Labor Act, 2017 (2074) – Major Highlights

The Labor Act, 2017 (2074) (“New Labor Act”) was passed by the Parliament on August 11, 2017 (Shrawan 27, 2074) and accorded the assent by the President on Sept. 04, 2017 (2074-05-19). The New Labor Act is now effective from the date of assent by the President by virtue of Section 3 (f) of the Interpretation of Statute Act, 1953 (2010). The New Labor Act has repealed the Labor Act 1992 (2048) (the “Previous Act”). The New Labor Act has brought complete change in employment regime in Nepal. The major provisions of the New Labor Act are briefly outlined below.


1.      Applicability of the New Labor Act


Definition of Entity

The New Labor Act is applicable to entity, which has been defined to include company, private firm, partnership firm, cooperatives, association or other organization (“entity”) in operation, or established, incorporated, registered or formed under prevailing laws to undertake industry or business or provide service with or without profit motive.

Head Count Threshold

The New Labor Act has removed the head count requirement for applicability. The New Labor Act is applicable to all entities regardless of number of labors (worker/emploees). Previous Act was applicable only to entity where ten (10) or more people engaged in the work.

However, the threshold of head count continues for certain arrangements to be made in the entity such as an entity having ten (10) or more workers should constitute a collective bargaining committee, labor relations committee etc.

Entity Registered in Foreign Country:

The New Labor Act has made provisions in relation to settlement of dispute with the entity registered in foreign country however, undertaking sales and and market activities in Nepal through representative or hiring labor in Nepal. In accordance with the New Labor Act the representative or the labor hired by the foreign entity may file complaint before Labor Office or Labor Court if such entity violates the terms and conditions of the employment agreement.

Domestic Workers

The New Labor Act also deals with domestic workers. The New Labor Act has made certain provisions relating to domestic workers. For example, the New Labor Act provides that the minimum remuneration of such workers, public and weekly holidays should be as prescribed. The employer can deduct the expenses incurred in providing food and lodging from the remuneration if such is provided. Domestic workers should be allowed to celebrate festivals as per their culture, religion, tradition.

Exempted Entity:

The New Labor Act is not applicable to civil service, armed force etc. It is also not applicable to entities incorporated under other prevailing laws or special economic zone, provided that terms and conditions of services in those entities have been covered in other prevailing laws. The Working Journalists are also not governed by the New Labor Act, unless the employment contract specifically provides for the applicability of the New Labor Act.

The New Labor Act does not specifically provide its application to the persons working with the foreign diplomatic missions. The foreign missions are exempt from local laws and jurisdiction which of course may be extended to the employment matters in Nepal.


2.      Hiring



The New Labor Act has provided flexibility in hiring providing different modes of hiring as per the requirement of the entity:

Regular Employment: the person hired for the work or service other than work based, time bound, casual or piece rate employment.

Work Based Employment: the person hired for carrying out specific work or rendering specific service.

Time bound Employment: the person hired for carrying out work or rendering service for definite period.

Casual Employment: the person hired to carry out the work or rendering service for seven or less days in a month.

Part -time Employment: the person who is hired in such a manner that he works for 35 hours or less in a week.

The Part-time worker cannot be restricted to work in other places. The remuneration of such part time worker shall be on the basis of the hours he/she works unless otherwise provided in the employment agreement. The remuneration shall be determined on the basis of remuneration of regular employee engaged in similar work. The part time worker shall be entitled to social security benefits.

Intern- The New Labor Act has introduced the concept of intern according to which any person may be allowed to work as intern pursuant to the approved syllabus of any educational institution after concluding the agreement with that educational institution. The interns shall not be engaged at work exceeding 8 hours a day and 48 hours a week. Interns are entitled to health and safety arrangements, and to medical expenses and compensation in case of injury at work. The intern shall be deemed regular employee if engaged in work other than prescribed in

Trainees -The New Labor Act also covers the trainees engaged in a work. The employer may also appoint a trainee to work, provided that the training period should not exceed more than a year. However, training for specialized work whose time period has been assigned by law is not regulated by this provision. The trainee should be provided with social security benefits including provident fund, gratuity, and minimum remuneration. The employer is not obliged to appoint the trainee as regular employee upon the completion of training period. However, if such trainee is appointed, he/she shall not be kept in probation.

