Brief on Labor Act, 2074 and Labor Regulation, 2075

Labour Act 2074 replaced the former Labour Act i.e. Labour Act 2048. The Labor Act, 2074 (2017), and the Labor Regulation, 2076 (2019) are the governing laws in relation to Labour Rights in Nepal which have introduced significant improvements to employment laws in Nepal. These reforms focus on defining the rights and responsibilities of employers and employees more clearly, fostering harmonious industrial relations, and eliminating labor exploitation.

The preamble of the Act clearly highlights the objectives of the act as mentioned below:

• to amend and consolidate the laws relating to labor in order to provide for rights, interests and benefits of labours,
• to develop good labour relations by making explicit provisions on the rights and duties of labours and employers and
• to increase productivity by ending all forms of labour exploitation.

Notable definitions according to the Act are:

• Enterprise: This refers to any organization, including companies, private firms, partnerships, cooperatives, associations, or any other entity established or operating under existing laws, with the purpose of engaging in any industry, occupation, or service, whether or not there is an intent to make a profit.
• Employment Contract: This is a formal agreement between an employer and a worker, detailing the terms of employment, such as service conditions and benefits, and also includes appointment letters provided by employers.

To summarize, the Labour Act, 2074 (2017), aims to regulate employment relationships by safeguarding workers’ rights and outlining employers’ duties, with the overarching objectives of improving productivity and promoting equitable labor practices. The act has been introduced to protect the rights of the labours and to improve the working environment for employees. Section 3 of the Act clearly mention, “This Act shall remain as minimum standards for labours and on matters relating to labours”.

1. Work Hours and Deduction of Salary
   1.1 Flexibility to Fix Work Hours:
   Employers have the flexibility to set work hours according to Rule 16 of the Labor Rules 2075.
   Work hours can be determined based on the nature of the entity’s work.
   Employers must notify all employees about the work hours.
   Employers may assign employees to rotating shifts depending on the nature of the work.
   1.2 Additional Rest Period for Certain Female Employees:
   Employers are required to provide an extra half-hour rest period to certain female employees:
   Those with a child under 3 years old for breastfeeding.
   Pregnant employees.
   The rest period can be taken all at once or in short intervals.
   1.3 Payments and Salary Deductions:
   Employers are required to pay employees for weekly off days.
   The Ministry of Labor may specify that employers pay salaries through banking channels.
   The Labor Rules provide guidelines on salary deductions, with varying rates based on the purpose of the deduction.
   Deductions apply to the base salary after subtracting:
   Fees for trade unions.
2. Types of Employment
   a. Regular employment
   b. Task-based employment
   c. Time-based employment
   d. Casual employment
   e. Part-time employment
    “Regular employment” means any employment other than those (b), (c), and (d)
   “Task-based employment” means employment to be given or given in which a particular task or service specified by the employer is required to be accomplished.
   “Time-based employment” means employment to be given or given in which a worker is required to provide a service or accomplish a task within a period fixed by the employer.
   “Casual employment” means employment to be given or given in which a worker is engaged for seven or less than seven days within a period of one month to provide any service or accomplish a task given by the employer.
   “Part-time employment” means employment to be given or given in which a worker is engaged by the employer for thirty-five hours or lesser than thirty five hours in a week to accomplish any work.
3. Provision related to Probation
   Any employer when executing an employment contract with a worker may keep him/her in probation for a period of six months and the contract with such worker may be terminated if his/her work is not satisfactory. The employment contract with such worker, if not terminated, shall be deemed valid automatically after the ending of the probation period of such worker.
4. Provisions Relating to Leave
   a. Weekly holiday
   Every worker shall be entitled to receive one weekly holiday.
   b. Public holiday
   Every worker shall be entitled to fully paid13public holidays including May Day and 14 public holidays including International Women’s Day in case of women workers.
   c. Home leave
   Every worker is entitled to receive fully paid home leave at the rate of one day for 20 days for the period he works.
   Workers employed in educational institutions or workers who get summer or winter holidays shall not be entitled to take home leave.
   d. Sick leave
   Every worker is entitled to paid12 days of sick leave annually. Provided that any worker who has worked for one or lesser than one year shall be entitled to receive sick leave proportionately.
   Any worker seeking more than three days of sick leave continuously may require to submit a medical certificate issued by a certified physician.
   Where there is a need to take sick leave because of sudden illness, such worker must inform the employer or the person specified by the employer immediately through available means of communication.
   e. Maternity leave
   A female worker is entitled to 14 weeks of maternity leave, with at least two weeks before and six weeks after childbirth being mandatory. She will receive 60 days of paid leave, with the remainder unpaid. If a doctor advises additional rest, one month of unpaid leave can be added. The same maternity leave provisions apply in cases of miscarriage or stillbirth. If the mother dies within 60 days of childbirth, her spouse can take the remaining paid leave. Additionally, male workers are entitled to 15 days of fully paid leave during their wife’s confinement.
5. Provisions related to provident fund, insurance and accident
   – Employers must deduct 10% of a worker’s basic salary, match it, and deposit the total for a provident fund.
    – Employers must deduct 8.33% of a worker’s basic salary monthly for gratuity.
   – Employers must provide annual medical insurance of at least Rs.100,000 per worker, with premiums shared equally between employer and worker.
   – Employers must provide accidental insurance of at least Rs.700,000 for each worker, covering all accidents, with the employer bearing the full premium.
   – In case of death or total incapacitation from an accident, the worker or their legal heir receives 100% of the insured sum.
   – For injuries from an accident, compensation is based on the severity of the injury.
6. Minimum Salary
   The Ministry of Labour, Employment and Social Security of the Government of Nepal has published a notification in the Nepal Gazette dated 17 August 2023 increasing the minimum wage for workers. The current minimum wage for worker is NPR 17,300 as prescribed in the notification is set out in details below.

