Employer of Record in Nepal

An Employer of Record (EOR) in Nepal helps you hire employees in the country without setting up a local legal entity. The EOR becomes the legal employer for your team members. They handle all the administrative and legal tasks that come with employment. This includes everything from payroll and taxes to benefits and compliance with Nepal's labor laws. You still manage your employees' day-to-day work. The EOR takes care of the official employment responsibilities. For companies looking to expand into Nepal, using an EOR like Rivermate simplifies the process and ensures you follow all local rules.

How an Employer of Record (EOR) Works in Nepal

Using an EOR in Nepal simplifies hiring and employment. Here is how it works:

1. You Find the Candidate. You recruit and select the person you want to hire in Nepal.
2. The EOR Hires Them. The EOR legally hires the employee on your behalf through their local Nepalese entity.
3. A Compliant Contract is Drafted. The EOR prepares a legally binding employment contract that follows Nepalese labor laws. This contract includes details like salary, job duties, and termination guidelines.
4. Onboarding is Handled. The EOR manages all new hire paperwork. This includes tax forms, social security registration, and bank details for payroll.
5. Payroll and Benefits are Managed. The EOR processes payroll, withholds taxes, and manages employee benefits. They make sure your employees get paid correctly and on time.
6. HR and Legal Compliance is Ensured. The EOR handles all HR functions and ensures ongoing compliance with Nepal's employment regulations. This includes managing workplace disputes and terminations according to the law.

Why use an Employer of Record in Nepal

Using an EOR in Nepal offers a straightforward way to build a team in a new country. It removes significant administrative and legal burdens from your shoulders. This allows you to focus on your core business goals and managing your team's daily work.

Here are some key reasons to use an EOR in Nepal:

• Avoids Setting Up a Legal Entity. You can hire employees in Nepal without the time and expense of establishing a local company.
• Ensures Legal Compliance. EORs have expertise in Nepalese labor laws. They make sure your employment practices are fully compliant, reducing your legal risks.
• Saves Time and Money. You skip the lengthy and costly process of entity setup. An EOR handles the administrative tasks, freeing up your internal resources.
• Simplifies Payroll and HR. The EOR manages all payroll, tax, and HR functions. This is especially helpful if you are unfamiliar with local regulations.
• Mitigates Risk. Misclassifying an employee as a contractor can lead to penalties. An EOR correctly classifies and employs your workers, protecting you from legal issues.

Rivermate's transparent pricing model eliminates complexity with a single, competitive monthly fee per employee. Unlike traditional PEO providers, our pricing in Nepal includes comprehensive HR support, benefits administration, compliance management, and access to our proprietary dashboard for real-time workforce analytics. No hidden costs, no setup fees—just straightforward pricing that scales with your business needs while ensuring full legal compliance in Nepal.

.Hiring in Nepal requires understanding its unique labor landscape. The country's workforce is governed by the Labor Act, 2017, which sets the foundation for employment practices. This guide will walk you through the key aspects of hiring in Nepal, from employment contracts to navigating the complexities of hiring independent contractors.

Employment contracts & must-have clauses

When you hire an employee in Nepal, a written employment contract is mandatory. This document protects both you and your employee by clearly outlining the terms of the working relationship. You must provide one copy to the employee and submit another to the Labor Office within 15 days of hiring.

Your employment contracts in Nepal should include these essential clauses:

• Employee's personal details: Full name and address.
• Job title and description: A clear outline of the role and responsibilities.
• Type of employment: Specify if the role is permanent, fixed-term, or part-time.
• Start date: The official first day of employment.
• Compensation: Clearly state the salary and any allowances or bonuses.
• Working hours: Define the expected daily and weekly hours.
• Leave entitlements: Detail the policies for annual, sick, and other types of leave.
• Termination conditions: Outline the procedures and notice periods for ending the employment.

Probation periods

In Nepal, you can include a probationary period in your employment contracts to assess a new hire's suitability for a role. The maximum duration for this period is six months. During this time, you can terminate the employment without prior notice if the employee's performance is not satisfactory. Once the probation period is successfully completed, the employee is entitled to all the benefits of a permanent position.

Working hours & overtime

The standard working hours in Nepal are 8 hours per day and 48 hours per week. For employees under the age of 18, the maximum is 6 hours per day and 36 hours per week.

Here are the key regulations for overtime:

• Maximum overtime: Overtime is limited to 4 hours per day and 24 hours per week.
• Overtime pay: You must pay employees 1.5 times their regular salary for any overtime work.

Public & regional holidays

Employees in Nepal are entitled to paid public holidays. The country observes a variety of religious and national holidays. Some of the major public holidays include:

Hiring contractors in Nepal

Hiring independent contractors can be a flexible way to access specialized skills for specific projects. However, it's crucial to correctly classify these workers to avoid legal and financial penalties.

An independent contractor is self-employed and provides services to your company under a service agreement. They are typically responsible for their own taxes and benefits. Misclassifying an employee as a contractor can lead to fines, back pay, and other legal consequences.

An Employer of Record (EOR) can help you mitigate this risk. An EOR acts as the legal employer for your workers in Nepal, ensuring compliance with local labor laws. This includes managing payroll, taxes, benefits, and employment contracts. By partnering with an EOR, you can confidently hire talent in Nepal without the complexities of establishing a local entity or the risks of misclassification.

In Nepal, your payroll responsibilities include understanding and complying with local labor laws. This means navigating everything from minimum wage and working hours to social security contributions and festival allowances. The system is designed to be progressive, with tax rates that increase with income. It also ensures that employees receive mandatory benefits like paid leave and bonuses.

Payroll cycles & wage structure

Most companies in Nepal pay their employees monthly. Your wage structure needs to be built on the foundation of the national minimum wage. The employment contract you provide to each employee should clearly outline their salary, any allowances, and other benefits. It's also a legal requirement to provide a festival allowance, which is typically equal to one month's pay, to support employees during religious holidays.

Overtime & minimums

The standard workweek in Nepal is 48 hours, spread over six days with eight hours per day. Any work performed beyond these hours is considered overtime. You must pay employees 1.5 times their regular wage for any overtime hours worked. There are limits to overtime, with employees allowed to work a maximum of four extra hours per day and 24 hours per week.

The current minimum wage in Nepal is NPR 17,300 per month. However, for workers in tea estates, the minimum wage is lower.

Employer taxes and contributions

You are responsible for several contributions on behalf of your employees. These are mandatory and form a key part of your payroll obligations.

Employee taxes and deductions

Employees also contribute to social security and pay income tax. The income tax system in Nepal is progressive.

In Nepal, providing competitive benefits and understanding leave policies is key to attracting and retaining top talent. The country's labor laws outline specific minimum requirements for employers. However, many companies choose to offer more to stand out. Navigating these regulations can be complex, but it's essential for legal compliance and employee satisfaction.

Statutory Leave

You must provide several types of paid leave to your employees in Nepal.

• Annual Leave: Employees earn one day of leave for every 20 days worked. They can accumulate up to 90 days of unused annual leave.
• Sick Leave: Employees are entitled to 12 days of paid sick leave per year. They can accumulate up to 45 days of unused sick leave.
• Maternity Leave: Female employees receive 14 weeks of maternity leave. The employer pays for the first 60 days.
• Paternity Leave: Male employees get 15 days of paid paternity leave.
• Mourning Leave: Employees are entitled to 13 days of paid leave if a family member passes away.

Public Holidays & Regional Holidays

Your employees in Nepal are entitled to paid leave on public holidays. Women may receive additional days off for specific holidays.

Typical Supplemental Benefits

Beyond the legal requirements, many employers in Nepal offer additional benefits to attract and keep great employees.

How an EOR Can Help with Setting Up Benefits

Setting up a comprehensive and compliant benefits package in a new country can be a major challenge. An Employer of Record (EOR) simplifies this process for you.

An EOR acts as the legal employer for your team in Nepal. This means they handle all the administrative and legal requirements of employment.

Here is how an EOR can help:

• Ensure Compliance: An EOR understands local labor laws and ensures your benefits packages meet all legal requirements.
• Save Time and Resources: You avoid the need to set up a local entity, which can be a long and expensive process.
• Offer Competitive Benefits: EORs can provide access to attractive benefits packages that help you compete for top talent.
• Manage Administration: The EOR handles payroll, taxes, and benefits administration, freeing you to focus on your business.