There was no such classification in the Previous Act and the Previous Act did not regulate the intern and trainee.



The Previous Act has no provision for outsourcing of jobs/services. The practice of outsourcing however, it had judicial baking and allowed to outsource certain manual works such as security personnel, drivers, cleaning staffs, messengers etc. The New Labor Act deals with outsourcing arrangement.

Work for Outsourcing:  the outsourced laborers can be engaged in the works other than core work of the entity. The work that can be carried out by the outsourced laborers can is as prescribed in the Nepal Gazette.

Outsourcing Agency: The company licensed by the Labor Office or Labor Department can provide manpower to another entity. The existing manpower suppliers are required to be registered and obtained license within six (6) months from the date of commencement of the New Labor Act.

Restriction: A company cannot supply manpower for more the two works or services. The New Labor Act has also restricts to avail the laborers from the labor supplier where the Main Employer, his management or family members are involved.

Obligation of the Main Employer: The Main Employer (the person providing work to the outsourced laborers) should obtain laborers from the licensee Labor Supplier. If the laborers are availed from outsourcing agency without licensed for Labor Supply the laborers are deemed to be the workers of the Main Employer. The Main Employer may engage laborers supplied by Labor Supplier entering into agreement with the Labor Supplier. The agreement should ensure that the laborers will not be provided the remuneration and facilities below the minimum remuneration and benefits prescribed in the New Labor Act. The Main Employer should regularly obtain the information if the Labor Supplier is providing such remuneration and benefits regularly. The Main Employer is required to inform the Labor Office or Department if the Labor Supplier has not provided outsourced labors the remuneration and benefits. Further, the Main Employer is required to adjust the increment if the minimum remuneration and benefits are increased in accordance with the laws.

Obligation of Labor Supplier: Labor Supplier must obtain a license to operate its business. Only after the Labor Supplier furnishes the security or bank guarantee, the Labor Office or Department issues the license. Labor Supplier should provide the remuneration and other facilities to such outsourced workers. The license of the Labor Supplier can be terminated on non-payment of remuneration and other benefits. The Labor Supplier can be fined up to Rs. 25,000 for violating any regulation or directives framed under the Nee Labor Act. In case of liquidation of the Labor Supplier, the workers shall be paid the outstanding remuneration and facilities within 15 days. If the the Labor Supplier fails to make such payment, the payment shall be done from the security or bank guarantee furnished.

Hiring Foreign Nationals

The New Labor Act continues the general terms of hiring of foreign nationals by a local entity that the foreign national can only be hired if local skill sets are not available for the job.  In additional to the general rule of hiring of the foreign nationals the New Labor Act also provides certain new provisions such as flexibility on work permit for certain entities the language of employment agreement, repatriation of salary and terms and condition of service etc. The provisions are  briefly summarized below.

General Provisions: No foreign nationals can be engaged in work without having obtained the work permit from the Department. Prior to engaging a foreign national in work, the entity must publish an advertisement in national level Daily Newspaper to fill the vacant posts by Nepali citizens. If no application is submitted or if no local skill set is available for any work after the vacancy publication foreign national can be hired for the work with the approval of Labor Department. This provision is similar to that of the Previous Act.

Entity with foreign investment or operating on foreign aid: Work permit to the foreign nationals hired as the chief executive may be provided by simply recording them at the Department. The work permit may also be provided in the same manner to the employees for such number as prescribed.

Work Permit for technicians for short period: Technicians engaged for less than three (3) months to carry out repairing of any machinery or installing new technology or similar casual work may be provided work permit simply by recording in the Labor Department.

Employment Agreement: As per the New Labor Act, no foreign national can be engaged in work without the employment agreement which should be entered into either in language understandable by such foreign national or in English language. Unless otherwise provided in the agreement, the employment agreement continues for three years.

Repatriation of Income: The foreign nationals can repatriate their income in convertible foreign currency.

Work Permit Exemption:  The foreign nationals having diplomatic immunity or the foreign nationals who are exempted from work permit under the treaty or agreement entered into with Nepal government are exempted from work permit requirement.

Probation Period

The New Labor Act has shortened the probation period as shown in the table below:

Previous Act New Labor Act
1 year (240 days) 6 months


3.      Working Hours


Working Hours continue to be 8 hours a day and 48 hours a week. Overtime has been increased to 24 hours per week from 20 hours a week.

