Home Leave in Nepal: Entitlements, Accumulation, and Encashment Rules

Home Leave (Ghar Bida) is the foundation of Nepal’s leave system under the Labour Act 2074. It functions similarly to annual leave in other countries, but with unique accumulation limits, mandatory encashment rules, and fiscal year considerations that many employers overlook.

Getting Home Leave right is critical for compliance. Errors in tracking accumulation caps or encashment calculations can lead to labor disputes, fines, and employee dissatisfaction.

Disclaimer: This article is for informational purposes only and does not constitute legal advice. Consult an employment lawyer for guidance specific to your organization.

What Is Home Leave?

Home Leave is Nepal’s statutory annual leave entitlement under the Labour Act 2074. It is fully paid leave that employees earn for every 20 days worked.

Key Facts:

• Entitlement: 1 day for every 20 days worked (~18 days/year)
• Payment: Fully paid at basic salary rate
• Purpose: Rest, recreation, and time with family
• Accumulation limit: 90 days maximum
• Excess over 90 days: Must be encashed annually

How Much Home Leave Do Employees Earn?

Standard Calculation

The Labour Act 2074 specifies:

1 day of home leave for every 20 days worked

For a standard work year:

• 260 working days ÷ 20 = 13 days of home leave
• Plus 5 days for weekly rest (Saturday) = ~18 days total per year

For Different Employment Arrangements

Employment Type	Working Days	Home Leave Earned
Full-time (5 days/week)	260 days	~13 days + 5 rest days = 18 days
Full-time (6 days/week)	312 days	~15.6 days + 4 rest days = ~20 days

Probation Periods

During probation (maximum 6 months), leave accrues proportionally:

• If an employee works 3 months (90 days):
• 90 days ÷ 20 = 4.5 days of home leave earned

Full entitlement applies only after probation ends.

The 90-Day Accumulation Limit

This is the most critical compliance rule for Home Leave.

How Accumulation Works

Unused Home Leave carries forward year-over-year. Employees can accumulate leave over multiple years.

Example: An employee takes minimal leave over several years:

• Year 1: Earns 18 days, takes 3 days → Balance: 15 days
• Year 2: Earns 18 days, takes 2 days → Balance: 31 days
• Year 3: Earns 18 days, takes 0 days → Balance: 49 days
• Year 4: Earns 18 days, takes 0 days → Balance: 67 days
• Year 5: Earns 18 days, takes 0 days → Balance: 85 days
• Year 6: Earns 18 days, takes 0 days → Balance: 90 days (cap reached)

The 90-Day Cap

Once an employee’s accumulated Home Leave reaches 90 days:

• No additional Home Leave accrues until the balance drops below 90 days
• The employee must take leave to reduce the balance
• Any days earned beyond the cap are lost (not accrued)

Example: Employee with 90 days accumulated takes 5 days of leave:

• New balance: 85 days
• Home leave accrual resumes for the next 5 days earned

Why the Cap Exists

The 90-day limit encourages employees to take regular time off and prevents excessive leave accumulation that would create financial liability for employers.

Encashment of Home Leave

There are two scenarios where Home Leave must be encashed (paid out):

1. Annual Encashment (Excess Over 90 Days)

If an employee’s accumulated Home Leave exceeds 90 days at year-end, the excess must be paid out.

Calculation:

• Accumulated Home Leave - 90 days = Excess to encash
• Excess days × Daily basic salary rate = Encashment payment

Example: Employee has 92 accumulated days at year-end:

• Excess: 92 - 90 = 2 days
• Daily basic salary: NPR 1,500
• Encashment payment: 2 days × NPR 1,500 = NPR 3,000

Important:

• This encashment happens annually at fiscal year-end (Shrawan end)
• Use basic salary only, not gross pay
• The 90-day balance remains for future use

2. Termination Encashment

When employment ends, all accumulated, unused Home Leave (up to 90 days) must be paid out.

Calculation:

• Total accumulated Home Leave (up to 90 days) × Daily basic salary rate = Termination payout

Example: Employee leaves with 45 accumulated days:

• Daily basic salary: NPR 1,500
• Termination payout: 45 days × NPR 1,500 = NPR 67,500

Important:

• This payout is mandatory and cannot be waived
• Includes all accumulated leave, even if the employee never took leave
• Must be paid on or before the employee’s final day

What Is “Basic Salary” for Encashment?

This is a common source of confusion.

Basic Salary vs. Gross Pay

Basic Salary (used for encashment):

• The core salary rate
• Excludes allowances, bonuses, overtime, and benefits
• Defined in the employment contract

Gross Pay (used for regular salary):

• Basic salary + all allowances and benefits

For encashment calculations, always use basic salary only.

Example

Component	Amount
Basic Salary	NPR 45,000/month
Housing Allowance	NPR 5,000/month
Transport Allowance	NPR 3,000/month
Gross Pay	NPR 53,000/month

For encashment:

• Daily basic salary = NPR 45,000 ÷ 30 days = NPR 1,500/day
• Do NOT use NPR 53,000 (gross pay) for encashment

Leave Taking Process

Employee Request

Employees must request Home Leave in advance:

• Provide notice (typically 1-2 weeks for short leave, 1+ month for extended leave)
• Specify start and end dates
• Obtain approval from manager

Employer Approval

Employers should:

• Review the request against operational needs
• Check the employee’s leave balance
• Approve or propose alternative dates
• Document the approval

Cannot Unreasonably Refuse

Employers cannot unreasonably refuse Home Leave requests. If disputes arise:

• Consider employee preferences, especially for holiday periods (Dashain, Tihar)
• If denial is necessary for operational reasons, propose alternative dates
• Disputes can be escalated to the Department of Labour

Home Leave During Peak Holiday Periods

Dashain and Tihar

Nepal’s major festivals (Dashain in September/October, Tihar in October/November) are the busiest times for Home Leave requests.

Employer Best Practices:

1. Plan ahead: Request leave requests 2+ months in advance
2. Stagger approvals: Allow team members to take leave in rotation
3. Minimum staffing: Ensure essential operations continue
4. Compensatory arrangements: Consider alternative dates if requests exceed capacity

Holiday Calendar Coordination

Since many holidays are lunar-based and shift annually in the Gregorian calendar:

• Review the gazetted holiday list each year
• Align Home Leave approvals with public holidays
• Communicate clearly to employees about date shifts

Pro-Rata Home Leave for Part-Time and Short-Term Employees

Part-Time Employees

Part-time employees earn Home Leave on a pro-rata basis:

Calculation:

• (Days worked ÷ 20) = Home Leave earned

Example: Part-time employee works 100 days in a year:

• 100 days ÷ 20 = 5 days of Home Leave earned

Employees Leaving Before 1 Year

If an employee leaves before completing 1 year, they are entitled to pro-rata Home Leave:

Calculation:

• (Days worked ÷ 20) = Pro-rata Home Leave
• Must be encashed at termination

Example: Employee works for 6 months (130 days):

• 130 days ÷ 20 = 6.5 days of Home Leave
• Termination payout: 6.5 days × daily basic salary

Record Keeping Requirements

You must maintain records for each employee:

Record	Retention Period
Home Leave entitlement and accruals	At least 3 years
Home Leave taken and dates	At least 3 years
Current Home Leave balance	Ongoing
Encashment calculations and payments	At least 3 years
Termination payouts	At least 3 years

Tip: A leave management system automates this tracking and generates audit-ready reports.

Social Security Fund (SSF) Implications

Nepal’s SSF requires accurate leave and attendance data for:

• Pension fund contributions
• Medical benefit calculations
• Other social security benefits

Home Leave records contribute to SSF compliance. Inaccurate records can result in:

• Contribution calculation errors
• SSF audit issues
• Penalties and fines

Common Mistakes

1. Not Tracking the 90-Day Cap

Exceeding the 90-day accumulation limit creates financial liability. Once the cap is reached, additional leave must be encashed, not accumulated.

2. Using Gross Pay for Encashment

Always use basic salary only. Using gross pay overpays employees and creates audit issues.

3. Forgetting Annual Encashment

If accumulated leave exceeds 90 days at fiscal year-end, the excess must be paid out. Missing this creates compliance risk.

4. Not Paying Out on Termination

All accumulated Home Leave (up to 90 days) must be paid out on termination. This is mandatory and cannot be waived.

5. Mixing Up Gregorian and Bikram Sambat Dates

Fiscal year calculations should align to Shrawan–Ashadh. Documents for authorities use BS dates; internal systems should display both.

6. Incorrect Pro-Rata Calculations

For part-time or short-term employees, calculate based on actual days worked, not a full-year assumption.

Home Leave vs. Other Leave Types

How Home Leave compares to other statutory leave:

Leave Type	Annual Entitlement	Accumulation	Encashment
Home Leave	~18 days	Up to 90 days	Mandatory on excess + termination
Sick Leave	12 days	Up to 45 days	Mandatory on excess + termination
Mourning Leave	13 days	No	No
Study Leave	10 days	No	No
Special Leave	1 day	No	No

Fiscal Year Considerations

The Nepali fiscal year runs from Shrawan 1 to Ashadh end (~mid-July to mid-July):

• Annual encashment calculations typically occur at fiscal year-end
• Leave resets and carryovers should align to Shrawan 1
• SSF contributions and reporting align to the fiscal year

Tip: Configure your leave management system to the Nepali fiscal year for accurate tracking.

Key Takeaways

• Home Leave is 1 day for every 20 days worked (~18 days/year)
• Accumulates to 90 days maximum; beyond that, must be encashed annually
• Termination encashment is mandatory for all accumulated leave (up to 90 days)
• Use basic salary only for encashment calculations, not gross pay
• Plan for Dashain and Tihar with staggered approvals and minimum staffing
• Track in both Bikram Sambat and Gregorian calendars
• Align calculations with the Nepali fiscal year (Shrawan–Ashadh)
• Part-time and short-term employees earn pro-rata Home Leave

Manual tracking of Home Leave—especially the 90-day cap and encashment rules—is error-prone. Leave Balance automates accruals, caps, and encashment calculations with native Bikram Sambat calendar, Nepali fiscal year alignment, SSF integration, and Nepal payroll — at a flat rate of $10/month (~NPR 1,490) with unlimited employees.

---