LABOUR RULES

2018

2018
www.trunco.com.np
Table of Contents

Regular Employment (Rule 3) 5

Mandatory disclosures in Employment Contract (Rule 4): 5
Labors kept on reserve (Rule 6 & 7) 5
Labor Permit (Rule 7 & 8) 5
Application required for permission of employment (Rule 9) 5
Period of employment (Rule 11) 6
Extension of duration (Rule 12) 6
The number of foreign citizens to be employed (Rule 13) 6
Cancellation of Permit (Rule 14) 6
Inspection (Rule 15) 6
Working Hours (Rule 16) 6
Additional time for Rest (Rule 17) 7
Birth Certificate to be submitted (Rule 18) 7
Methods of Deduction in Remuneration (Rule 19) 7
Payment for weekly holidays (Rule 20) 7
Payment via Banking Channel (Rule 21) 7
Provident Fund (Rule 22) 7
Gratuity (Rule 23) 7
Calculation of Gratuity Amount 8
Payment of Provident fund and Gratuity amount (Rule 24) 8
Settlement of dispute (Rule 25) 8
Determination of Percentage of Disability (Rule 26) 8
Labor Outsourcing (Rule 27) 8
Bank Guarantee (Rule 29) 8
Renewal of License, Submission of details and Suspension
(Rule 30, 31 & 32): 8
Duties of the Main employer (Rule 33) 8
Business-related Security and Health Policy (Rule 34) 9
Duty of the employer (Rule 35) 9
Safety and Health Committee (Rule 37 and 38) 9
Security Arrangements (Rule 41) 9
Lifting heavy weight (Rule 42) 9
Other arrangements regarding business related health and security 9
Child Care, Relaxing room and Canteen (Rule 45, 46 and 47) 9
Labor Audit (Rule 56) 9
Transfer of Labor (Rule 59) 9
Facilities to Labors during Transfer (Rule 60) 11
Labor Relations Committee (Rule 61 and 62) 11
Labor Performance Evaluation (Rule 63) 11
Collective Bargaining Committee (Rule 64) 11
Termination of Employment (Rule 72) 11
Retirement Age (Rule 73) 11
Payment after termination (Rule 74) 11
Basic Remuneration (Rule 77) 12
Fixation of Piece Rate (Rule 78) 12
Personnel Record (Rule 81) 12
Service Charge Distribution (Rule 82) 12
Public and weekly holiday of Domestic Labor (Rule 83) 12
Welfare Fund (Rule 84) 12
Housing fund (Rule 85) 12
3
 HIGHLIGHTS
OF LABOR RULES 2018

4 Labour Act 2018

Highlights of Labor Rules
2018

REGULAR EMPLOYMENT (RULE 3) control, provided that the appointment is

• In case of any disagreement on the type of not a demotion and there is no reduction of
employment, the entity/labor may submit remuneration, unless otherwise agreed by the
application to the labor office to determine labor.
whether the employment is regular or not. LABOR PERMIT (RULE 7 & 8)
• Within 1 month from the date of application, Application should be submitted to the DoL, in the
the labor office shall provide a decision on format prescribed in Annexure 1 of the Rules, prior
whether the employment is regular or not. to employing a foreign citizen.
• Based on the Act or the rules, in case any
question is raised on the type of employment Following documents should be annexed with the
in an application made to the department or in application:
a suit filed in court, The Department of Labor
• Original copy of the published job
(DoL) or the court can provide a decision on
advertisement containing particulars as
the matter.
prescribed in section 22 (3) of the Act.
MANDATORY DISCLOSURES IN
• Attested copy of passport having validity of at
EMPLOYMENT CONTRACT (RULE 4):
least 6 months.
• Nature of Employment.
• Bio-data of the foreign citizen.
• Job description and position.
• Proof of payment of applicable taxes by the
• Bylaws established under Section 108 of employer.
the Labor Act, 2074 (hereafter referred to as
• Summary of the selection procedure and skills
“the Act”) to be an indispensable part of the
and qualifications of Nepalese candidates,
contract.
if any, who applied for the job based on the
• Place, time and effective date of published advertisement.
implementation of the contract.
• Work plan to groom and train a Nepalese
• Other relevant employment terms. citizen to substitute the foreign labor.
LABORS KEPT ON RESERVE (RULE 6 & 7) • Copy of work approval from Ministry of Home
• The labor must be provided prior information Affairs, if applicable.
on the reason and period of being kept on On verification of submitted documents, DoL, shall
reserve. notify with reason, a rejected applicant within 7
• 50% of the existing remuneration to be days. If application is accepted, the DoL shall give
provided to the labor during the period when permission of employment within 30 days.
the labor is kept on reserve.
APPLICATION REQUIRED FOR
• Outsourced labors can also be kept on
PERMISSION OF EMPLOYMENT (RULE 9)
reserve. Information about relocation shall be
provided to the outsourcing agency. A foreign citizen desiring to work in Nepal shall
submit an application to DoL in the format
• Labors kept on reserve could be deputed
prescribed in Annexure 3 of the Rules.
to other departments within the same
enterprise or to another enterprise under its

