Nepal Leave Policy: Employer's Guide

Leave Policy in Nepal: Rules Every Employer Must
Know
Leave Policy in Nepal influences the way workers take their rest and recuperate and how they
manage their personal life and work. These rules should be well understood by all the
employers in Nepal.
A simple and easy to understand guide of Leave Policy in Nepal. It also outlines the benefits of
using modern HR software for compliance in expanding companies.
Leave rules impact payroll, staffing, and legal risk all at once so HR teams can't take leave rules
lightly. This article will talk you through all the different types of leaves, encashment rules,
eligibility requirements and the common mistakes that employers make when applying the
Leave Policy in Nepal.
Understanding the Leave Policy in Nepal
Leave Policy in Nepal originates from the Labour Act, 2074 (2017), along with the Labour Rules,
2075. These laws apply to most formal-sector employers.
Who the Leave Policy in Nepal Applies To
● Private companies, banks, hotels, and schools
● Registered industries and factories
● Corporate offices with formal employment contracts
● Foreign employees working under valid work permits
Why Company Policies Vary
Employers may include additional benefits above and beyond the minimum requirements. For
example, some multinational companies provide extra days off to celebrate a festival or
wellness days to recruit. Therefore, though leave policy is legally the same for all the
organizations, there is a slight variation in Leave Policy among them in Nepal.
Staff should use their contract to check against the statutory minimums at all times. An
agreement that provides less than the law's minimum requires does not meet the legal minimum
and is automatically replaced by the law.

Legal Framework Behind the Leave Policy in Nepal
The Leave Policy in Nepal is directly addressed in Chapter 9 of the Labour Act, from Section 40
to 51. Further, the procedural details are added in these sections in the Labour Rules, 2075.
● Labour Act, 2074 specifies all the types of leave and qualification criterion.
● Labour Rules, 2075: Establishes documentation and accrual formula.
● The registered employer may use the Social Security Fund (SSF) to fund the maternity
leave.
All three need to be read, before drafting an internal policy, by employers. Otherwise, they and
their business may find themselves in trouble if a labour inspector visits their premises.
Types of Leave Under the Leave Policy in Nepal
Leave Policy in Nepal allows a number of different types of leave. Each one has a specific
function and is used for various reasons by employees and employers, so there is no need to
consider leave as a single pool of leave.
The following is an overview of the different types of leaves, their respective durations and the
conditions of their Leave Policy in Nepal.
Annual Leave
● 1 day leave for every 20 days worked.
● This equals approximately 18-21 days a year after 1 year of service.
● Leave pay is at least 50% day's basic pay per day.
Sick Leave
● Twelve paid sick days per year.
● After 7 consecutive days of sickness, a medical certificate is required.
● Any unused sick leaves can be carried over until the maximum statutory limit
Casual Leave
● Staff members are entitled to 12 casual days of leave a year.
● This leave is for a short notice personal leave.
● It requires no advance planning for the employees.
Festival Leave
● Staff are given up to 3 flexible festival days.
● They can match these days to their religious and/or cultural events.

● There is no restriction on this leave under the Leave Policy of Nepal.
Maternity Leave
● Women employees get 98 days maternity leave altogether
● The first 60-days are fully paid for by the employer.
● If the family is unable to cover the remaining days, they will receive the remaining
amount from the Social Security Fund.
● The employees shall be absent for not less than 2 weeks prior to the delivery.
● Staff to be absent for a minimum of 6 weeks following delivery
● For complications, doctors can recommend another month of treatment.
The Nepal government is planning to increase paid maternity leave from 98 days to six
months for working women. If implemented, this would give mothers more time to recover and
care for their newborns. The change is currently a proposal and has not yet become law.
Paternity Leave
● Fathers get Paternity Leave with paid days around the birth of the child.
● If the mother dies within 60 days of the child's birth, the father has the right to claim the
rest of the mother's maternity benefits.
Bereavement Leave
● Employers provide approximately 13 fully paid days of leave for the employee.
● This leave is for the death of a spouse, parent, child or parent-in-law.
Unpaid Leave
● When the statutory categories of unpaid leave are exhausted, employees may apply for
unpaid leave.
● This leave is usually given at the discretion of the employer.
Who Qualifies Under the Leave Policy in Nepal
The Leave Policy in Nepal is intended for most of the permanent and full-time employees. Rates
are different for probationary, contractual and part-time employees.
Eligibility by Employment Type
● Full-time staff: Take leave from day one; have access to most of it after 12 months on the
job.
● The core protections and sick leave provisions also continue to apply to probationary
employees.

● Contract staff & fixed term employees: are treated the same as permanent staff under
the statute.
● Non-standard work: Leave will be provided on a pro-rata basis, according to hours
worked
● Minority workers: Are entitled to the same benefits as majority workers.
If employers classify employees as non-exempt, they could face penalties and back-pay
lawsuits. So, it is best for multinational companies to have a one leave policy for the entire staff.
Benefits of Following the Leave Policy in Nepal
An effective Leave Policy in Nepal provides added benefits above and beyond just legal
requirements. When an employer closely adheres to it, they may notice better retention and
morale rates throughout their organization.
Advantages for Employers
● Increased legal protection in the event of labour audits and inspections
● Reduction in payroll disputes upon employee termination
● More predictable staffing patterns, as leave patterns become predictable
● In a competitive job market, better employer branding.
Advantages for Employees
● Ensured rest/recovery time all year long
● Financial protection in sickness, during childbirth or in case of death.
● Clarity on the accrual and carry forward of leave
● Knowing that their statutory rights are upheld in all situations, no matter how big or small
the company is.
Public Holidays and the Leave Policy in Nepal
The Government of Nepal officially declares about 13 public holidays every year. These days
are in addition to the normal leave of the employees.
Key Points on Public Holidays
● The most significant period of holidays, other than Christmas, usually falls during the
Dashain and Tihar festivals.
● Comps must be provided to employees who are required to work on a holiday or
additional compensation shall be provided.
● Holiday dates should be changed annually, as they align to the lunar year.

Leave Encashment and Carry-Forward Rules
Staff have the option to bank their unused leave but with limits imposed by legislation.
Carry-Forward Caps
● Home leave: can be accumulated to a max of 90 days.
● Sick leave: Up to 45 days.
● Any surplus in excess of these caps is paid out as cash at year-end.
Final Settlement Rules
● Employees who resign, retire or die have the ability to cash in all unused home and sick
leave.
● The calculation is based on the employee's basic pay at the end of the contract.
● A lot of emphasis is placed on accuracy – both for the employer and the employee
leaving.
Employer Obligations and Penalties
The Leave Policy in Nepal imposes strong responsibilities on employers, rather than
employees. Failure to comply may have actual monetary and legal penalties.
What Employers Must Do
● Ensure that leave documents are kept up to date for all staff.
● Give statutory leave without having to give reasons for their personal leave
● Automatically use up any surplus leave at the end of the year.
● Take up unused leave at the time of an employee's departure.
● Ensure internal policies are updated when there is a change in the Labour Act or Labour
Rules.
Consequences of Non-Compliance
● Fines levied on the business by the Department of Labour on the inspection.
● The back-pay claims of current or former employees.
● Damage to reputation (may impact future employment)
● Legal-backlog issues that tie up management time and resources.
These risks are present and employers should have a clear and well-documented leave policy
and review it annually.