Salary Law in Nepal 2082/83 (2026)

Salary law in Nepal is mainly governed by the Labour Act 2074, Bonus Act 2030 and Income Tax Act 2058: wages follow a maximum one-month period, payment can be due within seven days, and payroll must address overtime, festival allowance, bonus, deductions, SSF and TDS. Our labour-law advisory team can help review the structure.

Key Takeaways

Salary rules in Nepal divide payroll into several legal questions. The Labour Act 2074 addresses wage timing, deductions, overtime and festival expense; the Bonus Act 2030 addresses profit-linked employee bonus; the Income Tax Act 2058 addresses salary TDS; and SSF rules address contributions and older provident-fund or gratuity arrangements.

• Wage period: The maximum wage period is one month. Salary is paid within seven days after that period ends.
• Short employment: For work lasting less than a month, payment is made within three days of work completion. Casual workers are paid when the work is completed.
• Overtime: Overtime pay is 1.5 times the basic hourly rate, subject to a four-hour daily and 24-hour weekly cap.
• Festival allowance: Festival expense is one month of basic remuneration each year, with pro-rata treatment for less than a year of service.
• Bonus: A profit-making enterprise allocates 10% of net profit before bonus and tax to the employee bonus fund, subject to the Bonus Act’s conditions.
• TDS: Salary tax is progressive. The current article’s stated range runs from the 1% social security tax band to a top slab around 36%, with a 10% rebate for female employees.
• SSF: For enrolled employers, the stated combined Social Security Fund contribution is 31% of basic salary: 11% employee and 20% employer.

Which laws govern salary and wages in Nepal?

Three principal statutes divide Nepal’s payroll rules. The Labour Act 2074 covers wage periods, deductions, overtime and festival expense; the Bonus Act 2030 covers profit-linked employee bonus; and the Income Tax Act 2058 covers salary TDS. The Contribution-Based Social Security Act 2074 governs SSF contributions and related transition questions.

The Nepal Law Commission is the relevant statutory reference point for the Labour Act, Bonus Act and Income Tax Act. The law does not treat “salary” as one single calculation. Basic remuneration, allowances, overtime, festival expense, bonus, deductions, SSF and TDS can have different rules.

That is why a contract described as “gross salary” or “CTC” does not answer every payroll question. You still need to identify the basic component, the allowance component and the payment that is being calculated. The same split can affect festival expense, overtime, SSF and severance.

When must an employer pay wages in Nepal?

The Labour Act 2074 sets the maximum wage period at one month and requires salary payment within seven days after the wage period ends. For employment lasting less than a month, payment is made within three days after work completion. A casual worker is paid when the work is completed, while the contract sets the wage period.

The wage period should be clear in the employment contract. It may be aligned with the Nepali month, but the legal limit remains important. An employer should not treat an open-ended payroll cycle as permission to delay payment beyond the applicable period.

Late payment can expose an employer to consequences under the Labour Act. The supplied material does not establish one universal penalty amount for every late-payment situation, so a specific dispute should be checked against the facts and the current statutory text.

What salary deductions are allowed in Nepal?

The Labour Act 2074 permits limited salary deductions, including income-tax withholding, the employee’s SSF share, authorised loan or cooperative repayments, court-ordered deductions and advances already paid. Fines, damages and till shortages cannot be deducted unilaterally; written acknowledgement and, in some cases, Labour Office approval are relevant to those deductions.

Salary deductions in Nepal should therefore be separated into statutory withholding, authorised repayment and disputed loss or damage. An employer should not label every reduction as a normal payroll deduction. The total deduction also cannot reduce take-home pay below what the Act permits.

The employee’s stated SSF share is 11% of basic salary for an enrolled arrangement. TDS is a separate withholding process. A loan or cooperative repayment is separate again and should be supported by the relevant authorisation rather than silently inserted into payroll.

How does overtime pay work in Nepal?

Nepal’s overtime rule pays a worker 1.5 times the regular hourly rate calculated on basic salary. Overtime requires the worker’s consent, is capped at four hours a day and 24 hours a week, and cannot be performed by a child below 18. Managerial employees may have contractual alternatives, but those arrangements remain subject to the Act’s minima.

The overtime base is not automatically the worker’s entire gross package. Payroll should identify basic salary, convert it into the regular hourly rate, apply the 1.5 multiplier and record the hours. A higher allowance or CTC figure does not by itself replace the stated basic-salary calculation.