Unlike the Previous Act, the New Labor Act simply requires to make arrangement for transportation while engaging a female employee in such a way that the working period begins or ends before the sunrise or after the sunset.


4.      Leave & Holidays


There have been major changes in maternity leave, sick leave and accumulation of leave in the New Labor Act.  It also provides additional category of leave such as paternity leave which was not there in the Previous Act. The comparison of leave is given in the following table.

Heading Previous Act New Labor Act
Weekly Off 1 day every week 1 day every week
Public Holidays 13 days 13 days

14 days including International Women Labor Day for female employees

Home Leave 1 day for every 20 worked days 1 day for every 20 worked days
Sick Leave Half paid up to 15 days

Eligibility: completion of 1 year of service

Fully paid up to 12 days

Eligibility: on a proportional basis for those employees who has not completed 1 year of service

Maternity Leave up to 52 days

fully paid

up to 14 weeks, fully paid for 60 days
Paternity Leave No up to 15 days, fully paid
Mourning Leave 13 days 13 days
Leave in lieu No For the laborers put in work on public holiday or weekly off
Special Leave 30 days in a year, not exceeding 6 months in total service period-unpaid No
Accumulation Home Leave – Up to 60 days Home Leave- 90 days

Sick Leave- 45 days

Excess Accumulation- Encashed every year.


The Act has also made it compulsory maternity leave from 2 weeks before the delivery up to at least 6 weeks after the delivery.


5.      Terminal Benefits


There have been also major changes in the terminal benefit provided to the employees such that the benefits are provided to each laborers irrespective of length of service or nature of employment. The Previous Labor Act provided the terminal benefits to the permanent employee and for certain benefits such as gratuity the employee should have completed certain year of services. The eligibility criteria have been removed by the New Labor Act. There have been also changes in the benefits such as rate of gratuity and leave encashment etc. The benefits have been compared in the following table.

Heading Previous Act Act
Provident Fund Contribution: 10% by employer and 10% by employee of the basic remuneration of the  concerned employee.

Eligibility: permanent r employee

The Act has continued the same provision. Such amount should be deposited in the Social Security Fund.
Gratuity Rate of Gratuity:

for the first 7 years of service: an amount equal to a half a month salary of the relevant year for each year of service.

for more than 7 up to 15 years service: an amount equal to a two third of a month salary of the relevant year for each year of service

for service exceeding 15 years: an amount equal to one-month salary of the relevant year for each year of service.

Time of Allocation: Every year


Eligibility: completion of 3 years of service

Rate of Gratuity: 8.33% of basic remuneration


Time of Allocation: Every month (time of payment of remuneration)


Eligibility: since the first day of employment

Leave Encashment Accumulation- Home Leave up to 60 days.

Encashment at the time of discontinuation of service as per the last drawn salary.


-Home Leave up to 90 days

-Sick Leave up to 45 days


Encashment -at the time of discontinuation of service at the rate of last drawn salary.


6.      Other Benefits

Headings Previous Act New Labor Act
Housing Fund Allocation of 5% of gross profit to provide housing to the worker/employees. No.
Festival Expenses No. Amount equivalent to the monthly remuneration once a year. The employee not completing 1 (one) year service is entitled to the expenses on proportional basis.
Disability Compensation If disability is caused by accident while on duty to any employee or worker, he/she is entitled to disability compensation depending on degree of disability. For 100% disability a lump sum amount equivalent to 5 years’ salary should be paid.  from insurance amount on the basis of degree of disability
Compensation against Injury The Proprietor should pay the whole amount incurred on treatment of worker or employee as compensation in case such worker or employee is injured while doing a work designated by Entity, on the recommendation of the medical practitioner recognized by Government of Nepal. from insurance amount
Death Compensation The entity is to be pay the nearest successor of an employee who dies while on duty a lump sum amount equivalent to 3 years’ salary of such employee. The Act provides that the nearest successor is entitled to the amount of accident insurance.
Medical Insurance No. Coverage: at least one hundred thousand rupees (Rs. 100,000) per year for every worker

Premium: half by the employer and half by the employee

Accident Insurance No. Coverage: at least seven hundred thousand rupees (Rs. 700,000) for every worker

Premium: fully paid by employer



7.      Safety and Health Arrangement


Formulation of Safety and Health Policy: As per the New Labor Act, the entity should formulate the safety and health policy as per the Regulation or Directive. Such policy should be registered with Labor Office.

Formulation of Safety and Health Policy: As per the New Labor Act, the entity should formulate the safety and health policy as per the Regulation or Directive. Such policy should be registered with Labor Office.

Safety and Health Committee: Where 20 or more workers are engaged in work in an entity, employer shall constitute a safety and health committee having the representation of workers.

Employer’s Duties– The New Labor Act has set out the duties of employer towards workers which include making appropriate safety and health arrangement, arrangements ensuring no adverse effect on workers from use, operation, storage or transport of chemical, physical or biological liquids, disseminating necessary notice, information and training related to safety and health arrangements, etc. It also sets out the general obligation of employer towards non-workers such as putting the signs to indicate the safety or health hazards, to manage the gas, chemicals waste of the entity so as not to cause adverse effect on local animals, people or environment, etc.

Employee’s Duties-The New Labor Act also sets out the duties of workers related to safety and health arrangements which includes refraining from doing any activities that are likely to cause adverse effect on safety and health of any individuals in the entity, cooperate with the employer to effect the health and safety arrangements, to compulsorily use the personal safety devices provided by the employer, etc.

Stopping Work– In case of the immediate threat of any injury or adverse effect on health or damage to the devices in the entity, the worker should provide the information thereof to the employer who should cause to stop the work until the period the threat is prevented or minimized.

Preventing Communicable Diseases– The employer should arrange for the prevention of communicable disease in the workplace. The worker suffering from the communicable disease can be ordered to stay in the unpaid leave or adjust with other leave and may be restricted to come to workplace until cured.

Medical Expenses– In case any worker suffers from the work related hazardous disease, he/she should be provided medical expenses. And where such disease cannot be cured the worker should be provided compensation as prescribed.

Light Work to Pregnant- The employer is required to make arrangement to put the pregnant female laborer is such work which generally does not have adverse impact on her health.


8.      Disciplinary Action


The New Labor Act has redefined the punishment as it removed suspension as punishment and included salary deduction or withholding promotion as one of the form of disciplinary action. Further, the list of there has been also changes in the list of misconducts subject to disciplinary action. The comparative chart of the list of misconducts and disciplinary action has been shown in the following table.

Punishment Misconduct under Previous Act Misconduct under New Labor Act
Warning abusing any items kept for interest, health and safety of the workers or employees or causing damage to them intentionally,

absence from the work frequently without obtaining permission or coming late after the regular time,

violating directives under the Act, Regulation or Bylaws

misbehaving with the customers of the entity.

absence from the work without obtaining permission,

leaving the workplace without obtaining the permission from the Managerial level,

coming late frequently without obtaining permission,

not abiding the order of the senior or employer with regard to work,

other misconducts as prescribed in Bylaws.

Withholding of Annual Salary Increment for One Year  or Withholding Promotion for One Year embezzlement in the transactions of the entity,

participation or compelling to participate in unauthorized or illegal strike,

striking without fulfilling the legal requirements

intentionally slowing down the work against the interests of the Entity

destroying any property of the entity, or causing damage thereon

taking the entity’s property outside the entity or allowing unauthorized person to use such without the permission of the competent person.

taking the entity’s property outside the entity or allowing unauthorized person to use such without the permission of the competent person

embezzlement with the entity’s transactions

destroying the entity’s property due to negligence or recklessness

preventing the supply of food and water in entity or obstructing movement in the entity

abusing any items kept or arrangements made for interest, health and safety of the workers or employees or causing damage to them intentionally

Other misconducts as prescribed in Bylaws.

Deduction of One Day Remuneration not accepting the letter or notice of punishment

participation or compelling to participate in illegal strike

collectively delaying in the work

causing loss to the entity by reducing the production or service recklessly or negligently

trying to take facilities by submitting false details

not using the security instruments provided by the employer

Other similar misconducts as prescribed in Bylaws

Suspension up to 3 Months creating or causing to create any stir within the Entity with an intention to or affecting the production or service

preventing the supply of food and water, or connection of telephone and electricity

obstructing the entry into or movement within the entity

accepting or offering bribe

consuming alcoholic drinks

There is no such disciplinary action.


(The employee can be suspended (a) for investigation of misconduct or (b) if he/she is taken in judicial custody for any office by lawful authority. But this is not the form of punishment)

Dismissal from Service causing bodily harm or injury to Proprietor, Manager or Employee of the entity

Stealing property of entity

absence from entity for more than a consecutive period of 30 days without notices

imprisoned on being convicted on a criminal offence involving moral turpitude

causing damage to secrecy relating to special technology of the Entity, Production Formula

causing bodily harm or injury to Proprietor, Manager or Employee of the entity

accepting or offering bribe

stealing property of entity

embezzlement of property of the entity

causing damage to the entity’s property knowingly

absence from entity for more than a consecutive period of 30 days without getting the leave approved

causing damage to secrecy relating to special technology of the Entity

convicted on a criminal offence involving the moral turpitude

Presenting false documents for appointment

Consuming the psychotropic drugs or alcoholic drinks

Having been punished twice for other misconducts within 3 years

Other similar misconducts as prescribed in Bylaws

The New Labor Act also provides that sexual harassment on workplace is subject to disciplinary action up to dismissal from service.


9.      Termination of Employment

In addition to disciplinary actions, the New Labor Act has provided certain other grounds on which the employment can be terminated:

Voluntary Termination of Employment

The employee can terminate the employment voluntarily by submitting a resignation letter. The employer must approve the resignation within 15 days and provide a notice thereof to the employee. Even if the employer does not approve the resignation the resignation becomes effective on the next day of the expiry of the 15 day time.  However, if the employee continues to work in the entity even on the effectiveness of resignation in such situation  the resignation is deemed cancelled.

Compulsory Retirement

The New  Labor Act has  increased the age for compulsory retirement .  The compulsory retirement age under the Previous Act and the New Labor Act is as shown below.

Previous Act New Labor Act
At the age of 55 At the age of 58

Termination of Service of Time Bound Employees

The employment of the employee on time bound employment is terminated after the expiry of the time period prescribed in the employment agreement

Termination of Service of Work Based Employee

The employment of the worker on work bound employment is terminated after the completion of the work provided in the employment agreement. However, the employment continues if the worker is engaged in a project and the time period of such project is extended.

Termination for Poor Performance

If the performance of  the employee is found to be unsatisfactory or below the standard in the performance appraisal for three or more times, the employment of such worker may be terminated by the employer. However, prior to terminating the employment the performance appraisal as per the Regulation under the Act or Bylaws should have been conduct. Such employee should be provided an opportunity to submit explanation giving at least  seven (7) days by the employer where ten (10) or more people work.

Termination due to Health Reason

In case any employee is physically or mentally disabled or injured rendering him/her unable to work or requiring a long period for medical treatment effecting in the work of the entity, the employer, on recommendation of a medical practitioner may terminate his/her employment. However, if the worker suffers injury due to accident in the workplace or due to workplace hazard and is undergoing the treatment, the employment cannot be terminated until a year from the date of starting of such treatment. The employment of a worker undergoing the treatment cannot be terminated until 6 months unless it is certified by a medical practitioner that he/she won’t be able to return to work.

Notice Requirement:

The employee or employer terminating the employment should provide a notice except in the situation of termination by dismissal. The notice requirement is linked to the length of service which is as follows.

Period of Employment Notice Period
a. for up to 4 weeks 1 day
b. 4 weeks to 1 year 7 days
c. exceeding one year 30 days

If the employer terminates the employment without providing a notice, the employee should be provided remuneration in lieu for the notice period.


10.  Flexibility in Retrenchment


The New Labor Act has amended the requirement of prior approval of Department of Labor to retrench employees. As per the New Labor Act, the workers can be retrenched as agreed with the Trade Union or Labor Relation Committee in absence of Trade Union.  Where the agreement cannot be reached with the Trade Union or the Labor Relation Committee the employees can be retrenched by giving information to the Labor Office.

The employees are entitled to the retrenchment compensation at the rate of one month salary for each year of service.  The compensation is paid on proportionate basis for the service rendered below one (1) year. The employee who is paid unemployment allowance is not entitled to the retrenchment compensation. The rule of retrenchment does not apply to the employer have less than 10 people.


