Under Nepal's Labour Act 2074 a worker works at most 8 hours a day and 48 hours a week; overtime is capped at 4 hours a day and 24 a week and paid at 1.5 times basic pay. Workers earn one day of home leave for every 20 days worked and 12 days of sick leave a year, and the employer deposits 8.33% of basic salary every month as gratuity with the Social Security Fund.
Use the free income tax calculator to check the yearly tax on a salary, including overtime and leave pay.
What are the legal working hours?
Section 28 of the Labour Act sets the limit at 8 hours a day and 48 hours a week. After 5 hours of continuous work the worker gets a half-hour rest, and that rest counts as working time. Workers also get a weekly day off (Section 40).
How much is overtime pay, and how much is allowed?
An employer cannot force anyone to work beyond normal hours except where stopping the work would endanger life, safety or health or cause serious loss (Section 29). When overtime is worked:
- it may not exceed 4 hours a day and 24 hours a week (Section 30);
- it is paid at 1.5 times the basic remuneration for normal hours (Section 31);
- working on a weekly or public holiday without getting a substitute day off within 21 days also counts as overtime.
For managers, a collective agreement or the employment contract may give other benefits instead of overtime pay.
How many days of leave does a worker get?
| Leave | Days | Paid? |
|---|---|---|
| Public holidays (Section 41) | 13 a year including May Day; 14 for women, including International Women's Day | Yes |
| Home leave (Section 43) | 1 day for every 20 days worked | Yes |
| Sick leave (Section 44) | 12 days a year, pro rata in the first year | Yes |
| Maternity leave (Section 45) | 14 weeks in total | Full pay for 60 days |
| Paternity (maternity care) leave | 15 days | Yes |
| Mourning leave (Section 48) | 13 days | Yes |
A few details matter for payroll:
- Sick leave over three days in a row needs a certificate from a recognised doctor.
- Maternity leave must include at least 2 weeks before and 6 weeks after the expected delivery. A doctor can recommend up to one more month of unpaid leave. Where the Social Security Fund pays the maternity benefit, the employer does not pay that part again (Section 47).
- Mourning leave covers a worker's own mourning, the death of a spouse, and, for a married woman, the death of her parents or parents-in-law.
- Sick, mourning and maternity leave are rights; the employer can reschedule other leave for stated work reasons (Section 51).
Which dates fall on public holidays depends on the year — see the holiday list and the Nepali calendar.
How does leave encashment work?
Section 49 lets a worker build up home leave to 90 days and sick leave to 45 days. Any balance above those limits is paid out at the end of each year at basic salary. When the worker leaves or dies, all accumulated home and sick leave is paid as a lump sum at the last basic salary.
What is gratuity, and who pays it?
Section 53 requires the employer to set aside 8.33% of each worker's basic salary every month as gratuity and deposit it with the Social Security Fund in the worker's name, from the day they start. On a basic salary of Rs 30,000 that is Rs 2,499 a month. A worker who is entitled to a pension does not also get this gratuity.
The provident fund works the same way: 10% of basic salary from the worker plus an equal 10% from the employer (Section 52). Where an employer is in the SSF scheme, those contributions are part of the monthly SSF deposit rather than an extra cost (Section 57); the rates and their tax effect are in salary TDS and SSF for FY 2083/84. Section 37 also gives every worker a festival allowance of one month's basic salary a year, usually paid at Dashain.
Frequently asked questions
Is gratuity paid in cash when an employee leaves?
Not by the employer, if contributions were made correctly. The Labour Act requires the 8.33% gratuity to be deposited with the Social Security Fund each month in the worker's name, so the worker claims it from the Fund under its rules.
Can an employee carry forward unused sick leave?
Yes, up to 45 days. Home leave can be carried forward up to 90 days. Anything above those limits is paid out at basic salary at the end of the year, and the whole saved balance is paid when the worker leaves.
Is overtime calculated on gross salary or basic salary?
On basic salary. Section 31 sets overtime at 1.5 times the basic remuneration for normal working hours, so allowances are not part of the overtime rate unless the contract says otherwise.
Sources
- Nepal Law Commission, Labour Act, 2017 (2074) — Sections 28–31, 37, 40–53 and 57.
- Ministry of Labour, Employment and Social Security, minimum remuneration notice, 2082 (basic Rs 63 an hour), summarised by Pradhan & Associates.
Last checked: 13 November 2026 (Kartik 27, 2083). For a specific dispute, ask the Department of Labour and Occupational Safety or a labour law professional. See also [hiring your first employee](/knowledge/hiring-first-employee-nepal).