New Labour Law Implemented

Executive Summary

​The Nepalese government has introduced a new labour law that:

• codifies rules previously governed by various agencies;
• relaxes eligibility rules for hiring foreign workers; and
• requires an employer of a foreign worker to contribute 8.33 percent of the employee's monthly income to the employee’s pension fund, among other changes.

The revised provisions are effective immediately.

The situation

​The Nepalese government has introduced a new labour law that amends several provisions of the previous labour law and introduces new provisions that aim to eliminate existing ambiguities.  The changes are effective immediately.

• Scope of applicability. The new law has a broader scope of applicability than the previous law, and now covers the below categories:
  • Any entity operating in any industry, profession or service, with or without profit, regardless of number of workers; and
  • Representatives or workers hired by an overseas entity undertaking promotion, sales and marketing activities in Nepal.
• New employment categories. The new law introduces several new categories of employment based on the nature of work performed, including regular employment, work-based employment (those hired for a specific project), time-based employment (those hired for a specific amount of time), casual employment (those hired for an unspecified amount of time), and part-time employment.
  • Impact.  Although this expansion will regulate more foreign nationals under the labour law, the effect of this will be minimal as the rules surrounding the validity of stays will not change.
• Employment period now mandatory in contract.  The period of employment must now be prescribed in the employment agreement. If the period of employment is not stipulated in the employment agreement, the contract will be deemed to be valid for three years.
  • Impact.  This requires employers to ensure that they negotiate the duration of the contract with the employee prior to the start date.
• Relaxed eligibility. The type of position for which a foreign national can be hired has been changed from "skilled technical position" to "skilled position". Therefore, foreign workers without technical skills can now work in Nepal.
  • Impacts. This increases the pool of eligible foreign nationals who seek to enter Nepal to work. 
    • Since the rules relating to labor market testing remain the same, foreign nationals and their employers will still be subject to the same processes to be able to work in Nepal. 
    • Since the maximum period for employment for a foreign national is yet to be prescribed by the new law, the rule that allows foreign nationals to work for up to five to seven years still applies.
• Repatriation of salaries earned. Work Permit holders may now send 75 percent of their remuneration earned in Nepal to their home country in convertible foreign currency. This issue was previously governed by the rules of various Nepalese government agencies. However, the provision has now been codified by the new labor law.
  • Impact. While this makes repatriation of remuneration earned in Nepal by foreign nationals a statutory right, the requirements for availing this right remain the same as per the previous law, which include certain restrictions.
• Mandatory contribution to employee pension fund. The employer must contribute 8.33 percent of the employee's monthly income to the employee’s pension fund, starting from the date the employee was hired. This requirement only applies to employees hired on or after September 4, 2017 who continue to remain employed as of December 22, 2017.  This requirement does not apply retroactively to employees who worked until September 4, 2017.
  • Impact. This requires employers to set aside funds for a new set of monthly contributions.

This alert is for informational purposes only. If you have any questions, please contact the global immigration professional with whom you work at Fragomen or send an email to [email protected].