11.  Collective Bargaining

Formation of Collective Bargaining Committee

As per the New Labor Act, in an entity with 10 or more employees, there should be a collective bargaining committee. The New Labor Act also defines as to how the committee should be formed such as by authorized trade union or by all the trade unions in absence of authorized trade union or by the signature of 60 percent workers in absence of any trade union. The member of the committee should be at least 3 but not exceeding 11. The committee is authorized to submit collective demands, negotiate and settle the demand, among other things.

Excluded matters from Collective Demand

The Labor Act excludes certain matters from collective demand such matter include, if it is (a) contrary to the Constitution of Nepal, (b) against interest of others due to being baseless allegation, (c) prejudicial to the personal conduct of any worker or employee; (d) unrelated to the entity, (e) without expiry of the time of the collective bargaining agreement, (d) about  the rate and benefit prescribed for social security.

Procedure for Settlement of Collective Dispute

The Collective Bargaining Committee submits the collective claim in writing to the employer. Upon the receipt of the collective claim, the employer must provide a notice in writing within 7 days specifying the place and time for discussion. If the employer does not call for discussion or if the problem is not settled through discussion within 21 days, application can be submitted to the concerned Labor Office for mediation.


If the dispute is not settled through mediation within 21 days the employees can go to strike giving seven (30) day notice if they do not agree for arbitration.  Even the matter is referred to arbitration the employee may go to strike in certain situation as defined in the New Labor Act.

No Secret Ballot Required for Strike

Unlike Previous Act the New Labor Act does not require secret ballot to go for strike. They can go for strike simply giving notice to the management and other security agencies.

Strike should be Peaceful

The Labor Act provides that the strike should be peaceful and the employees may call meeting at main entrance of the entity. However, the employee should not obstruct access to and from the premises and cause any loss.

Mandatory Arbitration for Collective Disputes

The New Labor Act requires the disputed parties to settle the dispute by arbitration in certain situations or for certain entities depending upon their nature. Such situation or entity includes the situation where the employer and collective bargaining agree to settle the dispute by arbitration. The entity the collective dispute of which should be  settled through arbitration include the entity (a) providing essential service, or (b) established in Special Economic Zone, (c) state of Emergency declared as per the Constitution.

The Arbitration Tribunal is composed by the Ministry constituting representatives of workers, employer and Nepal Government. Any agreement between the Collective Bargaining Committee and Employer in regard to collective dispute or award of the arbitration tribunal is binding upon both the parties.

Lock Out

The requirement of Lock Out is mostly similar to that of the Previous Act that the management can lock out the entity in the case of illegal strike or violent activities in strike. The major change related to Lock Out is that the prior approval of Department of Labor is sufficient and the approval of Government is not required.

Remuneration during Strike and Lock Out

The employees are entitled to half remuneration during lawful strike or lawful Lock Out. The employees are not entitled to any remuneration for unlawful strike. Conversely, the employees are entitled to full remuneration during unlawful Lock Out.

Government Intervention

The government has authority to require the parties to settle any collective disputes at any stage through arbitration if it potentially trigger financial crisis in the country or the government believes that the dispute should be settled through arbitration.

Special Provisions on Collective Dispute

The New Labor Act also provides that the collective bargaining may be placed and settled not in each individual entity but jointly for all the industries in the same sector in association level.   The association of the industries of one sector may enter into the collective bargaining agreement with the association of trade union active in such business sector. In the situation the individual industry is not required to deal with collective demand separately.

There was no such identical provision in the Previous Act.


12.  Sanctions


The New Labor Act provides more stringent sanctions for the violation of the provision of such Act. The Sanctions include fine, imprisonment and both.  The authority to impose sanction also depends on nature of violation. The brief outline of sanctions as provided in the New Labor Act is as follows:

Sanction by Labor Office

Non Compliance Consequence of Non Compliance
Deduction of Remuneration and Other Facilities contrary to prevailing laws Indemnify the concerned worker with amount double the deducted remuneration and other facilities


Obstructing government officer, submitting false details Fine up to Rs. 20,000


Engaging an intern or trainee against the provision of the Act Fine up to Rs. 10,000 per intern or trainee


Failure to deposit the gratuity amount, or in provident fund or social security fund, or to arrange medical or accident insurance Indemnify the worker with an amount double the amount to be paid
Keeping the workers in reserve discriminatorily Order to not to do so
Terminating employment against the provisions of the Act Issue necessary directives

Sanction by Labor Department:

Non Compliance Consequence of Non Compliance
Supplying labor without license and engaging labor in work from such supplier Fine up to Rs. 200,000.


