#1Labor Laws in Nepal: Brief Introduction Pioneer Law Associates www.pioneerlaw.com December 20, 2019 PIONEER LAW ASSOCIATES#2Coverage: Relevant Laws Key Changes in the Labor Act Hiring Foreign Nationals Employment Terms and Benefits Social Security Regime PIONEER LAW ASSOCIATES#3Relevant Laws Laws Labor Act, 2074 ("Labor Act”) Labor Regulations, 2075 ("Labor Regulations") Contribution based Social Security Act, 2074 ("Social Security Act") Contribution based Social Security Regulations, 2075 ("Social Security Regulations”) Social Security Schemes Operational Directives, 2075 ("Social Security Directives") Directives relating to the Work Permit of Foreign Nationals, 2075 ("Work Permit Directives") Effective Date September 04, 2017 June 22, 2018 August 13, 2017 November 19, 2018 November 22, 2018 July 29, 2018 PIONEER LAW ASSOCIATES#4Relevant Laws Laws Right to Employment Act, 2075 ("Right to Employment Act") Right to Employment Regulations, 2075 ("Right to Employment Regulations") The Individual Privacy Act ("Privacy Act") Safe Motherhood & Reproductive Health Act, 2075 (in relation to safe maternity) ("Safe Motherhood Act") Sexual Harassment at Workplace Prevention Act, 2071 ("Sexual Harassment Act") Effective Date September 18, 2018 February 11, 2019 September 18, 2018 September 18, 2018 November 21, 2014 PIONEER LAW ASSOCIATES#5Key Changes in the Labor Act Headings Applicability Hiring Old Labor Laws • Headcount Applicable Threshold: to entities more where 10 or employees are engaged No clarity on INGOs Advertisement requirement Limited hiring options (permanent, piece rate) contract, Probation: applicable to permanent employees • Outsourcing: covered • Foreign Not Nationals: Limited option (only on unavailability) New Labor Laws Headcount Threshold: No headcount threshold • Covers profit and not for-profit Specific provisions on excluded services · No requirement advertisement Flexible hiring options (Regular, time-bound, work based, casual, part-time) Probation: applicable to all employees Outsourcing: Regulated Foreign Nationals: Flexible and more options NEER LAW ASSOCIATES#6Headings Old Labor Laws Discrimination: New Labor Laws No • Discrimination: Specific on provisions for preventing specific provision discrimination Overtime for managers: No sufficient clarity No clarity on on terms discrimination Overtime for managers: separate arrangement made Flexibility to agree on the terms of terms of service for CEO hiring CEO Benefits Provident Fund: Eligibility: Permanent worker or employee Contribution: 10% of employer + 10% of employee calculated on basic remuneration of employee • Deposit in: Enterprise level fund or Retirement Fund Provident Fund: Eligibility: From the first day of appointment Contribution of employee: 10% of employer + 10% of employee calculated on basic remuneration of employee Deposit in: Social Security Fund PIONEER LAW ASSOCIATES#7Headings Old Labor Laws Benefits • Gratuity: Eligibility: completion of 3 years of service Rate of Gratuity: For the first 7 years of service: 1 of monthly salary for each year of service For 7-15 years of service: 2/3rd of monthly salary for each year of service For service exceeding 15 years: a month salary for each year of service • Deposit in: Enterprise Level Fund or Retirement Fund • Payment of Gratuity: subject to nature of termination New Labor Laws . ● • • Gratuity: Eligibility: From the first day of employment Rate of Gratuity: 8.33% of basic remuneration every month Deposit in: Social Security Fund Death coverage: fixed cost on medical and accidental benefits Leave Accumulation: annual leave 90 days, sick leave 45 days Payment of Gratuity: payable irrespective termination of nature of PIONEER LAW ASSOCIATES#8Headings Old Labor Laws Death coverage: linked to salary (3 years salary for death, 5 years salary for total disability) • Leave Accumulation: 60 days home leave New Labor Laws Death coverage: fixed cost on medical and accidental benefits annual Leave Accumulation: leave 90 days, sick leave 45 days Termination Limited grounds (Misconduct, retirement, retrenchment) More Grounds (Misconduct, retirement, retrenchment, bad health, under performance, project based: completion of work, time-bound: expiry of time) PIONEER LAW ASSOCIATES#9Headings Termination Old Labor Laws • Retrenchment: Dispute Settlement (Settlement of collective dispute) Labor Court Remedy for dismissal approval requirement ⚫ Disciplinary DOL Action: Suspension as a sanction Payment strike: full salary New Labor Laws • Misconduct: Wider coverage • during legal • • • Mandatory Arbitration: No No detailed provision on arbitration Dispute heard by single judge • Reinstatement and authority awarding punishment defined in the law More clarity on timeline • Retrenchment: No approval requirement • Retirement: retirement age Increased the Disciplinary Action: Suspension is not a form of sanction; suspension for investigation Payment during legal strike: half salary Mandatory Arbitration: essential services for • Detailed provision on arbitration • Dispute heard by tribunal Reinstatement or compensation (as discretion of the court) LAW ASSOCIATES#10Headings Internal Management Old Labor Laws • No detailed provision on transfer and deployment New Labor Laws Detailed provision on transfer and deployment Fair Labor Practice • Not provisioned Duties defined • Duties of employees are not defined Labor Audit • No Performance • Not covered Appraisal Standard Bylaws Not dealt with. • Provisioned • Duties defined for employees, employers and manufacturer of equipment for health and safety Required • Covered Allows to adopt standard Bylaws for regulated sector. PIONEER ΡΙΟ LAW ASSOCIATES#11Hiring Foreign Nationals ☐ Requirement of Work Permit: Every foreign nationals is required to obtain work permit to work in Nepal. □ Exception: Who has diplomatic immunity • Who is exempted from work permit under treaty or agreement with GoN ☐ Repatriation of Income: Repatriate in convertible foreign currency as per the NRB Circular (Ceiling Applies). Maximum number of foreign employees: Not exceeding 5% of the total employees in the entity. Maximum period of Work permit: 5 years for the expert and 3 years for others. PIONEER LAW ASSOCIATES#12CONDITIONS FOR HIRING FOREIGN NATIONALS: ☐ Unavailability of local skilled human resource: . Vacancy in national level daily newspaper required. No vacancy is required in case of Agreement with GoN. Hiring foreign nationals in FDI Company: The entities with foreign investment or operated in foreign aid Can hire 3 foreign nationals and Chief Executive Officer. ☐ Technical Casual Work: • Work permit for technicians deployed in work for less than three months for repairing any machinery or installing new technology or similar casual work. PIONEER ΡΙΟ LAW ASSOCIATES#13EMPLOYMENT TERMS AND BENEFITS PIONEER LAW ASSOCIATES#14Key Provisions Minimum leave benefits on proportionate basis • Accumulation of leaves Leave benefits for female employees Compulsory Insurance • Safety and Health Arrangement PIONEER LAW ASSOCIATES#15Working Hours Maximum Working Hours • 8 hours a day and 48 hours a week. Maximum Overtime 4 hours a day and 24 hours a week Overtime Pay • 1.5 times the basic remuneration Beak Additional Break • 30 minute break after working for consecutive 5 hours • 30 minute break for pregnant and other female employees whose child is less than 3 years of age PIONEER LAW ASSOCIATES#16Minimum Wage Minimum wage as prescribed in Gazette Notice dated August 16, 2018 (Shrawan 04, 2075 B.S.): Minimum Basic Remuneration/Wage Remuneration Dearness Allowance Total Monthly Rs. 8455 Rs. 4995 Rs. 13,450 Daily Rs. 325 Rs. 192 Rs. 517 Hourly Rs. 43 Rs. 26 Rs. 69 PIONEER LAW ASSOCIATES#17Leave and Holidays (Section 40-48) Leaves Old Labor Laws Maternity up to 52 days Leave fully paid Paternity Leave Not Provided Annual Leave Sick Leave 1 day for every 