Leave Rules in Nepal: A Complete Guide to the Labour Act 2074

The Labour Act 2074 (2017) is Nepal’s primary employment legislation, governing all establishments with one or more workers. It establishes eight distinct leave types, each with specific entitlements, accumulation limits, and encashment rules.

Understanding these requirements is essential for Nepali employers, especially in the growing IT/BPO sector and international organizations. Non-compliance can result in labor disputes and penalties from the Department of Labour.

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

The Eight Leave Types Under the Labour Act 2074

The Labour Act 2074 mandates eight types of leave that every employer must provide:

Leave Type	Entitlement	Paid/Unpaid	Accumulation Limit
Home Leave (Ghar Bida)	1 day per 20 days worked (~18 days/year)	Fully paid	Up to 90 days
Sick Leave	12 days per year	Fully paid	Up to 45 days
Maternity Leave	14 weeks (98 days)	60 days fully paid; remainder unpaid	N/A
Paternity Leave	15 days	Fully paid	N/A
Mourning Leave (Kiriya Bida)	13 days	Fully paid	N/A
Study Leave	10 days per year	Paid	N/A
Public Holidays	13 days (14 for women)	Fully paid	N/A
Special Leave	1 day per year	Paid	N/A

Below is a detailed breakdown of each leave type.

Home Leave (Ghar Bida) — Annual Leave

Home Leave is Nepal’s equivalent of annual leave. Employees earn 1 day of home leave for every 20 days worked, which equals approximately 18 days per year.

Entitlement Calculation

For a standard work year:

• 20 days worked = 1 day of home leave
• 260 working days ÷ 20 = 13 days of home leave
• Plus 5 days for weekly rest = ~18 days total per year

Accumulation and Encashment Rules

Home leave accumulates up to a maximum of 90 days. This is the most important rule to track:

• Employees can carry forward unused home leave year-over-year
• Once accumulated leave reaches 90 days, additional leave does not accumulate
• Excess leave over 90 days must be encashed annually at the basic salary rate

Example: An employee with 92 accumulated days of home leave:

• First 90 days remain in balance
• Excess 2 days must be paid out at year-end

Encashment on Termination

When employment ends, all accumulated, unused home leave (up to 90 days) must be paid out at the basic salary rate. This is mandatory and cannot be waived.

Sick Leave

Employees are entitled to 12 days of fully paid sick leave per year.

Accumulation and Encashment

Sick leave accumulates up to a maximum of 45 days:

• Unused sick leave carries forward year-over-year
• Once accumulated leave reaches 45 days, additional sick leave does not accrue
• Excess leave over 45 days must be encashed annually at the basic salary rate

Medical Certificate Requirements

• For absences of 3 days or fewer: No medical certificate required
• For absences exceeding 3 consecutive days: A medical certificate from a registered medical practitioner is mandatory

Example: An employee takes 5 consecutive sick days for a flu:

• Days 1-3: No certificate required
• Days 4-5: Medical certificate required
• Without a certificate, days 4-5 can be treated as unpaid leave

Encashment on Termination

All accumulated sick leave (up to 45 days) must be paid out at termination at the basic salary rate.

Maternity Leave

The Labour Act 2074 provides 14 weeks (98 days) of maternity leave.

Payment Structure

• First 60 days: Fully paid
• Remaining 38 days: Unpaid (can be taken as leave without pay)

Timing Requirements

• At least 2 weeks before delivery: Mandatory pre-delivery leave
• 6 weeks post-delivery: Mandatory post-delivery leave
• The remaining leave can be taken flexibly around delivery

Eligibility

• Applies to all female employees
• Proof of pregnancy (medical certificate) required
• Employer cannot dismiss or disadvantage an employee for taking maternity leave

Paternity Leave

Male employees are entitled to 15 days of fully paid paternity leave.

Eligibility and Timing

• Must be taken during the wife’s confinement period
• Proof of marriage and expected delivery date may be required
• Can be taken immediately before, during, or after childbirth

Mourning Leave (Kiriya Bida)

Employees are entitled to 13 days of fully paid mourning leave.

Eligibility

• Death of spouse: 13 days
• For married women only: Death of parents or parents-in-law (13 days total)
• The leave must be taken immediately upon receiving the news of death

Study Leave

Employees are entitled to 10 days of paid study leave per year.

Eligibility

• For annual examinations (academic or professional)
• Proof of examination schedule required
• Cannot be accumulated year-over-year

Public Holidays

Nepal observes 13 public holidays per year (14 for women, including an additional day for Teej).

Key Public Holidays

• May Day (Labor Day) — mandatory
• Dashain (5-6 days, September/October)
• Tihar (3-5 days, October/November)
• Nepali New Year
• Constitution Day
• Buddha Jayanti
• Other religious and national holidays

The government gazettes the official list annually. Many holidays are lunar-based and shift dates each year in the Gregorian calendar.

Working on Public Holidays

If an employee works on a public holiday, they are entitled to:

• 200% of regular wage (double rate) plus
• A compensatory leave day within 21 days

Weekly Rest Day

• Saturday is the mandatory weekly rest day
• One fully paid rest day per week
• If an employee works on Saturday, they must receive a compensatory day off within the same week

Special Leave

Employees are entitled to 1 day of special paid leave per year. This is additional discretionary leave for personal reasons.

Key Compliance Rules for Employers

1. Leave Accrual Tracking

You must track:

• Home leave balance (cap: 90 days)
• Sick leave balance (cap: 45 days)
• All other leave types (no cap)
• Encashment calculations for excess leave

2. Encashment Obligations

• Annual encashment: For home and sick leave exceeding accumulation limits
• Termination encashment: All accumulated home (up to 90 days) and sick leave (up to 45 days)
• Basic salary rate: Use basic salary (not gross pay) for encashment calculations

3. Record Keeping

Maintain records for each employee:

• Leave entitlements and accruals
• Leave taken and dates
• Leave balances and encashment payments
• Medical certificates (where required)
• Retain records for at least 3 years

4. Pro-Rata During Probation

Leave entitlements accrue proportionally during probation (maximum 6 months). The full entitlement applies after probation ends.

5. Non-Discrimination

You cannot:

• Dismiss or disadvantage an employee for taking lawful leave
• Deny leave entitlements to casual or probationary employees
• Require employees to forfeit accumulated leave

Nepal-Specific Calendar Considerations

Bikram Sambat (BS) Calendar

Nepal uses the Bikram Sambat calendar, which is approximately 57 years ahead of the Gregorian calendar:

• 2026 AD ≈ 2082/2083 BS
• Government documents and legal filings use BS dates
• International companies use AD dates
• Dual calendar display (BS + AD) is expected by Nepali employees

Fiscal Year

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

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

Holiday Date Shifts

Many holidays (especially Dashain and Tihar) are lunar-based and shift annually in the Gregorian calendar. The government gazettes the official dates each year.

Common Compliance Mistakes

1. Not Tracking Accumulation Limits

Exceeding the 90-day home leave or 45-day sick leave cap creates liability. Once limits are reached, additional leave must be encashed.

2. Incorrect Encashment Calculations

Use basic salary only for encashment, not gross pay. Gross pay includes allowances and bonuses; basic salary is the core rate.

3. Forgetting Medical Certificates

For sick leave exceeding 3 consecutive days, a medical certificate is mandatory. Without it, those days can be treated as unpaid leave.

4. Not Providing Double Pay for Public Holiday Work

Working on a public holiday requires 200% wage plus a compensatory day off within 21 days.

5. Mixing Up Gregorian and Bikram Sambat Dates

Documents for Nepali authorities must use BS dates. Internal systems should support dual calendar display.

Social Security Fund (SSF) Compliance

Nepal’s Social Security Fund requires accurate leave and attendance data for:

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

Inaccurate leave records can result in SSF compliance issues and penalties.

Key Takeaways

• The Labour Act 2074 mandates 8 leave types with different rules for each
• Home leave accumulates to 90 days maximum; excess must be encashed annually
• Sick leave accumulates to 45 days maximum; excess must be encashed annually
• Maternity leave is 14 weeks (60 days paid, remainder unpaid)
• Medical certificates required for sick leave over 3 consecutive days
• Public holiday work requires 200% pay plus compensatory day off
• All accumulated leave must be encashed on termination
• Track leave in both Bikram Sambat and Gregorian calendars
• Align leave balances with the Nepali fiscal year (Shrawan–Ashadh)

Manual tracking of these rules—especially accumulation caps and encashment—is error-prone. A leave management system built for Nepal automates accruals, caps, and encashment calculations. Leave Balance includes 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.

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