Labor Law in Nepal – Quick Look to Labor Act 2074 B.S

This article will help you to know all information about the labor law in Nepal.

Highlights of Labour Act, 2017 – Labor Law in Nepal

Labor law is understood as a body of rules and regulations which governs the relationship between employers, employees, and the government. Labor law is designed to protect the rights and designate duties of both employee and employer and regulate their employment relationship. In the context of Nepal, Labour Act 2017 has been enacted to provide rights, interests, and benefits for workers and aims to increase productivity by ending all forms of labor exploitation.

Labor law in Nepal

Applicability of Labour Act, 2017

Section 1(j) of the Labour Act, 2017, defines Enterprise as “any company, private firm, partnership firm, cooperative organization or association or other organization which is established, incorporated, registered or formed or operated in accordance with the prevailing law with the objective to carry on any industry, business or service, with or without profit motive”. This defines the areas where Labour Act is applicable.

However, this law is not applicable in the following areas:

  1. Nepal Army
  2. Nepal Police
  3. Armed Police Force
  4. National Investigation
  5. Special Economic Zone
  6. Employment under the Journalists Act, 2051

Basic Provisions Relating to Labours

  1. Labor Act, 2017 remains as a minimum standard for labor and matters relating to labor.
  2. No person shall employ any labor in forced labor, directly or indirectly.
  3. No person shall so employ a child in any work as to be contrary to law.
  4. No employer shall discriminate against any labor on the ground of religion, color, sex, caste, tribe, origin, language, ideological conviction, or other similar grounds.
  5. No discrimination shall be made between the laborers in remuneration for an equal value of work on the ground of sex.
  6. Every labor shall, subject to this Act and other laws, have a right to form and operate a trade union, acquire the membership of, or get affiliated with, such union, or be involved in other activities relating to the trade union.
  7. In the event of an infringement of any right conferred by the Labour Act and other laws to labor, such labor can get remedied pursuant to Labour Act or other laws.

Classification of Employment

Work-based Employment

Work-based employment means employment that the employer provides or has provided specifying any particular work or service for performance.

Time-based Employment

Time-based employment means employment that the employer provides or has provided to the laborer specifying a certain period on the condition that the laborer has to provide any service or perform any work within that period.

Casual Employment

Casual employment means employment that the employer provides or has provided to the laborer on the condition that the labor has to provide any service or perform any work, for seven days or less within a period of one month.

Regular Employment

Regular employment refers to a type of employment arrangement where an individual works for a specific employer on a continuous and long-term basis, usually for an indefinite period of time.

Part-time Employment

Part-time employment means employment that the employer provides or has provided to the laborer on the condition that the laborer has to perform a work in thirty-five hours or less than thirty-five hours in a week.

Working Hours and Remuneration

  1. No employer shall employ laborers to work more than eight hours a day and forty-eight hours a week
  2. Employers are not allowed to compel labor to work overtime.
  3. Where an employer needs to cause any labor to work for more than the working hours, such labor may be caused to work not exceeding four hours a day and twenty-four hours a week.
  4. While employing any labor to work overtime, the employer shall pay the labor remuneration at a rate of 1.5 times the basic remuneration receivable during regular hours of work.
  5. Each worker is entitled to receive remuneration and benefits from the date on which he or she starts the work.
  6. Remuneration consists of a basic salary and dearness allowance.
  7. Any labor who has completed one year of service period shall be entitled to an annual increment in remuneration (grade) each year in an amount equal to at least half a day’s remuneration based on the monthly basic remuneration to which the labor is entitled.

Social Security

Social Security provides various benefits to workers and their dependents, such as retirement, disability, and death benefits, as well as loans and other services. Some of the provisions regarding social security are as follows:

  1. The employer shall deduct ten percent of the basic remuneration of each labor, add a cent percent to that amount and deposit the total amount for the purpose of provident fund.
  2. The employer shall deduct an amount equivalent to eight point three and three (8.33) percent of the basic remuneration of each labor each month and deposit it for the purpose of gratuity.
  3. The employer shall procure make annual medical insurance of at least one hundred thousand rupees for each labor.
  4. The employer shall procure accidental insurance of at least seven hundred thousand rupees covering all kinds of accidents for each labor.


