An employment contract may be terminated by either party at the conclusion of the contract period (if it is for a defined time), upon completion of the job (if it is performance-based), or by both parties. Employers must have a legitimate reason for terminating employment.
According to the law, an employer may terminate an employee for unsatisfactory performance. However, the employer should give the employee at least seven days to present an explanation.
Employers may terminate employment based on ill health if the employee has been deemed disabled by a medical practitioner. However, if the worker sustains an injury on the job and is getting treatment, the employment cannot be terminated for a period of one year. Unless verified by a medical practitioner, the employment of a worker undergoing treatment cannot be terminated until six months have passed.
An employee may freely resign by submitting a written resignation letter. Within 15 days, the employer must approve the resignation. If the employer does not accept the resignation within 15 days, it is presumed to be accepted. The resignation may be revoked by mutual consent or if the employee continues to work after the last day of employment.
Except for dismissals for misbehavior, both employers and employees are obligated to offer notice of termination or resignation. The notice period is proportional to the length of service.
While dismissal does not require employer notification, any other type of termination does, depending on the employment term. Employees who have worked less than four weeks, for example, require one day's notice. They require seven days for employment lasting four weeks to a year, and thirty days for employment lasting more than a year.
If an employee is not eligible for unemployment benefits under the Social Security Act, they receive severance pay equal to one month's salary for each year of service.
Nepalese labor laws provide for a probation period of up to a year.