Termination of Employment Under Labor Law of Nepal

Pursuant to prevailing labor law of Nepal, Employer should take the employment termination in serious note. Termination shall only be done with the strict compliance of law. Termination without valid and sufficient ground may create the employer in trouble, Employee can even complain before labor office.

This article explains detail regarding grounds of the termination of employment under labor law of Nepal. 

 

Labor Act, 2017 (the "Labor Act”) and Labor Rules, 2018(2075) (the "Labor Rules”) are the primary legislation governing labor laws in Nepal.

 

Pursuant to Labor Act, Employment of any employee shall not be terminated in any condition except in accordance with the Act and the rules or bye-law framed under the Act. Proper and sufficient ground of the termination should be given by employer while terminating the employment.

 

Ground for the termination of the employment in Nepal are as mentioned:

 

3.1 Direct termination of employment upon misconduct
Employer can directly terminate the employee if employee commits misconduct pursuant to Section 131 (4) of the Labor Act which as mentioned:

a) Cause bodily harm to other employers of an entity,
b) Give and take the bribe,
c) Make financial misappropriation in the enterprise.
d) Intentionally causing damage to any property that belongs to or use of the employer.
e) Remain absent from the work for more than 30(thirty)consecutive days without having a leave sanctioned.
f) If any employee breaks the confidential information of the enterprise or workplace where he or she is working with the intention of causing loss or damage to such an enterprise.
g) Get convicted by the court of any criminal offense involving moral turpitude during the period of employment.
h) Consume narcotic substance or liquor during the working hours or come to the workplace upon consuming the same.
i) Get punishment for more than 2(two) times for the misconduct pursuant to Section 131 of Labor Act within a period of three years.
j) Commit any misconduct if the prevailing law provides for the dismissal from service in the case of commission of such misconduct.

 

3.2 Employment may be terminated on the ground of incompetence
The employment may be terminated on the ground of incompetence if the work performance of such a labor is found unsatisfactory or poor for 3(three) or more than 3(three) times while evaluating the work performance of any employee.
Note: The employer of any enterprise employing 10(ten) or more employees shall give a period of at least 7(seven) days to the concerned employee for clarification before terminating the employment.

 

3.3 Termination of employment on the ground of health
Employer can terminate the employment of employee where any employee becomes incapable of working as a result of physical or mental incapacitation and it affects the work because of a long time required for medical treatment, the employer may, on the basis of recommendation by a medical doctor terminate the employment of the labor.

i. Employment cannot be terminated during the treatment: The employment of any employee may not be terminated during the period of undergoing treatment in a hospital because of any accident or occupational disease while performing the work specified by the employer or until 1(one) year from the date of commencement of his or her treatment at home if he or she is undergoing treatment at home, and the employer shall provide full remuneration during such a period.
ii. Not allowed to terminate up to 6 months: In the case of an employee who is not able to attend the work of the enterprise on the ground of medical treatment in the circumstance other than those employee who are in undergoing treatment in the hospital because of any accident or occupational disease while performing the work specified by the employer or until one year from the date of commencement of his or her treatment at home if he or she is undergoing treatment at home the employment of such an employee may not be terminated until 6(six) months.
iii. Remuneration during treatment: Note that the employer shall not be required to provide remuneration if the employee is entitled to receive the remuneration facility from the Social Security Fund for the period of treatment.
iv. Shall engaged in another work: In cases where the labor who is physically incapacitated or has sustained grievous hurt or injury can be engaged in any work suitable to the condition of his or her health, the employer shall engage such an employee in work.

 

3.4 Voluntarily termination by employee
The termination of employment also can be done by voluntarily by the employee itself by submitting resignation in writing to the employer. The following procedure shall follow:

a. The employee shall submit resignation in writing to the employer.
b. The employer shall accept the resignation letter submitted by employee within 15(fifteen) days and give information thereof to the employee.
c. The resignation shall have been deemed to have been accepted automatically, if the employer doesn't accept it in time limit.

