In Nepal, the Labor Act of 2017 (2074), along with its Regulations of 2018 (2075), stipulates the legal requirements for notice periods during employment termination.

Notice Period by Employer

The employer is required to provide the following notice periods to an employee, depending on their tenure of service:

• Up to 6 months: 15 days' notice
• More than 6 months but less than 1 year: 1 month's notice
• 1 year or more: 3 months' notice

Notice Period by Employee

An employee intending to resign from their position must provide the following notice periods to their employer:

• Up to 3 months: 15 days' notice
• More than 3 months but less than 1 year: 1 month's notice
• 1 year or more: 3 months' notice

It's important to note that the employer or employee may waive the notice period by providing a sum equivalent to the salary payable during the notice period in lieu of notice.

In Nepal, severance pay is governed by the Labor Act of 2017 (2074) and the Labor Regulations of 2018 (2075).

Eligibility

Employees are entitled to severance pay under the following conditions:

• Dismissal (Excluding Serious Misconduct): If an employer terminates an employee's employment for reasons other than serious misconduct as defined in Section 46 of the Labour Act, 2017 (2074).
• Retrenchment: If an employee is made redundant due to economic reasons or changes in the business.

Severance Pay Calculation

The calculation of severance pay in Nepal is based on the employee's length of service, as per Section 53(1) of the Labour Act, 2017 (2074):

• At least one year of service: One month's salary for each year of completed service.

For service less than one year, severance pay is calculated on a proportionate basis.

Exceptions

An employee is not entitled to severance pay if:

• The employee is eligible for an unemployment allowance under the Social Security Act.
• The employee was terminated due to serious misconduct as defined by law.

Payment of Severance

The employer is required to pay the severance amount to the employee as a lump sum upon termination of employment. Employers must ensure timely payment to avoid penalties and legal complications.

Terminating an employee's contract in Nepal requires adherence to the provisions of the Labour Act of 2017 (2074) and its accompanying Labour Regulations of 2018 (2075).

Types of Termination

There are two main types of termination:

• Voluntary Resignation: An employee may resign at any time by submitting a written resignation letter to the employer. Resignations must be accepted by the employer within 15 days.

• Involuntary Termination by the Employer: If an employer decides to terminate an employee's employment, they must follow appropriate procedures:

  • Performance-based Dismissal: The employer must provide a written notice outlining the reasons for termination and grant the employee an opportunity to explain their case.
  • Termination for Other Valid Reasons: The employer must provide a reason for termination.
  • Termination for Serious Misconduct: An employee can be summarily dismissed for serious misconduct. In this case, a notice period is not required.

Grounds for Termination

Employers in Nepal can terminate an employee's employment for the following valid reasons:

• Poor performance or work-related negligence
• