Hire in Nepal through our Employer of Record (EOR)

An Employer of Record (EOR) is a third-party organization that takes on the legal and administrative responsibilities of employing workers on behalf of another company. This arrangement allows businesses to hire employees in countries where they don't have a legal entity, effectively expanding their global reach without the need to establish a local subsidiary or navigate complex international employment laws.

In the context of Nepal, an EOR can be particularly useful for foreign companies looking to tap into the country's growing talent pool or establish a presence in the region. By partnering with an EOR, businesses can hire Nepalese employees legally and compliantly, while focusing on their core operations and growth strategies.

How Does EOR Work?

The EOR model operates through a series of interconnected steps:

1. Client partnership: A company (the client) partners with an EOR provider to hire employees in Nepal.

2. Employee selection: The client identifies and selects the candidates they wish to hire.

3. Employment contract: The EOR drafts and signs a compliant employment contract with the selected candidate, becoming the legal employer.

4. Payroll and benefits: The EOR manages payroll, tax withholdings, and provides locally compliant benefits to the employee.

5. HR administration: The EOR handles HR-related tasks, such as leave management, performance reviews, and compliance with local labor laws.

6. Client direction: While the EOR is the legal employer, the client company retains control over the employee's day-to-day work and responsibilities.

Benefits of Using an EOR

Employing an EOR in Nepal offers several advantages for businesses:

1. Rapid market entry: Companies can quickly establish a presence in Nepal without the need to set up a local entity, saving time and resources.

2. Compliance assurance: EORs are well-versed in Nepal's labor laws, tax regulations, and employment standards, ensuring full compliance and minimizing legal risks.

3. Cost-effectiveness: By eliminating the need for a local subsidiary, companies can save on setup and operational costs associated with maintaining a legal entity in Nepal.

4. Flexibility: EORs allow businesses to scale their workforce up or down as needed, providing agility in response to market demands.

5. Local expertise: EORs offer valuable insights into Nepal's business culture, employment practices, and market dynamics, helping companies navigate the local landscape more effectively.

6. Risk mitigation: The EOR assumes legal responsibility for employment-related matters, reducing the client company's exposure to potential liabilities.

7. Focus on core business: By outsourcing administrative and compliance tasks to the EOR, companies can concentrate on their primary business objectives and growth strategies in Nepal.

8. Access to talent: EORs facilitate access to Nepal's diverse talent pool, allowing companies to hire skilled professionals across various industries.

9. Employee satisfaction: EORs ensure that employees receive locally compliant benefits and protections, contributing to higher job satisfaction and retention rates.

By leveraging an EOR's services, companies can effectively expand their operations into Nepal while minimizing risks and maximizing opportunities in this unique and developing market.

Nepal's employment landscape is characterized by a young, predominantly rural workforce with a significant portion engaged in agriculture. The country faces challenges such as skill mismatches, gender disparities in labor force participation, and a large informal sector. Despite these challenges, Nepal's economy is gradually diversifying, with growing service sectors and increasing foreign employment opportunities.

Overview of Labor Laws

Nepal's labor laws aim to protect workers' rights and regulate employment relationships. Key aspects include:

• The Labor Act 2074 (2017) is the primary legislation governing employment relations.
• It mandates a 48-hour workweek with provisions for overtime pay.
• The law stipulates minimum wage rates, which are periodically revised.
• Employers must provide various benefits, including annual leave, sick leave, and maternity leave.
• The Act also covers occupational health and safety standards.
• Social security contributions are mandatory for both employers and employees.

Cultural Considerations

Understanding Nepal's cultural nuances is crucial for effective workforce management:

• Family-centric society: Employees may prioritize family obligations over work commitments.
• Indirect communication: Nepalis often prefer subtle, non-confrontational communication styles.
• Respect for hierarchy: Age and seniority are highly valued in the workplace.
• Relationship-building: Personal connections are important in professional settings.
• Flexible work hours: The concept of a strict 9-to-5 workday is less prevalent.
• Religious diversity: Nepal has a multi-religious society, with holidays and customs that may affect work schedules.

Challenges of Direct Hiring

Employers face several challenges when directly hiring in Nepal:

1. Skill gaps: Finding candidates with the right skills and qualifications can be difficult due to mismatches between education and industry needs.

2. Language barriers: While English is widely used in business, proficiency levels vary, potentially causing communication issues.