5
 CHARGES (RULE 10) Maximum number of foreign
Particulars
Following charges shall apply for Labor permit: citizen to be employed
For In accordance with agreement
Period Charge per person organizations between Government of Nepal
For period up to 6 with foreign (GoN) and Foreign Government or
NPR 15,000
months investment or organization if any;
For period exceeding 6 foreign aid
NPR 20,000 Or, in absence of such an
months
agreement, maximum of 3 foreign
Where application has been made through citizens.
Nepalese Embassies or Diplomatic Missions, For other Not exceeding 5% of total
equivalent amount can be paid in convertible organizations labor requirement in the
foreign currency to respective Embassy or concerned organization.
Mission.
If records are not maintained for labors whose
PERIOD OF EMPLOYMENT (RULE 11) records are required to be maintained under
The permission of employment granted to the the Act, DoL shall fine the employer double the
labor as per Rule 8 or 9 shall not exceed the charges per Rule 10(1) and maintain records of
period mentioned by the working committee such labors.
of the Ministry of Labor (herein after referred as
CANCELLATION OF PERMIT (RULE 14)
“Ministry”).
The DoL may cancel the work permit or approval
Per rules 8 and 9, permission of employment may in following cases:
be granted to a foreign citizen for the following
period: • On expiry of work permit provided by the
Home Ministry, GoN.
For technically skilled Not exceeding 5 • Nonpayment of applicable taxes or any
labor years payment due to the GoN within the prescribed
For other foreign labor Not exceeding 3 years time.
• Conviction of labor by court for any criminal
However, on special circumstances, DoL may offense.
grant permission for an additional 2 years after
approval from the Ministry. • In the interest of National Security.
• Negligence in performing duties or depletion in
EXTENSION OF DURATION (RULE 12) moral values and integrity.
To extend the permission for employment for INSPECTION (RULE 15)
a foreign citizen, the employer shall submit an The DoL has the responsibility of inspecting or of
application with requisite documents to the directing inspections regarding the employment
department, 30 days prior to the expiry date of of foreign citizen within the scope of Rules 8 and
prior approval. 9 and Rule 13(3). The DoL may direct employer
to terminate services of such foreign citizen
THE NUMBER OF FOREIGN CITIZENS TO immediately, whose permission for employment
BE EMPLOYED (RULE 13) has not been received or records have not been
The number of foreign citizens to be employed maintained.
shall be as follows:
WORKING HOURS (RULE 16)
The employer shall determine the working hours
as per the nature of work and should inform all
workers.