Note:

In addition to the above, benefits like provident fund and gratuity provided by the Labour Act 2017, the Contribution Based Social Security Act 2017 and other prevailing laws must be provided.

7. Provisions Relating to Conduct and Punishment

Misconducts and punishment

Warning may be given for the following misconducts by any worker:

• act of being absent in the work without approving the leave ;
• act of leaving the workplace without taking permission of the management;
• act of reaching the workplace frequently late without taking permission of the management;
• act of disobeying the order given by the employer or any employee above his/her level in relation to the work; or
• Act of doing any other misconduct as specified in the by-law.

8. Layoff Procedures

Notice Requirements: Employers must provide notice in the event of a layoff, detailing the reasons, duration, employee information, and remuneration terms. The Rules also specify procedures for laying off outsourced employees.

Alternative Work During Layoff: Employers may reassign laid-off employees to other departments or entities, with the employee’s consent, particularly if the new role involves lower compensation or a different position.

9. Hiring of Foreign Nationals

• Documentation for Work Permits: The Labor Rules delineate the necessary documentation for obtaining and renewing work permits for foreign nationals. These include specific requirements depending on whether the application is initiated by the employer or the foreign national.
• Work Permit Fees and Limitations: Fees for work permits are established based on the duration of employment, with exemptions in certain cases. The Rules also impose a ceiling on the number of foreign nationals employed, generally not exceeding 5% of the total workforce.
• Validity and Extension of Work Permits: The standard validity of a work permit is linked to the term specified by the Ministry of Home Affairs, with a maximum duration of five years for technical experts. Extensions are limited and contingent on notable contributions in specific fields.

10. Sexual harassment is prohibited

• No person shall commit any act or cause to commit any act considered as sexual harassment by the law in the workplace or during the work through undue influence.
• The employer may even give the punishment of dismissal to the worker involved in the act of sexual harassment by giving due consideration to the condition and gravity of the such act.

11.     Outsourcing and Occupational Safety

Licensing for Outsourcing Companies: The Labor Rules outline the procedures and documentation required for companies to obtain licenses to operate as outsourcing agencies, including additional grace periods for compliance.

Health and Safety Policies: Employers must establish comprehensive occupational health and safety policies tailored to the nature of their business, including provisions for emergency response, information on chemical hazards, and formation of a Safety and Health Committee.

12.     Labor Relations and Collective Bargaining

Labor Relations Committee Formation: Entities employing 10 or more individuals must establish a labor relations committee, with specified roles and membership.

Collective Bargaining Procedures: The Labor Rules detail the process for collective bargaining, emphasizing the requirement for good faith negotiations between employers and employees, and the formation of sector.

13. Matters to be included in employment contract

According to Section 11(3) of the Labor Act, an employment contract must include details such as:

• Remuneration: The agreed salary or wages.
• Benefits: Any additional perks or allowances.
• Terms of Employment: The specific conditions under which the employee is hired.
• Additional Provisions: Any other relevant matters as prescribed by the Act.

 Further Specifications by the Labor Rules:

• Rule 4 of the Labor Rules outlines additional aspects that need to be included in the employment contract:
• Nature of Employment: A description of the type of employment.
• Primary Duties and Position: The employee’s main responsibilities and their job title.
• Incorporation of Service Rules: A statement that the employee’s service rules are part of the contract.
• Contract Details: The date, time, and place of signing the contract, as well as its effective date.
• Other Terms and Conditions: Any other important terms related to the employee’s work or service.