3. Complex bureaucracy: Navigating Nepal's regulatory environment and obtaining necessary permits can be time-consuming and confusing.

4. Cultural adaptation: Foreign companies may struggle to align their corporate culture with local work norms and expectations.

5. Infrastructure limitations: Unreliable power supply and internet connectivity in some areas can hinder remote work arrangements.

6. Retention issues: With increasing opportunities for foreign employment, retaining skilled workers can be challenging.

7. Legal compliance: Keeping up with changing labor laws and ensuring full compliance can be complex for foreign employers.

8. Informal sector competition: The large informal sector can make it difficult to attract and retain workers in formal employment arrangements.

By understanding these aspects of Nepal's employment landscape, companies can better navigate the challenges and opportunities of hiring in this dynamic market.

Nepal's payroll and tax system is designed to ensure both employers and employees contribute to the country's social security and revenue systems. The framework includes mandatory contributions to the Social Security Fund (SSF) and income tax withholdings, along with potential voluntary contributions to schemes like the Provident Fund. Understanding these obligations is crucial for businesses operating in Nepal and for employees working in the country.

Employer Contributions

Employers in Nepal have several financial responsibilities when it comes to payroll and taxes:

1. Social Security Fund (SSF): Employers are required to contribute 20% of an employee's basic salary to the SSF. This fund provides various benefits to employees, including:

   • Medical treatment
   • Accident insurance
   • Maternity benefits
   • Dependent benefits
   • Old-age pensions

2. Voluntary Provident Fund: While not mandatory, employers may choose to establish a Provident Fund scheme. If implemented, the employer would need to make matching contributions to the fund.

3. Skills Development Levy: Depending on the size of the company, employers may be subject to a skills development levy. However, specific details about this levy are limited and may vary.

4. Registration and Compliance: Employers must register with the SSF and obtain an employer registration number. They are responsible for submitting contributions and related filings by specified deadlines. Failure to comply can result in penalties and interest charges.

5. Industry-Specific Contributions: Some industries may have additional tax contribution obligations. Employers should be aware of any sector-specific requirements.

It's important to note that tax regulations in Nepal can change, so employers should stay informed about the latest updates to ensure compliance.

Employee Contributions

Employees in Nepal are also required to make contributions and are subject to income tax:

1. Income Tax: Nepal uses a progressive tax system, where tax rates increase with income levels. Employers are responsible for withholding income tax from employee salaries based on the tax tables provided by the Inland Revenue Department (IRD) of Nepal.

2. Social Security Fund (SSF): Employees must contribute 11% of their basic salary to the SSF. This contribution is withheld and remitted by the employer.

3. Allowances and Deductions: Employees are entitled to certain deductions that can reduce their taxable income:

   • Standard deduction
   • Provident fund contributions (within government-set limits)
   • Life insurance premiums
   • Medical expenses (within limits)

4. Non-Resident Employees: Different tax rules and withholding rates may apply to non-resident employees working in Nepal. Tax treaties with specific countries can also impact their tax situation.

5. Taxable Benefits: Some employment benefits may be considered taxable income for employees.

Understanding these contributions and deductions is essential for both employers and employees to ensure compliance with Nepal's tax laws and to effectively manage payroll processes. It's advisable to consult with local tax experts or the relevant government authorities for the most up-to-date and detailed information on payroll and taxes in Nepal.

Nepal offers a comprehensive set of employee benefits, ensuring workers are well-protected and supported in their professional lives. As an Employer of Record (EOR), Rivermate expertly manages these benefits, ensuring compliance with local labor laws while providing valuable support to both employers and employees. By handling the intricacies of benefit administration, an EOR allows companies to focus on their core business operations while maintaining a satisfied and productive workforce.