Employers should keep overtime tracking and consent records. If a worker is under 18, the issue is not simply the premium rate: the supplied rule excludes that worker from overtime. For a managerial employee, the contract needs a careful review rather than an assumption that ordinary hourly calculations do not apply.

What is festival allowance in Nepal?

Festival expense, often called festival allowance or Dashain allowance, equals one month of basic remuneration for each year. Dashain is the default timing described in the supplied material, but a worker may request payment around the worker’s main festival. A worker with less than a year of service receives pro-rata treatment based on months worked.

The key calculation is basic remuneration, not gross salary or total compensation. Employers should first identify the basic component in the employment contract and payroll records. Adding transport, housing, special, project or shift allowances to the festival calculation without checking their legal character can change the result.

Workers should also check whether the basic figure changed during the relevant year and how the employer counted months of service. The supplied material establishes the pro-rata principle but does not provide one universal calculation example for every joining or departure date.

How does the Bonus Act 2030 affect salary?

The Bonus Act 2030 requires a profit-making enterprise to allocate 10% of net profit before bonus and tax to an employee bonus fund. Distribution is made within eight months after the fiscal year ends. Eligibility requires service for at least half of the working period, while casual and certain shift workers are excluded under the stated rule.

The bonus is different from ordinary salary and different from festival expense. The relevant base is enterprise net profit, not simply the employee’s monthly basic salary. Payroll and finance teams should therefore reconcile the enterprise result, the fiscal year, the employee’s service period and the worker category.

The supplied limits are eight months’ salary for workers earning up to twice the minimum wage and six months’ salary for those earning above that level. The applicable minimum wage and the worker’s status should be verified before applying those caps. A bonus calculation should not rely on an old payroll template.

How is salary TDS handled in Nepal?

Salary TDS in Nepal is progressive rather than flat. The stated range begins at 1% in the social security tax band and rises to a top slab around 36% under the current Finance Act. Female employees receive a 10% rebate on employment-income tax. Employers file and deposit e-TDS by the 25th of the following Nepali month.

The Inland Revenue Department is the relevant tax authority for current salary-TDS information. Monthly withholding is an advance against annual tax liability, so the employer should reconcile payroll figures with the annual income-tax position.

Tax slabs and thresholds can change through Finance Acts. For 2026, or 2083 BS, verify the current slab thresholds and filing instructions with the Inland Revenue Department. The related salary tax calculator guide for Nepal can help you identify the figures that still need official confirmation.

Does SSF replace provident fund and gratuity in Nepal?

SSF does not produce one identical result for every employer. For an SSF-enrolled employer, the stated combined contribution is 31% of basic salary: 11% from the employee and 20% from the employer. This arrangement replaces older statutory PF and gratuity arrangements that previously applied under the Labour Act, subject to the relevant enrolment position.

The Social Security Fund administers the contribution-based system. The 31% figure should not be treated as a universal deduction from the employee: the stated split is 11% employee and 20% employer, both calculated on basic salary for the enrolled arrangement.

The supplied material also states that EPF and CIT continue for civil servants in pensionable service, voluntary contributors and employers that have not yet migrated. Hybrid arrangements may exist during transition. An employer should verify its actual SSF enrolment and migration status before removing PF or gratuity entries from payroll.

What is a practical salary compliance process in Nepal?

Use a payroll review that starts with worker status and basic remuneration, then checks wage timing, deductions, overtime, festival expense, bonus, TDS, SSF and severance. This is a practical review sequence, not an official filing timetable. The decisive conditions are the wage period, the worker category, the basic figure and SSF enrolment.

1. Identify the worker category. Confirm whether the person is an ordinary wage-period worker, employed for less than a month, casual, managerial, under 18 or within the Bonus Act’s eligibility rules.
2. Confirm the wage period. Read the employment contract and check that the period does not exceed one month. Mark the date when the period ends.
3. Separate basic remuneration and allowances. Record the basic amount separately from dearness, transport, housing, special, project, shift and other allowances. Do not treat a CTC label as the legal answer.
4. Apply the payment deadline. For an ordinary wage period, check payment within seven days after the period ends. For work under one month, check the three-day rule after completion. For casual work, check payment on completion.
5. Review deductions. Separate TDS, the employee SSF share, authorised loan or cooperative repayments, court orders and advances from disputed fines, damages or shortages.
6. Record overtime correctly. Obtain worker consent, track hours and apply 1.5 times the basic hourly rate. Confirm that the four-hour daily and 24-hour weekly limits are not exceeded.
7. Calendar festival and bonus duties. Calculate festival expense on one month of basic remuneration and apply pro-rata treatment where service is below a year. For a qualifying profit-making enterprise, check the 10% bonus allocation and the eight-month distribution period.
8. Reconcile TDS and SSF. Check the e-TDS filing by the 25th of the following Nepali month, annual reconciliation and the correct 11% employee and 20% employer SSF split where the employer is enrolled.
9. Check separation payments. Review severance using the basic-remuneration basis. The supplied material identifies severance as one month per year of service, but the employee’s facts and applicable conditions should be verified before calculation.

