monthly e-TDS return through the taxpayer portal. The employee then receives a withholding certificate and claims the TDS as a credit on the annual income-tax return. Late deposit or filing attracts interest and a fee under the Income Tax Act 2058, so the monthly cadence has to be kept disciplined.

Yes. Under the Income Tax Act 2058, female employees receive a 10% rebate on the employment-income tax computed, applied at the time of withholding and reconciled at the annual return. The rebate is built into the salary-TDS computation by employers' payroll systems, with the gender treatment as recorded by the employer. It is a longstanding feature of Nepali salary tax, intended to support female workforce participation.

Salary can be paid in cash for smaller wage amounts, but bank-account payment is the norm for formal employment and is generally expected at scale. The Income Tax Act 2058 has rules about cash transactions that affect the deductibility of salary as a business expense above set thresholds, and SSF and TDS work most smoothly through bank-routed payroll. So while small-cash payments remain possible, bank-routed salary is the standard and the safer route.

Severance under the Labour Act 2074 is generally one month's basic salary per completed year of service on lawful termination — calculated on the basic, not the gross or CTC. Some terminations, such as those for serious misconduct after a proper inquiry, can affect severance entitlement. The severance computation is one of the most commonly disputed items when a termination reaches the Labour Court, which is why the basic-versus-allowance split set at the contract stage matters.

Late payment of salary breaches the Labour Act 2074 and exposes the employer to a penalty under the Act's penalty regime, alongside the worker's right to claim the unpaid amount with interest. Persistent late payment is a ground for the worker to raise a complaint at the Labour Office and, if unresolved, escalate to the Labour Court. The Act treats timely wage payment as a core employer obligation, not a contractual nicety.

Reimbursements for genuine business expenses are generally not salary, provided they are supported by receipts and policy. Where the "reimbursement" is in substance a fixed allowance paid regardless of expense, the IRD and Labour Office can re-characterise it as salary for tax and entitlement purposes. A clean policy distinguishing reimbursements from allowances, with receipt-based payouts and reasonable amounts, is what supports the non-salary treatment in an inspection or audit.

Yes. A worker can raise unpaid salary internally with the employer, then file a complaint with the local Labour and Employment Office, which can investigate and order recovery with interest and a penalty on the employer. Unresolved disputes proceed to the Labour Court. The worker should retain payslips, the employment contract, attendance records and any written demand for payment to support the claim, and act within the statutory time window.

Commission, sales incentives and similar variable pay sit alongside the regular wage and are generally treated as part of remuneration for the purposes of the worker's contractual rights. For statutory entitlements that key off basic salary — SSF, festival expense, overtime, severance — only the basic component is the reference, not the variable element. A well-drafted incentive policy distinguishes the variable element from basic and sets clear vesting and payment rules.

When designing the salary structure for a new business, when setting festival expense and the Bonus Act distribution, when computing severance on termination, when an IRD or Labour Office assessment surfaces a payroll issue, and when migrating PF/gratuity into SSF. A lawyer or labour adviser confirms the right basic-allowance split, runs the back-pay computation where necessary, and represents the employer or worker if the matter reaches an assessment or the Labour Court.