Nepal, officially known as the Federal Democratic Republic of Nepal, is a country in South Asia, bordered by India and the Tibet Autonomous Region (TAR). It’s a popular country for businesses looking to expand into Asia, with a growing workforce of 7.9 million people and a GDP of 36.92 billion US dollars.

Workers in Nepal are well known for their strong work ethic and proficiency in the English language. This, alongside its accelerated economic growth in recent years, makes it a good candidate for businesses looking to employ abroad.

Businesses looking to employ in Nepal should familiarize themselves with labor laws and employee rights, with Nepal’s Labor Act 2074 outlining rules around employee rights and protections employers must abide by.

This help guide will provide the information businesses need to compliantly employ workers in Nepal, from an overview of Nepalese labor laws, to mandatory employee benefits that workers are entitled to. We’ll also cover how Remote People can help simplify hiring in Nepal for expanding businesses.

Nepal Labor Law

Nepal’s labor laws are primarily explained in The Labour Act, 2017 (2074), a piece of legislation that explains the different rights and obligations of both employees and employers in a working environment.

This act has replaced the previous Nepalese labor laws dictated in the Labor Act 2048, introducing more specific provisions for arrangements, including employee count and the formation of collective bargaining committees.

The new labor act provides details on employee benefits in Nepal, such as holiday allowance, overtime compensation, and the right to a minimum wage.

We strongly recommend consulting legal experts for detailed compliance when hiring people in Nepal. This protects employers and ensures contracts adhere to the latest legislation set by labor laws.

Mandatory Employee Benefits in Nepal

There are many different mandatory employee benefits in Nepal, which we’ve detailed below.

Social Security Contributions

Nepal operates under the Social Security Fund (SSF), which was established to manage social security taxes and reduce economic and social risks to workers.

The SSF collects contributions from both employers and employees to fund services such as old-age, disability, and work injury benefits.

As of 2025, insured workers and employers pay 10% each of their monthly earnings/payroll.

Annual Paid Leave

Workers in Nepal are entitled to ‘home leave’, otherwise known as annual leave. They accrue 1 day of home leave for every 20 days worked, to a maximum of 18 days per year.

Unused leave can be carried over to the next calendar year, with the maximum limit on accumulated days being 90 days. Workers are also entitled to paid days off on public holidays, which are separate from home leave entitlement.

Working Hours

Employees can work a maximum of 8 hours per day or 48 hours per week. They must be allowed to take a half-hour break after 5 hours of continuous work, and a 1-hour break if they work over 6 hours continuously in one day.

Work is usually carried out over 6 days a week, with 1 day per week granted as a rest day. The workweek usually starts on a Sunday and ends on a Friday, with Saturday being the typical rest day.

Overtime Pay

Any hours worked over an employee’s normal contracted hours count as overtime. Employees must provide consent to be allocated overtime hours, and employers must ensure good records are kept of all overtime hours worked.

Overtime must be paid at the rate of 1.5 times an employee’s normal wage, and is capped at a maximum of 4 hours per day or 24 hours per week. Total working hours must not exceed 12 hours per day or 60 hours per week.

Public Holiday Leave

There are many public holidays in Nepal, which are typically considered paid days off if they fall on a working day. The public holidays in Nepal are as follows:

  • January 11: Prithvi Jayanti
  • January 14: Maghe Sankranti
  • January 30: Martyrs’ Memorial Day
  • January 30: Sonam Losar (Tamang New Year) (date varies)
  • February 19: National Democracy Day
  • February 26: Maha Shivaratri (date varies)
  • March 8: Nari Dibas
  • April 6: Ram Nawami (date varies)
  • April 14: Nepali New Year
  • May 1: Majdoor Divas
  • May 12: Buddha Jayanti (date varies)
  • May 29: Ganatantra Diwas (Republic Day)
  • August 9: Janai Purnima (date varies)
  • August 16: Shree Krishna Janamashtami (date varies)
  • September 19: Constitution Day
  • September 22: Ghatasthapana (date varies)
  • September 29: Phulpati (Dashain) (date varies)
  • September 30: Astami (Dashain) (date varies)
  • October 1: Nawami (Dashain) (date varies)
  • October 2: Dashami (Dashain) (date varies)
  • October 3: Ekadashi (Dashain) (date varies)
  • October 4: Duwadashi (Dashain) (date varies)
  • October 20: Laxmi Puja (Tihar) (date varies)
  • October 21: Gai Tihar (date varies)
  • October 22: Gobhardan Pujan (Tihar) (date varies)
  • October 23: Bhai Tika (Tihar) (date varies)
  • October 24: Tihar Holiday (date varies)
  • October 27: Chhat Parwa (date varies)

Sick Leave

If employees are unwell, they can take up to 12 days of sick leave per year. In the first year, sick leave is allocated proportionally to a worker’s employment period.

Sick leave can be carried over to the next calendar year to a maximum of 45 days in total. Employees should be paid the excess if they accumulate more than 45 days of sickness by the end of the calendar year.

Maternity Leave

Female workers in Nepal may take up to 14 weeks of maternity leave when they have a baby. The first 60 days of maternity leave are fully paid by the employer; after this point, the Social Security Fund pays maternity benefits for the remaining 38 days.

Employers must take leave 2 weeks before they have their baby, and return no sooner than 6 weeks after delivery. Maternity leave is usually only payable for 2 deliveries in an employee’s period of service with an employer.

Paternity Leave

Fathers in Nepal are entitled to 15 days of paid paternity leave when their wife has a baby. Paternity leave starts when labor begins and is paid at the full rate of an employee’s salary.

Pensions

Retirement age in Nepal varies depending on the sector, with civil servants retiring at 58 and Supreme Court judges retiring at 65. There are contributory schemes whereby employees and employers fund contributions, building a pension fund for retirement age.

There are also non-contributory schemes which provide an allowance to people over the age of 70, plus widows over the age of 60 in need of financial support.

Severance Pay

Employees in Nepal may be eligible for severance pay if they have been dismissed from their employment contract. Severance pay is usually payable at the rate of 1 month’s salary for each year of service.

Employees are usually not entitled to severance pay if they are receiving unemployment allowance via the Social Security System.

Supplementary Employee Benefits in Nepal

Alongside mandatory employee benefits, employers in Nepal are encouraged to offer additional benefits to employees. This has been proven to raise staff retention rates and increase the likelihood of people applying for new job positions.

A few examples of supplementary benefits you could offer include:

  • Performance bonuses
  • Private pension opportunities
  • Expenses for transport, food, or housing
  • Enhanced annual leave entitlement
  • Company car
  • Flexible working

Optimize Employee Benefits with Remote People

Remote People can help you to simplify hiring in Nepal with a range of services.

Our Employer of Record (EOR) services help you manage payroll, taxes, employment contracts, and employee benefit compliance by acting as the legal employer for your workers in Nepal. This solution is ideal for businesses that prefer not to set up a local entity, allowing you to hire and operate efficiently while staying fully compliant.

An EOR is also the key to ensuring compliance with local labor laws, with providers ensuring all workers are legally hired and are receiving the benefits they’re entitled to.

If you’re looking to hire in Nepal but aren’t sure where to start, check out our guide to doing business in Nepal to learn an economic overview of the country, information on taxes, advantages of the Nepalese market, and different ways your business can expand into Nepal.

Contact Remote People if you require any help, and we look forward to helping your company grow in Nepal.