What should employers check in payroll beyond monthly pay?

Employers should check the records, cost drivers, recurring errors and worker-specific exceptions behind each payslip. Monthly salary is only one part of the exposure. Basic remuneration can affect festival expense, overtime, SSF and severance, while profit, service period, tax status and enrolment can affect other payroll obligations.

Which records should be prepared for a payroll review?

The supplied material does not establish one universal document list for every payroll question. For a review, an employer can organise the employment contract, wage-period record, payroll sheets, basic-and-allowance breakdown, overtime tracking and consent records, bonus and fiscal-year information, e-TDS records, annual reconciliation and SSF contribution information.

These are review records, not a statement that every item must be filed in every case. If a deduction involves a loan, cooperative repayment, advance, court order, fine, damage or shortage, preserve the relevant authorisation or acknowledgement and verify whether Labour Office involvement is required.

What cost factors should a Nepal employer include?

The supplied material does not establish a current government charge, registration fee or professional fee for payroll advice, so this guide gives no price. Qualitative payroll exposure depends on basic remuneration, allowances, overtime, festival expense, bonus, employer SSF contributions, severance and the work needed to correct records or reconcile TDS.

TDS withheld from salary should be distinguished from an employer contribution. The employee SSF share and employer SSF share should also be shown separately. A payroll budget that shows only gross salary can hide overtime, festival, bonus, SSF or severance obligations.

What mistakes create salary disputes?

Common risk points include treating gross salary as basic remuneration, delaying payment beyond the wage rule, making deductions without the required authority, calculating overtime on the wrong base, missing the consent record, applying the wrong festival period, overlooking the Bonus Act’s service test and assuming that every employer has the same SSF position.

• Using gross salary or CTC instead of basic remuneration for festival expense or overtime.
• Failing to state the wage period clearly in the employment contract.
• Making a unilateral deduction for a fine, damage or till shortage.
• Recording overtime without consent or allowing hours beyond the stated daily and weekly caps.
• Paying festival expense without checking the worker’s service months.
• Calculating bonus without checking net profit, the half-working-period test or the worker category.
• Missing the 25th-day e-TDS deadline or relying on outdated Finance Act thresholds.
• Removing PF or gratuity entries without verifying SSF enrolment and migration status.

What does a realistic Nepal payroll scenario look like?

Illustratively, a Kathmandu employer has a monthly worker whose contract lists basic remuneration and separate allowances. When the wage period ends, the employer checks the seven-day payment rule, calculates overtime only from basic salary, and reviews whether festival expense should be one month of basic remuneration or a pro-rata amount.

The same employer separately checks TDS, SSF enrolment, the 11% employee and 20% employer contribution split, and any Bonus Act eligibility. This example shows the order of questions only. It does not create a deadline, document requirement or entitlement beyond the rules described above.

Which salary-law edge cases need separate checking?

Short employment, casual work, workers under 18, managerial contracts, female tax rebates, Bonus Act service tests and SSF transition arrangements can change the analysis. A rule that applies to an ordinary monthly worker may not answer a question about casual payment, overtime prohibition, bonus eligibility or PF-to-SSF migration.

When should you seek salary-law advice?

Seek advice before adopting a new salary structure, changing basic remuneration, making disputed deductions, handling festival expense or bonus, migrating PF and gratuity into SSF, or responding to a tax or labour review. The correct approach depends on the contract, worker category, payroll records, tax position and SSF enrolment.

A payroll lawyer or tax adviser can review the basic-versus-allowance split, overtime records, deduction authority, bonus calculation, TDS reconciliation and SSF treatment. This guide is general information, not legal advice. Verify a current rule with the relevant authority when the facts are uncertain.

In short: salary law in Nepal is not only about the amount printed on a payslip. Check the wage period, basic remuneration, lawful deductions, overtime consent and limits, festival expense, Bonus Act conditions, salary TDS and SSF status together.

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Our team can help you review a Nepal payroll structure, employment contract, salary deductions, overtime, TDS or SSF position. Contact Alpine Law Associates for a fact-specific discussion, or see our tax compliance and advisory service.