Economic Overview, Himalayan Software Hub & Regional Hydro Grids
Nepal combines expanding cross-border clean hydroelectric power exports with a rapidly rising software development and IT services hub in Kathmandu.
Key Economic Sectors
- Software Engineering & IT Outsourcing: Custom software, mobile apps, digital animation, and AI data tagging in Kathmandu.
- Hydroelectric Energy Power Grids: Mega-scale hydro projects exporting clean electricity to India and Bangladesh.
- Adventure Tourism & Mountain Logistics: World's premier high-altitude mountaineering and trekking hospitality.
Employment Contracts, Labour Act 2074 (2017) & Probation
Regulated by the Labour Act 2074 (2017).
- Written Statement of Terms: Mandatory in Nepali or English detailing salary, allowances, and job description.
- Probation Period: Statutory probation is 6 months (shortened from 1 year under previous law).
Working Hours, Multi-Tier Leave & Dashain Festival Bonus
Leave Entitlements & Dashain Bonus
- Standard Hours: 48 hours per week (8 hours/day over 6 days).
- Annual Paid Home Leave: 1 day for every 20 days worked (~18 days/year).
- Paid Sick Leave: 12 fully paid days per year.
- Mandatory Festival Allowance (*Dashain Bonus*): All employees who complete 1 year of service must receive an annual festival bonus equal to **1 full month's basic salary** before the Dashain festival.
- Maternity Leave: 14 weeks (98 calendar days) (60 days fully paid by employer).
Social Security Fund (SSF 20% Employer / 11% Employee) & IRD Tax
| SSF Insurance Scheme | Employer Share | Employee Share | Description |
|---|---|---|---|
| Retirement / Pension Scheme | 18.33% | 10.00% | Old-age pension & gratuity fund (28.33% total) |
| Medical & Health Protection | 1.00% | 1.00% | Universal health and maternity medical care |
| Accident & Disability Insurance | 0.67% | 0.00% | Workplace accident and disability coverage |
| Total Statutory SSF Remittance | 20.00% | 11.00% | 31.00% total monthly contribution to Social Security Fund |
Personal Income Tax: Progressive rates: 1% (social security tax up to NPR 500k/yr), 10% (NPR 500k–700k), 20% (NPR 700k–1M), 30% (NPR 1M–2M), 36% (NPR 2M–5M), and 39% top rate on excess, remitted to the IRD.
Why Use an Employer of Record (EOR) in Nepal
- Scale Himalayan Software Teams: Onboard full-stack developers and QA testers in Kathmandu in days.
- SSF & Dashain Bonus Automated Compliance: Automated management of 20% employer SSF contributions and annual Dashain bonus disbursements.
Hiring in Nepal? Key Resources
Whether you are evaluating entity setup vs. using an Employer of Record, or looking for the best international payroll solution, our guides give you transparent benchmarks:
