The Federal Democratic Republic of Nepal is a small, landlocked country located between India and the Tibetan Autonomous Region of China. Despite the country’s very challenging climate and topography, Nepal’s economy is proving to be quite robust. Its GDP has more than quadrupled in the past 20 years, reaching $46.08 billion in 2025, and 4.0% growth is predicted for this year.

For a population of 31.607 million people, this represents a substantial change. The per capita GDP has risen to $1,460 per year, and while Nepal is still a low-middle-income country, it’s getting close to moving up a level.

Export CategoryExport Value (USD)
Mineral Water$127 million
Processed Fish (Tuna/Other)$105 million
Gold$95 million
Sugar and Molasses$63 million
Coconut Oil$19 million

Nepal has a very young population, so that, of its over 30 million inhabitants, only 8.435 million are part of its formal labor force. Informal industries, however, are also extensive and can help to account for this smaller-than-expected workforce. Nepalese workers are largely involved in agricultural work (roughly 65%), with only 20% of workers employed in services like financial services, IT, telecommunications, and tourism.

Industry only employs around 15% of workers. Nepal’s major export products include carpets, fibers, iron, palm oil, and spices. India is by far the country’s biggest trading partner, but it also exports to the US, Germany, China, and the UK. Nepal presents investors with ample opportunities in hydroelectric power, agriculture, ICT, tourism, and infrastructure creation.

It’s also sandwiched between the two biggest markets by population in the world. This is why so many investors are looking to hire Nepalese employees through PEO service providers. This article will explain how a Nepal PEO works and why one can be an excellent partner for your business’s Nepalese expansion.

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What is a PEO?

A Professional Employment Organization, or PEO, is a service provider that helps clients manage their employees, especially when they’ve set up entities in foreign countries. Without this kind of collaboration, most investors would need to hire in-house HR teams and work with legal and tax professionals to manage their employees. Despite using up lots of resources to do so, they would normally still find maintaining compliance a real challenge. 

When they work with PEOs in Nepal, however, organizations quickly find that the wide range of services provided for them helps to streamline their operations and even helps them reduce costs. PEOs act as co-employers with their clients. They take on the responsibilities of managing HR and compliance while the clients act as worksite employers, focusing only on their employees’ schedules and work tasks.

Functions like payroll, administration, benefits, paid time off (PTO) management, taxes, and more are outsourced to the PEO. With expert knowledge of local employment and tax laws, PEOs help their clients maintain compliance in their hiring, employment procedures, and working conditions. This protects the clients from penalties while automating many of these processes increases accuracy and reduces wasted time and resources.

A similar sort of service provider is a Nepal EOR or Employer of Record. EORs work in much the same way as PEO providers, taking on responsibility for HR and compliance for their clients. The main difference between these two types of organizations is that, while PEOs work with clients who already own entities in Nepal, EOR clients are usually not incorporated in this country.

Instead, the EOR uses its own entity to hire local employees on behalf of the client, becoming their legal employer in Nepal. Despite this important distinction, the terms PEO and EOR are often used interchangeably when discussing international employee management.

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Why Hire through a PEO in Nepal?

If you’ve always thought of Nepal as just a poor, isolated country besieged by natural disasters, it’s time to take another look. This country’s economy has been growing steadily for decades, and the quality of life for its population has also been increasing.

English is used as an important language for education and business in Nepal, and around a third of people can speak this language effectively, making international communication easier. However, there are still challenges to overcome when hiring in Nepal, and that’s why a PEO partner can be so useful.

You’ll need to ensure that you strictly follow local labor laws, and your PEO will help you manage regulations such as:

  • Regular hours: Nepalese employees work eight hours a day and six days a week for a total of 48 regular hours. They are entitled to at least one 30-minute break for rest and meals after working five hours, and these breaks are included in working hours.
  • Overtime: If they work more than 48 hours in a week, workers have to be paid at 150% of their normal wages for overtime hours. Employees can work up to four hours of overtime a day and not more than 24 overtime hours per week. 
  • Annual Leave: Nepalese workers are entitled to annual leave of “home leave”, accumulated at the rate of one day of leave for every 20 days worked. This works out to 16 days of leave per year. Workers can roll their leave over to the following years and accumulate as many as 90 days of leave.
  • Maternity and paternity leave: Expecting mothers are entitled to at least 14 weeks of maternity leave, and six of these must be taken before their expected delivery dates. They are paid their full wages through the Social Security Fund for this period, but if they are not entitled to receive these benefits, the employer must pay their wages for the first 60 days of leave. Fathers are entitled to receive up to 15 days of paternity leave paid for by their employers.

Another big challenge that investors face in Nepal is setting up their businesses. According to the World Bank, Nepal is a relatively difficult place to register a new entity, which is ranked 135th out of 190 countries for ease of company setup. Registering a limited liability company (LLC), for example, requires eight procedures and takes at least 22.5 days in the capital, Kathmandu, and often longer elsewhere.

It’s also harder to get electricity set up and pay taxes in Nepal than in most countries. However, a PEO partner can help with some of these procedures, like registering a personal account number (PAN) for income tax purposes with the Inland Revenue Department (IRD) and registering employees with the Social Security Fund (SSF). 

Some PEOs also offer recruitment services to help you find highly skilled talent in Nepal. Most will help you negotiate salaries and benefits with your candidates, prepare compliant contracts, and manage your employees’ entitlements for you.

Services Offered by Nepal PEOs

Nepal Professional Employment Organizations work as co-employers to help you manage your workers compliantly and fairly. They let you outsource most of your HR functions and support you and your workers through a combination of their online, cloud-based platforms and professional staff. PEOs typically offer the following services:

Payroll Management

When you hire new workers, your PEO will create a profile for them on its platform. This includes adding them to your payroll and setting up a unique calculation for each worker based on their salary, benefits, and personal income tax obligations. As their worksite employer, you’ll still need to perform time and attendance tracking and share the data you collect with the PEO.

Many platforms have built-in time-tracking tools that allow you to do this directly, without the need for external time-tracking software. Once you share this data for a pay period, the PEO will automatically process your payroll, calculating each worker’s gross pay, deductions for benefits contributions, and taxes to withhold.

It will then pay each worker their net pay for the period, normally by direct deposit. By automating most of the payroll process, the PEO runs this function efficiently and with a high degree of accuracy.

Employee Benefits Administration

Your Nepalese workers are entitled to a range of benefits that include annual, sick, maternity, and paternity leaves. You also need to make contributions for old age benefits, accident and safety insurance, health insurance, and survivors’ benefits through the Social Security Fund, and so do your employees. These contributions are as follows:

Benefit

Employee Contribution

Employer Contribution

Social Security Tax

1.0%

n/a 

Pension Fund

10.0%

10.0%

Severance Gratuity

n/a

8.33%

Additional Contribution

n/a

1.67%

Total

11.0%

20.0%

If you want to offer additional benefits to help you attract and retain top talent, your PEO can normally connect you with plan providers for pensions, life insurance, health insurance, and even employee equity. Most PEOs will administer these supplementary benefits for an additional fee.

Tax Compliance

As an employer in Nepal, you’re required to withhold personal income taxes from your employees’ pay. When you partner with a PEO, however, it takes on this responsibility for you and, as part of processing your payroll, it will calculate and withhold these taxes for you. The PEO can also remit the withheld funds to the IRD on your behalf. Income taxes are assessed on income in stages according to the following rates:

Income (NPR)

Tax Rate

First 500,000

1% (except for individuals contributing to the SSF who pay 0%)

Next 200,000

10%

Next 300,000

20%

Next 1,000,000

30%

Next 3,000,000

36%

Any income over 5,000,000

39%

Recruitment and Employment Contracts

If you aren’t already in touch with workers you want to hire in Nepal, some PEOs can help you find the talent you need. These firms employ professional recruiters who will assess your hiring needs and use their talent pools and local connections to source candidates for you quickly. Other PEOs simply offer platform tools like applicant tracking systems (ATSs) to help you recruit more efficiently on your own. 

Unless you’ve already gone ahead and hired workers before engaging a PEO to help manage them, most providers will help you generate locally compliant contracts for your candidates. Oral contracts are legal in Nepal, but written contracts are recommended as they’re much more secure.

Workers can be hired for specific projects or set periods, i.e., on fixed-term contracts. If a worker is still employed after completing a time-based contract, they’re considered to be hired permanently. New workers can be put on probation for up to six months.

Onboarding

Once your new workers have signed their contracts, they need to be onboarded, and your PEO partner will help with this process. While you’ll likely need to provide orientations and job-specific training, the PEO will handle admin tasks.

It will collect your new hires’ personal and banking information, store their important documents, and register them with the tax and social security authorities. With automated processing and local expertise, Nepal PEOs can usually onboard workers in just a few days.

Terminations

You will eventually find that you need to terminate workers, either for individual or economic reasons. When you do, your PEO will advise you on how to handle these terminations compliantly. You may need to provide notice of just one day for workers who’ve worked less than four weeks, seven days for up to a year of service, and 30 days to any workers who’ve been employed longer.

Workers dismissed for individual reasons receive unemployment payments derived from the employer’s monthly severance gratuity payments to the SSF. Those dismissed for economic reasons, however, must be paid one month’s wages for every year of service to the employer.

Advantages of Using a PEO in Nepal

The use of PEOs for hiring workers in Nepal is becoming more and more popular because of the following advantages that can be obtained:

  • Cost savings: Instead of hiring an HR team and paying for expensive consultations with tax and legal experts, a PEO can compliantly manage your employees more cost-effectively. Nepalese workers are also highly affordable, further contributing to your organization’s cost savings. 
  • Quick market entry: With recruitment help from some PEOs and quick onboarding processes, you can normally start working with Nepalese workers within just one week.
  • Risk mitigation: PEOs shield you from risks by helping you maintain compliant working conditions, salaries, and benefits, and help with mandatory reporting to monitoring authorities.

Steps to Engage a Nepal PEO

If you want to start working with a Nepal PEO, you’ll just need to follow these easy steps:

  • Select a provider: Based on your budget, the PEO’s reputation, and the services it offers, choose the best provider for your needs.
  • Book an initial consultation: Meet to express your needs and receive information on services and a detailed quote.
  • Sign a service agreement: If you agree to the terms offered, you can sign a service agreement to engage the PEO. After that, it can begin sourcing talent for you or onboarding employees you’ve already hired.

Partner With a PEO in Nepal To Expand Your Business Successfully

Businesses looking to hire in Nepal can count on Remote People for streamlined, fully compliant Professional Employer Organization (PEO) services. A trusted PEO partner makes it easy and cost-effective to onboard, manage, and pay employees while staying aligned with Nepal’s complex labor and tax regulations. Contact Remote People today to connect with top-tier PEO providers and expand your team in Nepal with confidence.

Looking for a trusted PEO provider in Nepal? Remote People connects businesses with reliable PEO services that handle HR functions, payroll, and employee compliance in Nepal. Contact us today to streamline your business expansion and hiring needs in Fiji!