Employer of Record (EOR) in Nepal
An EOR in Nepal allows businesses to enter the market quickly and maintain compliance with local laws, all while reducing the overhead costs of establishing a local entity. Atlas HXM offers a seamless EOR service that handles all aspects of employment from payroll processing to compliant administration.
Partner with Atlas HXM for a cost-effective, compliant solution to hire and manage your workforce in Nepal.
Quick Overview of EOR in Nepal
Expanding into Nepal doesn't have to mean drowning in paperwork or hefty setup costs. With an Employer of Record (EOR), you can bypass the complexities of local regulations and quickly hire employees, all while maintaining compliance with Nepal's Labour Act. From payroll processing and tax compliance to benefits management, an EOR takes care of the legal nitty-gritty like Social Security Fund (SSF) contributions, so you can focus on growing your business without the need to set up a costly local entity.
The EOR model offers a low-risk, cost-effective alternative to setting up a subsidiary. Establishing a local entity in Nepal can cost anywhere from USD 15,000 to USD 30,000 plus the cost of maintaining human resources (HR), legal assistance, accountants and more. It can also become highly administrative. By partnering with an EOR, you can avoid these setup costs and enter the market faster, avoiding the overhead of a physical office. This is especially beneficial for startups, SMEs, and businesses testing new markets, who need to act quickly and comply with complex local regulations.
How an EOR Works
Atlas HXM provides EOR services that ensure your business remains compliant with Nepal's Labour Act while you focus on growing your operations, free from administrative and legal burdens.
Candidate Selection
Atlas HXM does not recruit candidates, but will check the employment setup for compliance around new hires like validating right-to-work, reviewing contract terms against Nepal's Labour Act rules, and configuring payroll and statutory obligations correctly.
Employment Contracts
Atlas HXM drafts and administers employment contracts in compliance with Nepalese labor law. In the contract, we clearly outline employment terms to reduce the risk of future disputes, such as:
Probationary period
Salary, benefits, and working hours
Leave entitlements and notice periods
Payroll & Benefits Management
Payroll is processed in Nepalese rupees (NPR), including:
Accurate tax withholdings and Social Security Fund (SSF) contributions
Statutory benefits such as workplace accident insurance and pension contributions
The EOR also helps maintain compliance with mandatory benefits, so employees are protected under Nepal's Labour Act.
Ongoing HR Support
Provides HR support, including: Leave management, employee relations and regulatory updates throughout the employee's tenure. This allows businesses to focus on core operations, while Atlas HXM handles ongoing compliance.
What to Choose: EOR vs PEO
Work Life in Nepal
Nepal's employment framework is designed to balance operational needs with strong employee protections. Here's what you need to know:
Employment Types:
Permanent: Ongoing employment of indefinite duration without a specific end date with full statutory benefits and strong job security protections. Permanent employees in seasonal industries are entitled to at least 25% of their remuneration during seasonal closure periods.
Work-based or time-based employment (fixed-term): Hired for a specific project or defined duration. The contract must outline the time period/particular work or service, remuneration scheme, and terms of service.
Part-time or casual employment: Part-time employment means the employee performs work perform a work in thirty-five hours or less than thirty-five hours in a week. Casual employment means employee provides service for seven days or less within a period of one month.
Probation Periods: The probationary period in Nepal is 6 months of continuous service, or a full running season for seasonal employment. After this period, the employee is permanently appointed and provided with a written confirmation letter stating their position title, conditions of service, and remuneration. If the employer is not satisfied with the employee's performance, they can terminate the employment contract without notice during the probationary period.
Working Hours & Overtime: In Nepal, the standard workweek is 48 hours, with a maximum of 8 hours per day. Employees under 16 years of age are limited to 6 hours per day and 36 hours per week. A 30-minute rest break is required after every 5 hours of work. For eligible employees, overtime is paid at 150% of the employee's basic remuneration, with a maximum of 4 hours overtime per day and 24 hours per week. The EOR ensures that all overtime is calculated correctly and that employee work hours comply with local regulations.
Leave Entitlements
Leave Type | Eligibility / Duration | Payment / Notes |
|---|---|---|
Annual Leave | 1 day per every 20 days worked; maximum 18 days per year | Fully paid; accumulates up to 90 days maximum |
Maternity Leave | Up to 14 weeks (approximately 98 days); compulsory leave from 2 weeks before delivery | First 60 days paid by employer; remaining 38 days covered by SSF up to a capped limit of the Employee’s basic salary |
Paternity Leave | 15 days | Fully paid |
Sick Leave | Up to 12 days per year | Fully paid; accumulates up to 45 days maximum; excess paid out annually and unused also paid upon termination |
Public Holidays | All statutory holidays | Replacement holiday within 21 days for employees required to work on public holidays |
Payroll & Benefits: Wages are determined in accordance with Nepal's minimum wage orders, with sector-specific thresholds. Atlas HXM manages payroll in NPR, SSF contributions (employer and employee), statutory bonus entitlements under the Bonus Act, workplace accident insurance, and pension contributions. Supplemental benefits can include private health insurance, meal allowances, transportation allowances, housing allowances, and festival bonuses.
Atlas HXM can help you manage these aspects and can help ensure that employees are supported and compliant with Nepal's Labour Act while businesses can focus on operations without administrative burdens.
What to Choose: Indirect vs Direct EOR
Taxes & Compliance
Nepal operates on a fiscal year running from July 15 to July 14 of the following year. Employers must remit monthly tax withholdings (TDS) to the Inland Revenue Department by the 25th of the following month, SSF contributions within the first 30 days following the applicable payroll month, and advance tax payments quarterly — by mid-October, mid-January, and mid-April. Annual income tax returns are due within 3 months after the end of the fiscal year.
Category | Details |
|---|---|
Employer Payroll Tax | Social Security Fund (SSF): 20% of employee's basic salary; Mandatory workplace accident insurance: minimum NPR 700,000 coverage per employee; Tax Deducted at Source (TDS): withheld from employee salaries and remitted to the Inland Revenue Department monthly |
Employee Payroll Tax | Personal income tax: progressive rates from 1% to 39% based on annual income; Social Security Fund (SSF) contribution: 11% of basic salary per month |
Pension System | Mandatory SSF contributions; lifetime pension after 20 years of service calculated as (Years of Contributions × Last Salary) ÷ 50; lump sum of contributions plus interest for employees with fewer than 20 years of service |
VAT & EOR Costs: Nepal applies a standard VAT rate of 13% to most goods and services. EOR service fees may be subject to VAT depending on whether the EOR provider is billing from a Nepal-registered entity or an offshore entity. Client companies should clarify the VAT treatment of EOR service fees with their provider and tax advisors to ensure accurate financial planning.
Atlas HXM handles tax compliance, including progressive income tax calculations, SSF contributions, year-end filings, and non-resident taxation, ensuring businesses remain compliant with Nepal's Inland Revenue Department while minimizing administrative burden.
Termination
Both employers and employees must provide written notice before terminating employment, except in cases of dismissal for serious misconduct. Notice periods range from 1 day (for employment of up to 4 weeks) to 30 days (for employment of more than 1 year). Employees dismissed due to redundancy are entitled to severance pay of 1 month's basic wages for each completed year of service, with proportional severance for employees with less than 1 year of service. Strong employee protections apply, and employees on probation may be terminated without notice if performance is unsatisfactory (however, normally the employer shall follow due process). The EOR ensures proper handling of terminations, including notice periods, severance calculations, final wages, SSF obligations, and all required documentation.
5 Things to Look for in an EOR Provider in Nepal
Established legal entity and direct local presence in Nepal, with genuine employer of record capability — not a reseller or third-party intermediary.
In-depth and current knowledge of Nepal's Labour Act, Social Security Fund regulations, minimum wage orders, tax legislation, and immigration requirements.
Proven track record of accurate, on-time payroll processing in Nepalese rupees (NPR), including correct calculation of SSF contributions, TDS, overtime, leave encashments, and severance.
Experience administering both statutory benefits (SSF, maternity pay, workplace accident insurance) and supplemental benefits competitive within Nepal's labor market.
Advanced technology platform for payroll, compliance reporting, and HR system integration, with verified security and compliance standards (ISO 27001/27017/27018, GDPR).
Atlas HXM provides direct EOR services, managing payroll, compliance and benefits efficiently. Atlas HXM's unified platform automates HR, payroll, and compliance tasks, while offering premium employee support, global benefits, and access to 9,000+ learning courses. Recognized by Everest Group PEAK Matrix 2025 and NelsonHall NEAT Assessment 2026, Atlas HXM combines compliance, technology, and global expertise.
FAQs
How quickly can I hire employees in Nepal through an EOR?
You can typically hire employees within 1–2 weeks, compared to the several months required for establishing a local entity in Nepal.
What is the minimum wage in Nepal?
As of August 27, 2023, the minimum wage is NPR 17,300 per month for non-tea plantation employees and NPR 13,893 per month for tea estate employees.
Are there restrictions on terminating employees in Nepal?
Yes, Nepal's Labour Act requires proper notice periods, just cause where applicable, and statutory severance pay for redundancy dismissals. Employees on probation may be terminated without notice however typically a due process should also be followed.
Does Nepal have a mandatory 13th month salary?
No, Nepal does not have a statutory requirement for 13th month pay. However, profitable enterprises employing 10 or more people required to distribute a profit bonus annually under Nepal's Bonus Act when the company generates profit. Some employers also voluntarily provide festival bonuses during major celebrations such as Dashain and Tihar.
What are the main employer payroll contributions in Nepal?
Employers contribute 20% of the employee's basic salary to the Social Security Fund (SSF) each month, and must provide mandatory workplace accident insurance coverage of at least NPR 700,000 per employee.
What is the standard annual leave entitlement in Nepal?
Employees are entitled to 1 day of paid annual leave for every 20 days worked, up to a maximum of 18 days per year. Leave accumulates up to a cap of 90 days, after which excess leave is encashed annually.