Nepal, located in South Asia, shares boundaries with India and China. Itl has a traditional economic system and a majority of the population engages in subsistence agriculture. This particular economic sector has employed about 65% of its working population. Despite the country’s challenges with poverty and reliance on remittances, Nepal has managed to strive towards economic growth since the 1950s through a series of five-year plans.

Major Economic Hubs:

‍Kathmandu, Pokhara, Lalitpur

Skills in Demand:

Digital Literacy, Public Speaking, Web/App Development, Design

Resident Tax Information

The citizens of Nepal are taxed on their worldwide income, while non-resident individuals must pay taxes for anything derived in Nepal.

The income tax rates in Nepal are progressive, with higher taxes applying to those who earn more.

Income tax rates for single taxpayers in Nepal are –

Income tax rates for married taxpayers in Nepal are —

Social Security

Employers must ensure that they contribute to the social security of Nepal. The Nepalese social security covers

• Old Age and retrenchment benefits

• Maternity benefits

• Sickness benefits

• Employment injury

The employer and employee each contribute 20% to the overall social security fund, which goes towards funds like Medicare or Social Security in America. The government then takes 31%, so it’s important for employers here too pay their fair share.

Employers are responsible for withholding the monthly contributions to social security.

Statutory Benefits

Statutory benefits are employee benefits employers must compulsorily offer their employees residing in Nepal.

Statutory benefits in Nepal include —

• Pregnant women deserve time to take care of themselves, especially when they are nursing or pumping for their baby. They must be given at least thirty minutes break in addition to lunch every day.

• The standard workweek in Nepal is eight hours a day and forty-eight hours a week. For employees under 18, the normal workweek is thirty-eight hours.

• The law says that employers can require their employees to work overtime not more than four hours per day and have them compensated with an extra paycheck.

Overtime pay in Nepal can be as much 1.5 times the basic salary, but it is often agreed upon and provided based on a collective bargaining agreement between employers and employees.

Employees under 18 are prohibited from working overtime, and employers would attract hefty fines and penalties.

Fringe Benefits

Fringe benefits are provided to employees in addition to statutory benefits, statutory leaves, social security contributions, and employees’ annual paycheck.

• Remote work allowances
• Flexible working hours
• Additional paid time off
• Office equipment that includes mobile phones and/or laptops/desktops
• Allowances for business trips
• 13th-month pay

Exempt Benefits

Certain employee benefits offered by employers are taxable as per the Nepali laws. Such exempt benefits include —

• Remote area allowance up to NPR 50,000

• Pension income up to 50% of the pensionable income

• Annual life insurance or health insurance premium up to NPR 20,000

• Foreign allowances up to 25% of the received amount

• Medical tax credits up to 15% of the medical expenses

Long-term Incentives

Long-term incentives are an excellent way for employers to attract and retain top talent. These employee benefits can be offered on a time horizon that exceeds twelve months or one year, which makes them perfect as part of your strategic retention plan.

Commonly provided long-term incentives in Nepal include — Employee stock options to senior executives and key employees

• Dental covers

• Private health insurance covers

• Life insurance

• Life insurance

• Employer sponsored pension plans

Termination Process

The employment contract can be terminated by both the employer and the employee.

Notice Period

The notice period in Nepal is dependent on a mutual discussion between the employer and the employee, and should be in accordance with the labor laws of Nepal.

Severance Pay

Employees are eligible for severance pay from the first day of employment at a fixed rate of 8.33% of the basic remuneration.