Cancellation of termination: The resignation submitted by an employee may be cancelled through mutual consent between the employer and the employee. If the employee continues working in the same enterprise even after the day on which his or her resignation is accepted and becomes effective, his or her resignation shall be deemed to have been cancelled.

 

3.5 Compulsory retirement:
For regular employment, shall get compulsory retirement after completing the age of 58(fifty-eight) years.

 

3.6 Other grounds of termination
The employee who are engaged in time-based, work-based and causal employment are terminated in the following circumstances;

Types of Employment	Time Period of Employment
Time-based	After the expiry of the time specified in the employment contract, the employment gets terminated. Provided that if the employee is in project-based employment and the period is extended or the period for the completion of such work is extended on the basis of the nature of the work, the employment shall not terminate until that period.
Work-based	After the completion of the work specified in the employment contract in the case of work-based employment, Provided that if the employee is in project-based employment and the work is added or the period for the completion of such work is extended on the basis of the nature of the work, the employment shall not terminate until that work remains.
Casual employment	In the case of an employee in casual employment, the termination of labor is at the will of the employer or employee.

 

Employer can directly terminate the employee if employee commits misconduct pursuant to Section 131 (4) of the Labor Act which as mentioned: 

 

• a. Cause bodily harm to other employers of an entity, 
• b. Give and take the bribe, 
• c. Make financial misappropriation in the enterprise.
• d. Intentionally causing damage to any property that belongs to or use of the employer.
• e. Remain absent from the work for more than 30(thirty) consecutive days without having a leave sanctioned.
• f. If any employee breaks the confidential information of the enterprise or workplace where he or she is working with the intention of causing  loss or damage to such an enterprise.
• g. Get convicted by the court of any criminal offense involving moral turpitude during the period of employment.
• h. Consume narcotic substance or liquor during the working hours or come to the workplace upon consuming the same.
• i. Get punishment for more than 2(two) times for the misconduct pursuant to Section 131 of Labor Act within a period of three years.
• j. Commit any misconduct if the prevailing law provides for the dismissal from service in the case of commission of such misconduct.

 

The employment may be terminated on the ground of incompetence if the work performance of such a labor is found unsatisfactory or poor for 3(three) or more than 3(three) times while evaluating the work performance of any employee. 
Note: The employer of any enterprise employing 10(ten) or more employees shall give a period of at least 7(seven) days to the concerned employee for clarification before terminating the employment.

 

Employer can terminate the employment of employee where any employee becomes incapable of working as a result of physical or mental incapacitation and it affects the work because of a long time required for medical treatment, the employer may, on the basis of recommendation by a medical doctor terminate the employment of the labor. 

 

Employment cannot be terminated during the treatment:  The employment of any employee may not be terminated during the period of undergoing treatment in a hospital because of any accident or occupational disease while performing the work specified by the employer or until 1(one) year from the date of commencement of his or her treatment at home if he or she is undergoing treatment at home, and the employer shall pro`vide full remuneration during such a period.

 

Not allowed to terminate up to 6 months:  In the case of an employee who is not able to attend the work of the enterprise on the ground of medical treatment in the circumstance other than those employee who are in undergoing treatment in the hospital because of any accident or occupational disease while performing the work specified by the employer or until one year from the date of commencement of his or her treatment at home if he or she is undergoing treatment at home the employment of such an employee may not be terminated until 6(six) months.

 

Remuneration during treatment: Note that the employer shall not be required to provide remuneration if the employee is entitled to receive the remuneration facility from the Social Security Fund for the period of treatment.

 

Shall engaged in another work: In cases where the labor who is physically incapacitated or has sustained grievous hurt or injury can be engaged in any work suitable to the condition of his or her health, the employer shall engage such an employee in work.

 

The termination of employment also can be done by voluntarily by the employee itself by submitting resignation in writing to the employer. The following procedure shall follow:

 

• a. The employee shall submit resignation in writing to the employer. 
• b. The employer shall accept the resignation letter submitted by employee within 15(fifteen) days and give information thereof to the employee.
• c. The resignation shall have been deemed to have been accepted automatically, if the employer doesn't accept it in time limit.
   