When an employment relationship in Nepal ends, there is a formal process for both the employee and the employer. This process, known as termination and offboarding, is guided by the country's labor laws to ensure a fair and transparent transition. It involves several key steps, including providing notice, calculating final pay, and completing all necessary paperwork. Understanding these steps is important for a smooth and compliant exit.

Notice periods

In Nepal, both employers and employees must give notice before ending an employment contract, unless the termination is due to misconduct. The length of the notice period depends on how long the employee has worked for the company.

Here are the minimum notice periods required:

If an employer ends the employment without giving the proper notice, they must pay the employee their salary for the notice period.

Severance pay

Employees in Nepal are entitled to severance pay, which is calculated based on their years of service. An employee who has completed at least one year of continuous service is entitled to receive severance pay at a rate of one month's basic salary for each year of service. For employees who have worked for less than a year, the severance pay is calculated proportionately.

The employer must pay all outstanding wages and benefits to an employee within 15 days of their termination. This includes any accumulated leave pay and other benefits.

How Rivermate handles compliant exits

At Rivermate, we make sure that every termination and offboarding process in Nepal is handled correctly and in compliance with local labor laws. We understand that navigating these regulations can be complex, so we manage the entire process for you.

Here’s how we handle compliant exits:

• Clear and compliant communication: We ensure that all communication with the departing employee is clear, respectful, and meets all legal requirements.
• Accurate final pay calculation: We calculate and process all final payments, including outstanding salary, severance pay, and any unused leave, to ensure your former employee receives everything they are entitled to.
• Proper documentation: We handle all the necessary paperwork, including the termination letter and final settlement, to ensure a complete and compliant offboarding process.
• Risk mitigation: By managing the termination and offboarding process for you, we help minimize the risk of legal disputes and ensure a smooth transition for both you and your departing employee.

Getting the right visas and work permits in Nepal can feel complicated. We will break it down for you. The process involves multiple government departments, and you need a local employer to sponsor you. This guide explains what you need to know to stay compliant.

Employment Visas & Sponsorship Realities

For you to work in Nepal, a locally registered company must sponsor your employment visa. This is where an Employer of Record (EOR) can help if you do not have your own legal entity in the country. An EOR acts as your legal employer in Nepal, handling payroll, taxes, benefits, and visa sponsorship.

Here is what you can expect:

• Sponsorship is necessary. You cannot apply for an employment visa on your own as a freelancer or independent contractor. An EOR can serve as your official sponsor.
• Local labor market testing. Your employer (or EOR) must show that they could not find a qualified Nepalese citizen for your role.
• Entering the country. Most people enter Nepal on a tourist visa and then convert it to a work visa after receiving a job offer.
• EOR capabilities. An EOR can legally hire both local and foreign workers. They manage the complex application process with the Department of Labour and the Department of Immigration.

What an EOR generally can sponsor:

• Work visas for full-time employees in roles where local talent is unavailable.
• Employees of companies that do not have a registered entity in Nepal.

What an EOR may not be able to sponsor:

• Independent contractors. These individuals typically need to explore other options, like a business visa, if applicable.
• Roles where there is an abundance of qualified local talent.
• Situations where visa quotas may be a factor, as some countries have limits on foreign workers.

Business Travel Compliance

If you are visiting Nepal for short-term business activities, you need to understand the difference between a tourist visa and a business visa to stay compliant.

Tourist Visa

A tourist visa is strictly for tourism, recreation, and sightseeing. You cannot legally perform any work or engage in business activities on a tourist visa.

Business Visa

A business visa is for foreign investors, entrepreneurs, and business representatives who plan to engage in business-related activities. This can include:

• Attending business meetings
• Negotiating contracts
• Exploring investment opportunities
• Conducting feasibility studies

A business visa does not permit you to work for a local company or receive a salary from a Nepalese employer. It is designed for those who are investing in or operating a business in the country. Unlike a tourist visa, a business visa often allows for multiple entries and longer stays.