  1. Labor shall get a weekly leave of one day in each month
  2. Each laborer shall each year get a paid public leave of thirteen days including May Day, and fourteen days including International Women’s Labour Day in the case of female labor.
  3. Labor who is involved in work that must not be stopped or must be done continuously shall get the substitute left in consideration for having worked on any day of weekly or public leave.
  4. Every labor shall get paid home leave at the rate of one day for twenty days of the period he or she has worked.
  5. A laborer who is employed in an educational institution or who gets summer or winter leave shall not get home leave.
  6. Labor shall get paid sick leave of twelve days a year. Provided that labor who works for a period of one year or lesser than one year shall get the sick leave proportionately.
  7. Pregnant female labor shall get maternity leave for a total of fourteen weeks before or after delivery.
  8. Where a laborer himself or herself has to mourn according to his or her religion or because her husband or wife dies or a married female worker has to mourn on the death of her father or mother or father-in-law or mother-in-law, such labor shall get a mourning leave of thirteen days.
  9. Labor is entitled to accumulate home leave and sick leave for up to ninety days and forty-five days, respectively.

Occupational Health and Safety

  1. The employer must formulate rules and implement a policy on the safety and health of the laborers and other persons at the workplace.
  2. The duties of the employer towards the labor in respect of occupational safety and health shall be to make a safe environment for work by making appropriate safety and health arrangements at the workplace.
  3. The duties of the laborer in relation to occupational safety and health shall be not to perform any such action in the workplace intentionally or recklessly that may cause adverse effects or risk on the safety and health of him or her or of others.
  4. The employer shall form such a safety and health committee with representation of the laborers also as prescribed in an enterprise where twenty or more laborers are employed.
  5. Where it appears from the inspection or any other source that there exists a ground that an immediate danger has arisen or is likely to arise in the safety and health of the labor or other person in the workplace of any enterprise, the Office may give direction to the employer to immediately stop the work in such a workplace.
  6. The employer shall make necessary arrangements for the prevention and control of infectious diseases in the workplace.
  7. Where any female labor is pregnant, she shall give information thereof, accompanied also by proof showing her health checkup, to the employer.
  8. Where any labor suffers from any such occupational disease as prescribed while doing work of any enterprise, the enterprise shall provide the labor with such treatment expense as prescribed for the treatment of such a disease and such amount of compensation as prescribed, if such a disease is incurable.

Dispute Settlement

  1. If any labor has an individual claim on any matter related to the right such labor may make an application in writing to the employer. The dispute may be settled through mediation within 21 days. If the mediation fails to settle the dispute, the matter goes to the labor office and a decision on the issue should be held within 15 days.
  2. Collective disputes can be settled through collective bargaining. The collective bargaining committee may submit collective claims or demands in writing to the employer on issues relating to the interest of the laborers. Various processes such as Negotiations, mediation, or arbitration have been prescribed for dispute settlement. The collective bargaining committee may organize a strike for the settlement of any collective dispute if the matter cannot be solved through arbitration. The right of laborers assembles at the main entrance of the workplace or enterprise to exert pressure in order to fulfill the demand has been granted by the Act.

Termination of the Employee and Layoff

  1. Any labor may, by submitting a resignation in writing to the employer, terminate the employment.
  2. After the expiry of the time specified in the employment contract, in the case of the labor engaged in the time-based employment.
  3. In the case of labor in casual employment, at the will of the employer or labor.
  4. After the completion of the work specified in the employment contract in the case of labor who is in work-based employment.
  5. If the work performance of a laborer is found unsatisfactory or poor for three or more three consecutive years, the employer may terminate the employment of such labor.
  6. Where any laborer becomes incapable of working as a result of physical or mental incapacitation or grievous hurt or injury or it affects the work because of the long time required for medical treatment, the employer may, on the basis of a recommendation by a medical doctor, terminate the employment of such labor.
  7. Where an enterprise faces financial problems in its operation or the laborers become redundant because of the merger of more than one enterprise or the enterprise needs to be closed down partially or completely because of any other reason, the employer may retrench the number of laborers.
  8. Where, for any reason, the retrenchment of its laborers has been made but the enterprise resumes its operation within two years or needs to supply additional laborers, the preference for employment shall be given to the laborers retrenched.
  9. Any laborer who is in regular employment shall get compulsory retirement after completing the age of fifty-eight years.

Labour Court

  1. The Government of Nepal shall, by notification in the Nepal Gazette, form a required number of labor courts.
  2. The chairperson and members shall collectively exercise the jurisdiction of the Labour Court.
  3. The Labour Court has the power to examine witnesses and evidence, take e defendant’s statement equal to the note of defense as per necessity, and uphold, withhold, or alter any direction, decision, or order given by the Office or the employer.
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