Payroll and Benefits Guide Nepal

Termination Process

Employment can be terminated in Nepal for reasons including serious negligence of duties, poor performance, absenteeism, insubordination, misconduct, revealing confidential information of the client or the employer, Physical and Sexual Harassment, Involvement in Physical Actions and any legal or police case against the employee.

Employers must provide a written notice stating the reasons for termination and allow the employee to explain themselves. Employees can contest termination by filing a complaint with the Labor Office within 45 days.

An employee can resign by submitting a written resignation letter to the employer. The employer must accept this within 15 days, or it is deemed accepted.

Notice Period

The notice period for employment termination varies based on the duration of employment:

• During Probation Period = Immediate termination is usually possible.

• Up to 4 weeks of service = A minimum of 1 day’s notice is required.

• 4 weeks to 1 years of service = A minimum of 7 days’ notice is required.

• Above 1 year of service = A notice period of 30 days is required.

Both employers and employees must adhere to these notice periods unless termination is due to misconduct, in which case immediate termination is possible. If either party fails to provide the required notice, they must pay the equivalent remuneration for the notice period to the other party.

The employer can choose to pay in lieu of the notice period.

Severance Pay

Employees are entitled to severance pay unless they are eligible for unemployment benefits under the Social Security Act. The severance pay is calculated as 1 month’s salary for each year of service. For employees with less than one year of service, the severance pay is proportional to their length of service.

Severance must be paid as a lump sum upon termination of employment to avoid penalties and legal complications.

Generally, workers who resign voluntarily will not be entitled to severance payout.

Probation Period

A trial period of 6 months is in place. It might be permitted to extend a probation period by an additional six months if the employee’s performance is unsatisfactory.