Cancellation of termination: The resignation submitted by an employee may be cancelled through mutual consent between the employer and the employee. If the employee continues working in the same enterprise even after the day on which his or her resignation is accepted and becomes effective, his or her resignation shall be deemed to have been cancelled. 

 

For regular employment, shall get compulsory retirement after completing the age of 58(fifty-eight) years.

 

The employee who are engaged in time-based, work-based and causal employment are terminated in the following circumstances;

Types of Employment	Time Period of Employment
Time-based	After the expiry of the time specified in the employment contract, the employment gets terminated. Provided that if the employee is in project-based employment and the period is extended or the period for the completion of such work is extended on the basis of the nature of the work, the employment shall not terminate until that period.
Work-based	After the completion of the work specified in the employment contract in the case of work-based employment, or Provided that if the employee is in project-based employment and the work is added or the period for the completion of such work is extended on the basis of the nature of the work, the employment shall not terminate until that work remains.
Casual employment	In the case of an employee in casual employment, the termination of labor is at the will of the employer or employee.

 

Retrenchment means the situation of the permanent termination of employee due to various reasons. Retrenchment shall be done on the following grounds;

• a. Due to financial problems.
• b. Due to merger of more than one enterprise.
• c. Due to any other reason.

 

10.1  Conditions to be followed for retrenchment: 
During the retrenchment, the employer should complete the following procedures:

a. The employer shall give notice in prior to at least 30(thirty) days before the date for retrenchment, setting out the following information reason requiring retrenchment, possible date for retrenchment and probable number of labors to be retrenched.
b. The information should be provided to Labor Office and the authorized trade union, if any, of the enterprise or in the absence of such a union, to any trade union which is active in the     enterprise or the labor relation committee. 
c.  While retrenching the labors, retrenchment shall be made generally in the following order:
i. Foreign employees.
ii. Employees who have been awarded more punishments comparatively for misconduct.
iii. Employees whose standard of work performance is rather weak and
iv. Employees who have been appointed at the last out of the labors engaged in the same type of work. 

 

10.2  Compensation Amount for retrenchment:
While retrenching the number of employees, the employer shall pay a lump sum amount to be set by calculating at the rate of one month’s basic remuneration for each year of his or her service as compensation to an employee who has completed the service period of at least 1(one) year. The employee who is entitled to the unemployment allowance under the social security laws shall not receive the compensation.

Note: The provision of retrenchment shall not be applicable to any employer who employs 10(ten) or less than ten employees. 

 

10.3  Recall for employment after retrenchment:
If any enterprise retrenched in the number of employees, when re-establish the enterprise within 2(two) years, such enterprise after giving a notice at least 15(Fifteen) days may re-call for the employment. Such notice should be published in national daily newspaper. It should be also published in the job portal of ministry of labor and also in website of concerned entity.
The employer if join back to the entity as per the notice should be selected on the basis of qualification, experience and working capacity of employees as per the necessity of number.

 

The Labor Rules ensure the employer to hire new employees than the previous employees on the following conditions;

• a. Due to age.
• b. Due to physical condition.
• c. Due to installation of new technology.
• d. Due to change in the production price.

 

Prior to terminating the employment relation in any circumstance except when employment is terminated upon action taken for misconduct, the employer or labor shall give a notice as follows to each other; 

Time	Circumstances
Prior to at least 1 (one) day	In the case of employment for a maximum of 4 (four) weeks.
Prior to at least 7 (seven) days	In the case of employment for a period of 4 (four) weeks to 1 (one) year. And
Prior to at least 30 (thirty) days	In the case of employment for a period of more than 1 (one) year.

 

• a. Where the employer terminates employment without giving the prior notice, the employer shall pay the amount equal to the remuneration for the period requiring the notice to be given to the concerned employee. 
• b. Where the employee terminates employment without giving a prior notice to the employer except when employment is terminated upon action taken for misconduct, employer may deduct the amount equal to the remuneration for the period requiring the notice to be so given from the remuneration payable to the concerned employee.

 

Date of Publication: 30 August 2023

 

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