6 Labour Act 2018

ADDITIONAL TIME FOR REST (RULE 17) Deductions Maximum Permissible
Rule
Half an hour of additional rest time shall be Nature deduction
provided to pregnant women or women having 19(5) If percentage As per agreement.
children below 3 years of age. Such additional has been
rest time shall form part of regular working hours. specified
on mutual
BIRTH CERTIFICATE TO BE SUBMITTED agreement
(RULE 18) For the purpose of determining the amount from
Within 3 months from the end of maternity leave, which deduction is to be made, following shall be
female labors under maternity leave shall furnish deducted:
to the employer, a copy of the birth registration
certificate of the child or a certificate provided by • Fees to be paid to trade union
the hospital/health post where the child was born. • Amount to be contributed to provident fund
• Fees for collective bargaining
• Upon submission of documents mentioned
above, the employer shall approve the PAYMENT FOR WEEKLY HOLIDAYS (RULE
maternity leave of the labor. 20)
• The female labor shall submit a medical report Employer shall pay labors for the weekly holidays.
in case of miscarriage or a birth certificate from
the hospital/health post in case of stillbirth. PAYMENT VIA BANKING CHANNEL (RULE
21)
Based on the availability of banking services,
METHODS OF DEDUCTION IN
the Ministry may direct the employer located in a
REMUNERATION (RULE 19)
specified area to pay the remuneration to labor
The details of such deduction are summarized in only through proper banking channel.
the table below:
PROVIDENT FUND (RULE 22)
Deductions Maximum Permissible Until the Social Security Fund is established per
Rule
Nature deduction contributions from Social Security Act 2074 or
19(1) Government If period is specified, until the implementation of the aforementioned
Order/ Court within such period. Act, the employer shall deposit the amount of
Decree provident fund in:
(Page:10) If period is not
specified, amount • Provident Fund Account
not exceeding 50%
• Approved Retirement Fund or
of monthly salary
until total amount is • Separate account
realized. Per section 20 of the Social Security Act, 2074,
19(2) Any benefits Not exceeding 33% of the employer shall transfer the amount deposited
provided monthly salary. in aforementioned funds in a lump sum or in
19(3) Any receivables Not exceeding 33% of maximum of 3 installments within 6 months from
to the company monthly salary. registration in the Social Security Fund.
19(4) Where it is May deduct more
not possible than 33% based on GRATUITY (RULE 23)
to realize the duration and time of Until the Social Security Fund is established as per
total deductible work. contributions from the Social Security Act 2074
amount only or until the implementation of aforementioned Act,
just charging employer shall deposit the amount of gratuity in:
33% due to
limited term of
employment
7
 • Citizen Investment Trust • If the laborer is unable to work due to disability
• Approved Retirement Fund or caused by accident in the workplace, the
laborer may file an application for determination
• Separate account of percentage of disability to the Labor Office
Per section 20 of the Social Security Act, 2074 within 1 year of discharge from hospital.
the employer shall transfer the amount deposited • The labor office shall send such labor to a GoN
in aforementioned funds to the Social Security approved hospital, medical offices or medical
Fund in lump sum or in maximum 4 installments board for determination of percentage of
within 6 months from registration in the Social disability.
Security Fund.
• Concerned Insurance Company shall pay the
CALCULATION OF GRATUITY AMOUNT compensation based on the percentage as
determined by such hospitals, medical offices
For the period before 19 Bhadra 2074 or medical board on NPR.700, 000.
LABOR OUTSOURCING (RULE 27)
Period of Service Amount of Gratuity
Labor who has Amount equivalent to half Application with prescribed details and documents
served for 7 years of the current monthly needs to be filed for license for outsourcing of
remuneration for every year labor in the concerned area office or the DoL if
of service. there is more than one labor office in that area.
Labor who has Amount equivalent to two-
BANK GUARANTEE (RULE 29)
served between 7 third of the current monthly
to 15 years remuneration for every year Bank guarantee provided as token money by
of service. license holder must have a validity period of at
Labor who has Amount equivalent to one least 3 months more than that of the license.
served more than month’s remuneration for
15 years every year of service RENEWAL OF LICENSE, SUBMISSION OF
DETAILS AND SUSPENSION (RULE 30, 31 & 32):
For the period after 19 Bhadra 2074 (4 Sept Rule Particulars Due Date
2017), 30 (1) File an application for Within Ashwin end
renewal of license every year
• The employer shall deposit 8.33% of basic
30 (2) Upon failure to renew Renew within the
remuneration for every month of service.
fiscal year by paying
PAYMENT OF PROVIDENT FUND AND fines of 10% of
GRATUITY AMOUNT (RULE 24) renewal fee for every
Before transferring the amount related to Provident month exceeding
Fund or Gratuity in Social Security Fund, the the due date.
employer may pay such amount to the concerned 32 Labor office may By providing 7
labor in case of termination of employment or his suspend license (up days advance
family in case of death of the labor. to 6 months at a time) notice. Reasonable
on failure to comply opportunity of being
SETTLEMENT OF DISPUTE (RULE 25) with the prescribed heard would be
The Labor office may direct for settlement in case conditions. given.
of dispute between employer and labor regarding
Gratuity or Provident Fund. The settlement needs DUTIES OF THE MAIN EMPLOYER (RULE 33)
to be done within 2 years. The duties of the employer shall be as follows:

DETERMINATION OF PERCENTAGE OF • There shall be no discrimination between

DISABILITY (RULE 26) outsourced and permanent labors, on

8 Labour Act 2018

 the facilities and benefits- apart from the OTHER ARRANGEMENTS REGARDING
remuneration and fees- provided to them. BUSINESS RELATED HEALTH AND
• Maintain personnel and attendance record SECURITY

• Make payments to labor outsourcing agency • Appropriate arrangements shall be made at

as per contractual terms or on a monthly basis, the workplace with respect to cleanliness,
if not specified in the contract. appropriate temperature control, access to
clean air and drinking water, proper lighting,
• Include outsourced laborers in the Health and and first aid. Any wastage or spillage generated
Security Committee established as per Rule during work shall be processed in order to not
37. cause any harm to the health of the laborers.
BUSINESS-RELATED SECURITY AND • The employer should follow the directions
HEALTH POLICY (RULE 34) given by the Ministry, the DoL or Labor office.
The employer shall prepare and maintain • If an labor is diagnosed with a business-related
business-related security and health policy disease mentioned in the Gazette published
after consulting with the Health and Security by the GoN, the employer shall pay for the
Committee, if formed, otherwise with the medical expenses and compensation as
concerned labors or the Trade Union. prescribed by the ministry.

DUTY OF THE EMPLOYER (RULE 35)

CHILD CARE, RELAXING ROOM AND
• Make necessary arrangements to promptly CANTEEN (RULE 45, 46 AND 47)
take the labors who get injured or fall sick
during work, to a hospital or a health post. The employer shall make the following
arrangements:
• Inform the Labor office regarding the fulfillment
Condition Arrangements for
of duties concerning security and health
provided to the labors. 50 or more Child care for children
female below the age of 3 years
workers with provision of care taker
SAFETY AND HEALTH COMMITTEE (RULE
50 or more -Relaxation room
37 AND 38)
workers -Canteen
• Safety and Health committee shall be formed
in an organization employing 20 or more LABOR AUDIT (RULE 56)
people.
• The enterprise may conduct a labor audit as
• The organization employing more than 300 per the criteria determined by the Ministry,
people may add 3 more members to the through its own management or through any
committee. person or institution associated with labor
• The committee shall meet at least 4 times a sector, within the end of the Poush every year.
year. • The labor audit report is to be made in the
format provided in schedule 10 of the Rules.
SECURITY ARRANGEMENTS (RULE 41) • In case of any false particulars provided in the
Appropriate security arrangements should be in labor audit report, the auditor would be penalized
place to protect laborers from possible accidents as per section 163 (2) (Kha) of the Act with a fine
that may be caused by machines and tools. of NPR 20,000 for each count of falsification.

LIFTING HEAVY WEIGHT (RULE 42) TRANSFER OF LABOR (RULE 59)

The laborer should not be made to lift or carry An labor interested to be transferred from one
more than the following weights enterprise to another enterprise could be transferred
Adult Man 55 Kgs based on mutual agreement between both enterprises.
Adult Women 45 Kgs

9
10 Labour Act 2018
FACILITIES TO LABORS DURING operates within 2 years or requires additional
TRANSFER (RULE 60) labors, it must call back the retrenched labors to
Facilities to be provided by the employer, for the work, by providing 15 days’ notice.
labors’ transfer from existing work place to another
shall be as prescribed: This information should be placed on the job
portal site of the ministry and the website of the
• Transport charges for luggage. enterprise for a minimum of 15 days.

• One month salary for settlement arrangements RETIREMENT AGE (RULE 73)
in the new location.
The enterprise can submit an application to the
• Travel and daily allowance and outstation Ministry, with basis and reasons, if it desires to fix
allowance as prescribed in the bylaws. the retirement age below 58 years.
The employer is not required to compensate
aforementioned benefits if the labor is transferred PAYMENT AFTER TERMINATION (RULE 74)
within the same location or on transferred on his The method for payment after termination of
own request. engagement shall be as follows:

LABOR RELATIONS COMMITTEE (RULE 61 If the labor is Deposit the amount in a

AND 62) unable to collect in bank or financial institution
Labor relations committee shall be formed in an person. account of the labor
enterprise having 10 or more labors. Where no bank Deposit the amount in a
account is bank or financial institution
Meetings of the committee shall be held at provided account of a family member
the time and place determined by the meeting nominated by the labor
coordinator.
In case of death of the labor before receipt of
LABOR PERFORMANCE EVALUATION remuneration, the payment shall be made to a
(RULE 63) family member in an order as prescribed below:
• The employer shall evaluate the labor’s
performance as per policy and procedures and • Any person nominated by the labor
should provide a performance evaluation form • In the event of death of nominee or if no
to the labor. nominee is appointed, payment shall be made
• The performance evaluation form filed by the in following order:
labor at the beginning of the year, shall be ƒƒ Spouse living together,
securely kept for 3 years. ƒƒ Son, daughter-in-law or unmarried
COLLECTIVE BARGAINING COMMITTEE daughter living together,
(RULE 64) ƒƒ Grand-children, father, mother, father-in-
law or mother-in-law living together,
A Collective Bargaining Committee (CBC) shall be ƒƒ Spouse, son, daughter-in-law, or
formed based on the number of labors engaged unmarried daughter living apart
in the enterprise: In cases where the amount cannot be deposited
No. of labors No. of members in the CBC in bank account and the person does not make
Up to 20 3 a claim within 3 years, the amount shall be
21 to 100 5 deposited in the Social Security Fund. The labor
More than 100 One member per 50 additional or his representative can claim an amount not
labors; maximum up to 11. exceeding that initially deposited in the Social
Security Fund.
TERMINATION OF EMPLOYMENT (RULE 72)
If an enterprise which has retrenched labors
for any reason per Section 145 of the Act, re-

11
 BASIC REMUNERATION (RULE 77) PUBLIC AND WEEKLY HOLIDAY OF
Basic remuneration of a regular labor shall be DOMESTIC LABOR (RULE 83)
equivalent to 60% of last 3 months average gross Paid public Holidays 12 days
salary. However, it shall not be less than the Paid weekly Holidays 1 day
minimum remuneration fixed by the GoN.
If domestic workers are made to work on public
FIXATION OF PIECE RATE (RULE 78) holidays or weekly holidays, they should be
The following must be considered when fixing a compensated with additional remuneration or
piece rate: compensatory leave, within 21 days.

• As per agreement between labor and WELFARE FUND (RULE 84)

employer, if any. For the management of funds remaining after
• Increase piece rate in proportion to increment distribution of bonus u/s 13 of the Bonus Act
in minimum wage rate. 2030, a welfare fund shall be established
• In other cases, hourly rate of minimum wage of wherein 70% of the surplus bonus amount will be
labor. deposited.

In case of liquidation or retrenchment of all labors

PERSONNEL RECORD (RULE 81) of the organization, the amount in the welfare fund
The employer should maintain a record of name, should be proportionately distributed to all labors
address, family background, contact number, working in the organization up to 1 year prior to
citizenship number, email, etc. for all labors. Any the date of initiation of liquidation.
changes in labor details should be informed
immediately by the labor and updated accordingly. HOUSING FUND (RULE 85)
Any amount remaining in the Housing Fund
The employer shall maintain records of salary established u/s 41 of the erstwhile Labor Act,
paid and attendance marked for all labors for a 2048, could be utilized for the following purposes:
minimum period of 5 years.
• Management of residence quarters for laborers
SERVICE CHARGE DISTRIBUTION (RULE 82) or,
If service charge is collected from consumers • A labor welfare scheme as per decision of a
by a hotel, motel, restaurant, jungle safari or any labor related committee.
similar business, it shall be distributed to laborers
as follows: On liquidation of an organization, 50% of such
fund shall be distributed to the existing labors on a
Per agreement with an authorized representative proportional basis while the remaining 50% will be
or trade union, if any provided to the employer.

Otherwise, as follows:
% of Total
Recipient
Collection
Laborers, trainees working as per
71% section 18 of the Act or outsourced
laborers
24% Employer
2.5% Hotel Association
Authorized representative or Trade
2.5%
Union

12 Labour Act 2018

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WHO SHOULD YOU CONTACT?

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Senior Partner
 +977-01-4410927
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Managing Partner
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Sanjeev Kumar Mishra

Partner
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 smishra@trunco.com.np

Santosh Lamichhane
Director
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 santosh@trunco.com.np

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