Overview of Relevant Labour Laws
Labour audits in Nepal are governed by a comprehensive framework of labour legislation. These laws define the rights of employees, obligations of employers, and administrative procedures for compliance. Key statutes include the Labour Act, 2074; Labour Rules, 2075; Social Security Act, 2074; Bonus Act, 2030; and Occupational Health and Safety standards. These laws regulate employment conditions, benefits, union rights, and audit requirements. Every employer must adhere to these provisions to ensure legal compliance and minimize labour-related risks. Medha Law and Partners Is a leading law firm in Nepal.
Labour Act 2074 and Provisions
The Labour Act, 2074 (2017) is the principal law regulating labour rights and employer duties in Nepal. Section 80 of the Act mandates an annual labour audit for companies with ten or more employees. It also prescribes requirements for employment contracts, wages, benefits, leave, termination, and workplace safety. The law provides for regular inspections and legal action in case of non-compliance. This Act replaced earlier fragmented labour laws, consolidating them into a single legislation to enhance enforcement and standardization.
Rules Under Labour Rules 2075
Labour Rules, 2075 (2018) are procedural regulations under the Labour Act, 2074. Rule 50 specifies the format and deadline for submitting a labour audit report. Schedule 13 provides the standard format for audit reporting. The Rules also detail the procedures for employment registration, dispute resolution, minimum wage enforcement, and documentation. These rules are legally binding and must be followed while conducting or submitting labour audits to the Department of Labour or Labour Offices.
Social Security Act Obligations
The Social Security Act, 2074 mandates the registration of employees under the Social Security Fund (SSF). Employers must deduct and deposit contributions as per the Social Security Fund Operation Procedures. Labour audits evaluate whether these contributions are accurately calculated and submitted. The SSF covers medical, maternity, accident, old age, and unemployment benefits. Non-compliance is treated as a legal violation and affects the audit outcome. The audit also checks whether the employer has issued Social Security numbers to all eligible workers.
Occupational Health and Safety Law
Nepal’s Occupational Health and Safety (OHS) regulations are incorporated in Chapter 10 of the Labour Act, 2074. These provisions require employers to maintain a safe and hygienic workplace. Audits must examine safety protocols, use of protective equipment, and the recording of work-related accidents. The Labour Rules also require regular training and risk assessment in industries involving physical or chemical hazards. A labour audit checks adherence to these safety measures and ensures records of injuries are maintained and reported.
Employment Contract Legal Requirements
The Labour Act mandates written employment contracts for all employees. Section 20 requires contracts to specify job duties, remuneration, benefits, work hours, and termination conditions. A labour audit verifies whether all staff members have legally valid contracts. The audit also reviews whether probation periods, performance evaluations, and job descriptions align with the law. Failure to maintain accurate and current contracts can lead to audit failure and legal fines under Section 103 of the Labour Act.
Laws on Working Conditions and Wages
The Labour Act, 2074 outlines working conditions including maximum working hours, overtime rates, rest periods, and night work limitations. Section 28 establishes the right to a weekly day off and paid public holidays. Section 34 defines rules for wage payment, including deadlines and permissible deductions. The Minimum Wage Fixation Committee sets and revises wage floors periodically. Labour audits assess whether employers follow these wage laws, maintain salary records, and avoid unauthorized deductions or delays in payment.
Bonus and Allowance Legal Framework
Under the Bonus Act, 2030, enterprises meeting profit thresholds must allocate a specific percentage of net profits for employee bonuses. Companies are required to submit bonus distribution reports to the Labour Office. The Labour Rules define other mandatory allowances, such as overtime, travel, and communication expenses, where applicable. A labour audit checks the payment of these bonuses and allowances, verification of eligibility, and fairness in distribution. Failure to follow these rules results in audit observations or fines.
Provisions on Leave and Holidays
The Labour Act, 2074 guarantees paid leave entitlements, including:
- 12 days of casual leave annually
- 15 days of sick leave
- 13 days of public holidays
- 90 days of maternity leave (including paid and unpaid components)
Labour audits require verification of leave records and ensure that employees are granted entitlements as per law. Employers must also maintain accurate logs and calculations for leave accruals and availed days. Non-compliance results in adverse audit remarks and possible fines.
Trade Union Rights and Compliance
Trade union rights are protected under the Labour Act, 2074 and Trade Union Act, 2049. Employees have the right to form unions, elect representatives, and engage in collective bargaining. Labour audits examine whether companies obstruct union formation or ignore registered union demands. Employers must recognize legally constituted unions and hold periodic negotiations as required. Compliance with collective agreements is also part of the audit review.
Legal Penalties for Audit Failure
Section 103 of the Labour Act prescribes penalties for non-compliance with audit requirements. These include:
- Monetary fines from NPR 10,000 to NPR 100,000
- Orders to conduct a pending audit within a specified period
- Legal proceedings initiated by Labour Offices
Companies failing to appoint an auditor or submit reports on time may face suspension of licenses or contract disqualification. Falsified or incomplete audits can also trigger inspections and litigation.
Government Notification Requirements
Employers must notify local Labour Offices about:
- New employee hires and terminations
- Updates to working conditions or policies
- Labour audit report submissions
- Industrial disputes or accidents
As per Labour Rules, failure to notify the office within the prescribed timeframe may result in administrative actions. Labour audits confirm that these notifications are made on time and accurately recorded.
Compliance with Local Labour Offices
Each province and district in Nepal has designated Labour Offices. Employers must submit annual audit reports to these offices. These offices:
- Review labour audits
- Conduct site inspections
- Resolve disputes
- Issue compliance certificates
Audits are incomplete unless accepted by the relevant office. Local labour officials may also issue further directions or require clarification. Companies must maintain consistent communication with the Labour Office to ensure full compliance.
Court Interpretations on Labour Audits
Nepalese courts have addressed several cases concerning labour audits. Precedents emphasize the need for:
- Transparency in audit processes
- Employee welfare as a primary objective
- Genuine record-keeping and data integrity
Courts have upheld penalties for non-compliance and endorsed the Department of Labour’s authority to enforce audit submissions. Judicial decisions help interpret vague legal provisions and are referenced during legal disputes involving audits.
Updates and Amendments in Labour Laws
The Government of Nepal frequently updates labour laws based on socio-economic changes. Recent updates include:
- Increase in minimum wage
- Mandatory Social Security Fund registration
- Online registration and audit submission features
Employers must regularly check notifications from the Ministry of Labour, Department of Labour, and the Nepal Gazette. Labour audits must reflect compliance with the latest legal requirements. Periodic amendments affect payroll, working conditions, and safety standards.
FAQs
What laws govern labour audit?
Labour Act 2074, Labour Rules 2075, and Social Security Act 2074 govern labour audits in Nepal.
Is Labour Act applicable?
Yes. The Labour Act, 2074 applies to all businesses with employees in Nepal.
Are there wage laws too?
Yes. The Act mandates minimum wages, timely salary payments, and working hour limits.
What about health laws?
Occupational health and safety standards under the Labour Act require a safe working environment.
Are holidays legally required?
Yes. The law mandates public holidays, casual leave, sick leave, and maternity leave.
Is bonus law mandatory?
Yes. Profitable companies must distribute bonuses under the Bonus Act, 2030.
Can we ignore old laws?
No. All applicable labour laws must be followed, including older regulations still in force.
Are new rules frequent?
Yes. The government issues periodic updates through notifications and amendments.
Do courts support audits?
Yes. Courts enforce audit compliance and have penalized companies for non-submission.
Where to read the laws?
Official publications are available on the Ministry of Labour’s website and the Nepal Gazette.