20 worked days (18 days in a year) Half paid up to 15 days Eligibility: completion of 1 year of service Mourning Leave 13 days Compensatory Not Provided Leave New Labor Laws 98 days fully paid (Pursuant to Right to Safe Motherhood and Reproductive Health Act 2018) 15 days paid leave 1 day for every 20 worked days (18 days in a year) Fully paid up to 12 days Eligibility: on a proportional basis for those employees who has not completed 1 year of service 13 days To be provided within 21 days for working in public or weekly holidays PIONEER LAW ASSOCIATES#18Leave and Holidays Leaves Old Labor Laws Weekly Leave 1 day every week Public Holiday 13 days Accumulation Home Leave - Up to 60 days New Labor Laws 1 day every week 13 days including May Day 1 day additional to female employees on International Women's Day Home Leave - 90 days Sick Leave 45 days PIONEER LAW ASSOCIATES#19Leave Encashment (Section 49) Old Labor Laws Accumulated annual leave up to 60 days can be encashed at the time of discontinuation of service. New Labor Laws Accumulated annual leave up to 90 days and sick leave up to 45 days can be encashed at the time of discontinuation of service. • Any unused annual or sick leave in excess of the limit of accumulation shall be en-cashed at the end of each year. • Encashment shall be done at the rate of basic remuneration during such payment. PIONEER ΡΙΟ LAW ASSOCIATES#20SOCIAL SECURITY REGIME PIONEER LAW ASSOCIATES#21Applicability • Currently covered the employees of Formal Sectors Foreign Nationals No specific exclusion in the law. Enlistment in Social Security Fund ("SSF") Events Timeline Enlisting Employers By November 30, 2019 (last deadline) and Employee in the Fund Enlisting newly hired employees in the Fund Within 3 (three) months from the date of enlistment of Employers in the Fund PIONEER LAW ASSOCIATES#22Rate, Schemes and Allocation of Contribution RATE OF CONTRIBUTION Contribution Provident Fund Gratuity Additional Total Employee 10% 1% 11% Employer 10% 8.33% 1.67% 20% SCHEMES AND ALLOCATION OF CONTRIBUTION S.N. Social Security Schemes Allocation 1 Medical Treatment, Health and Maternity Scheme 1% 2 Accident and Disability Scheme 1.40% 3 Dependent Family Scheme 0.27% 4 Old Age Scheme 28.33% Total: 31% LEER OCIATES#23Medical Treatment, Health and Maternity Scheme Benefits 1. Medical Consultancy Services 2. Regular Pregnancy Test Cost of the Employee, or Employees' Wife, Hospital Operation and Admission, 3. Treatment Cost of Child for 3 months Eligibility • • Medical Treatment and Health Safety Scheme: Contribution in SSF for a period of 3 (Three) months • Safe Motherhood Scheme: • Contribution for 12 months within a period of Amount Not exceeding NPR. 100,000 p.a. Not exceeding NPR. 100,000 p.a. 4. Treatment without Admitting to hospital as per the prescription of doctor 5. Maternity Care /Miscarriage after 24 weeks of Pregnancy/still birth 18 months Not exceeding NPR. 25,000 p.a. Amount equivalent to one month's minimum remuneration per child. ER LAW ASSOCIATES#24Accident and Disability Scheme Benefits Accidental Benefits Disability Benefits Eligibility Contribution for a minimum period of 2 years Amount Total expenses incurred in case of work related accident Treatment expense up to 7,00,000/- in case of accidents except work related accident 60% of basic remuneration until return to work in case of temporary full disability Lifetime monthly pension of 60% of basic remuneration based on the ratio of disability in case of permanent disability Lifetime monthly pension of 60% of the basic remuneration based on the ratio of disability in case of permanent full disability PIONEER LAW ASSOCIATES#25Dependent Family Scheme Benefits Eligibility Amount Spouse pension benefits Death of employee due to occupational hazard/diseases Lifetime monthly pension of 60% of last drawn remuneration Scholarship benefits for children Children who have not completed 18 years of age in the event