Mandatory Benefits

In Nepal, employers are required to provide the following benefits:

• Annual Leave: One day of paid leave for every 20 days worked
• Public Holidays: 13 paid public holidays annually, with an additional day for women
• Sick Leave: 15 half-paid sick leave days per year
• Maternity Leave: 98 days of paid maternity leave for female employees
• Paternity Leave: One day of paid paternity leave for fathers
• Mourning Leave: 13 days of leave in the event of a close family member's death
• Social Security Contributions: Both employer and employee contribute 10% of the employee's salary to the Social Security Fund
• Severance Pay: Calculated based on length of service in case of employment termination

Optional Benefits

To attract and retain talent, many employers in Nepal offer additional benefits such as:

• Private Health Insurance: Extended coverage for employees and dependents
• Dental and Vision Insurance: Supplementary coverage for specific health needs
• Wellness Programs: Gym memberships, fitness classes, or health screenings
• Meal Allowances: Vouchers or stipends for work-related meals
• Transportation Allowances: Financial support for commuting expenses
• Housing Allowances: Assistance with relocation costs, especially for non-local hires
• Flexible Work Arrangements: Remote work options or flexible schedules
• Additional Paid Time Off: Beyond the mandated minimums
• Festival Leave: Extra time off for major religious and cultural celebrations
• Continuing Education Opportunities: Financial assistance for relevant courses or certifications
• Life Insurance: Added financial security for employees' families

By offering a mix of mandatory and optional benefits, employers in Nepal can create a comprehensive and attractive compensation package that supports employee well-being and job satisfaction.

The process of termination and offboarding in Nepal is governed by the Labour Act 2074 (2017), which outlines the legal framework for ending employment relationships. This process involves several key steps and considerations to ensure compliance with local labor laws and protect both employer and employee rights.

Lawful Grounds for Termination

In Nepal, employment can be terminated under various circumstances:

• Mutual agreement between employer and employee
• Completion of a fixed-term contract
• Unsatisfactory performance over three or more consecutive years
• Serious misconduct, such as physical assault, theft, or fraud
• Redundancy due to economic factors or business reorganization
• Retirement at the age of 58

Notice Requirements

Employers must provide proper notice before termination, except in cases of misconduct:

• 1 day for employment up to 4 weeks
• 7 days for employment between 4 weeks and 1 year
• 30 days for employment exceeding 1 year

Severance Pay

While not mandatory in all cases, severance pay may be required in certain situations:

• Redundancy terminations often involve severance packages
• Compulsory retirement may include severance as per company policy

Important Considerations

When terminating employment in Nepal, employers should:

1. Provide a written statement explaining the reason for termination
2. Be aware that employees have 45 days to challenge unlawful terminations
3. Consult with legal professionals specializing in Nepali labor law for specific guidance

Offboarding Process

To ensure a smooth transition, employers should:

1. Conduct an exit interview
2. Retrieve company property and revoke access to systems
3. Process final payments, including any outstanding wages or benefits
4. Provide necessary documentation, such as experience letters or certificates
5. Update internal records and inform relevant departments

By following these guidelines and adhering to the Labour Act 2074, employers can navigate the termination and offboarding process in Nepal while minimizing legal risks and maintaining positive relationships with departing employees.

Nepal, a country known for its stunning Himalayan landscapes and rich cultural heritage, has specific regulations for foreign nationals seeking employment within its borders. Understanding the visa and work permit requirements is crucial for anyone planning to work in Nepal.

Visa Requirements

Foreign nationals intending to work in Nepal must first obtain a valid visa. The most common types of visas for workers are:

1. Business Visa: Issued to individuals entering Nepal for business-related activities, such as attending meetings or exploring business opportunities.

2. Working Visa: Granted to those who have secured employment with a Nepali company or organization.

To apply for a visa, you'll need to provide:

• A valid passport
• Completed visa application form
• Passport-sized photographs
• Proof of sufficient funds
• Relevant supporting documents (e.g., job offer letter)

Work Permit Process

Once you have the appropriate visa, you'll need to obtain a work permit. The process typically involves the following steps:

1. Your Nepali employer must apply for a work permit on your behalf with the Department of Labour.

2. The employer needs to provide justification for hiring a foreign worker, demonstrating that the position cannot be filled by a local candidate.

3. You'll need to submit various documents, including:

   • Copy of your passport and visa
   • Educational certificates
   • Professional qualifications
   • Police clearance certificate from your home country

4. The Department of Labour reviews the application and, if approved, issues the work permit.

Important Considerations

• Work permits are usually issued for one year and can be renewed.
• The process can be time-consuming, so it's advisable to start well in advance of your intended start date.
• Certain sectors may have additional requirements or restrictions for foreign workers.
• It's crucial to maintain legal status by ensuring your visa and work permit remain valid throughout your stay.

By understanding and adhering to Nepal's visa and work permit requirements, foreign workers can ensure a smooth transition into their new roles while complying with local regulations.