Engaging a foreign national in work without work permit Fine up to Rs. 200,000 depending upon the number of workers; repetition even after being punished shall be fined with additional fine of Rs. 5,000 per person per month.


Discriminating among the workers Fine up to Rs. 100,000 and the order the maintain the equality may be given.
Engaging a worker without appointment letter or employment agreement Fine up to Rs. 500,000 at a rate of Rs. 10,000 per worker; the order to conclude an employment agreement and provide an appointment letter shall also be given

Sanction by Labor Court

Non Compliance Consequence of Non Compliance
For engaging a bonded labor Imprisonment up to 2 years or fine up to  Rs. 500,000 or both. The Labor Court can require the entity to provide such bonded labor with remuneration, allowance and other facilities, as well as to indemnify the bonded labor with an amount double such remuneration, allowance and other facilities.
If the entity does not make health and safety arrangements knowingly and as a result the worker dies or suffers physical or mental injury Imprisonment up to 2 years, except otherwise provided. Such person suffering the injury should be compensated.




13.  Social Security


The Labor Act requires the retirement fund such as (a) gratuity, and (b) provident fund to be deposited in the Social Security Fund.  There has been separate law on social security. The parliament has enacted the Social Security Act, 2017 (2074) which has also been also obtained the accord of assent of the President on August 16, 2017.


14.  Other Key Provisions


Composition of Labor Court

As per the Act, the Labor Court shall consist of a chairperson and two members. The jurisdiction of the Labor Court is exercised collectively where the majority opinion prevails.


Any decision or order of the Department or Labor Office can be appealed at Labor Court within 35 days of such order or decision. Any decision of the entity terminating the employment or on disciplinary action can be appealed at Labor Court within 35 days of having obtained the notice of such decision. The appeal on the case originally tried and settled by the Labor Court is placed at Supreme Court. Any decision rendered by the Labor Court exercising appeal jurisdiction is final.

Enforcement of Decision

The concerned party should enforce the decision or order of the Labor Court after the finality of such order or decision. The decision on individual or collective dispute or the arbitral award should be enforced by the concerned parties. If the decision or order is not implemented, the concerned party can file an application to the Labor Office for implementation. The Labor Office can write to the concerned worker or employer for the implementation of such agreement, decision or order, which shall be effected within 15 day.

If the order, decision or agreement is not enforced as per the procedure mentioned above, the concerned party may submit an application to the Labor Office for enforcement of such order, decision or agreement. For this purpose, the Labor Office may write to the concerned office or officer to freeze the immoveable property, to freeze the bank account, to freeze or suspend the concessions, exemptions granted under prevailing laws, to suspend the work permit, or issue other necessary orders.

The concerned party can file a complaint to the Labor Court if the order, decision or agreement, or arbitral award is not enforced within 3 months from the date of filing of application with the Labor Office or within 15 days from the date of action taken by the Labor Office for enforcement. The Labor Court provides a certain time period for implementation and non-compliance during the period is punished with fine up to Rs. 100,000 or imprisonment up to 1 year.

Regulation of Management Level Employee

Manager and managerial level employee have been prohibited from submitting collective demands on behalf of trade union, taking part in collective bargaining and taking part in strike.

Performance Appraisal

The entity can conduct performance appraisal of its workers once in a year in general. The bases and procedure of appraisal should be justifiable and reasonable, and disclosed to workers prior to performance appraisal. The worker should be provided an opportunity to present disagreement on the appraisal, if any. The entity should arrange for the review of the appraisal if such disagreement is submitted.

Certificate of Work Experience

The entity should provide a certificate of work experience stating the period of the service and the post if the worker whose service has been terminated asks for one.


15.  Repeal

The New Labor Act has repealed the following Acts:

Labor Act, 1992 (2048)

Industrial Trainee Training Act, 1982 (2039)

Retirement Fund Act, 1985 (2049)


**DISCLAIMER: This document is prepared on the basis of the draft of the Labor Bill made available. The legal text of the Labor Act, 2074 is yet to be published in Nepal Gazette which will be authentic legal text. This document is prepared for general understanding and should not be taken for any legal purpose without consulting legal professionals.**

The copyright of the document is vested with PLA.

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