of death of the Employee Can be extended up to 21 years if the children continuously engaged in the study are Entitled to monthly payment of 40% of the last drawn remuneration of the Employee Entitled to monthly payment of 60% of the last drawn remuneration of the Employee divided proportionately among children if more than one child. PIONEER LAW ASSOCIATES#26Cont... Benefits Benefits Eligibility Amount for dependent In case the Employee is Entitled to monthly payment family members unmarried and does not of 60% of the last drawn have any child, dependent remuneration of the parents living in a joint Employee divided family are eligible proportionately among father and mother. Funeral expenses In case of death of the Funeral Employee due to reason expenses of any 25,000/- to dependent family member or nominee PIONEER LAW ASSOCIATES#27Old Age Scheme Old Age Scheme Pension Retirement Scheme Scheme PIONEER LAW ASSOCIATES#28Old Age Protection Scheme Cntd.. Benefits Pension scheme Retirement scheme Eligibility Amount • Completion of the age Formula to calculate: of 60 ⚫ contribution for at least 180 months or 15 years • Employees engaged after July 17, 2019 Total contribution and amount of consideration received from the investment made by the Fund will be divided by 180 months (15 years) Receivables Such amount will be provided as pension every month during the employee's lifetime. Upon Death: Lump sum amount provided to the nominee upon death of the Employee prior to the retirement age. Completion of the age Lump sum amount provided to the nominee upon of 60 retirement of the Employee engaged in employment prior to July 17, 2019 the retirement age. • contribution for at least 180 months or 15 years • Employees engaged after July 17, 2019 Option for Employees hired prior to July 17, 2019: Can opt in the pension scheme and receive the pension benefits accordingly. २ S S#29Reporting Requirements Employers are required to notify the Fund within one of termination of employment with the employee due to any reason. New employees are required to enlist the employees. within 3 months from the date of appointment. PIONEER LAW ASSOCIATES#30Sanctions S.N. Non-Complia 1. nces Non-Depositio n of Fund within 15 days from the end of the Month (Section 9 of Social Security Act) Sanctions Recovery Steps The Fund may recover such 1. amount with additional 2. interest at the rate of 10%. 3. Freeze of Bank Account Freeze of Private property of the employer Freeze or suspend any of the the prevailing laws exemptions entitled pursuant to 4. To suspend the Approval letter obtained by the employer 5. 2. Non the Fund Enlistment To freeze the passport of the employer. Issuance of Oder in the name In case the Employer does not pay in of Employer to; out the amount then such amount is immediately enlist in the recovered by the Fund from the Employer. (a) (Section 17 of (b) Social Security Act) (c) Fund deposit the Fund with additional interest Pay out the amount to the employees whose service has been terminated ER LAW ASSOCIATES#31Sanctions (Cntd..) S.N. Non-Complia Sanctions nces 3. Non- Complying with the Order of the Fund 4. (Section 51) Recovery Steps Fine up to NPR 50,000/- Ask to report to the Fund, Embezzlement of Fund by the Employer In case the amount is identified then imposition of fine up to such amount, In case the amount cannot be identified then imposition of fine up to NPR 1,00,000/- or imprisonment up to one year or both. Ask for the security or guarantee, Taking into custody for up to 25 days, Arrest. PIONEER LAW ASSOCIATES#32EMPLOYER'S OBLIGATION •Enlistment •Depositing the contribution Contribution during unpaid situation (For maximum 3 months) •Information on Discontinuation of Employment (within 1 month of termination) PIONEER LAW ASSOCIATES#33THANK YOU FOR YOUR PARTICIPATION. For further information: Anup Raj Upreti: [email protected] Tilak Bikram Pandey: [email protected] PIONEER LAW ASSOCIATES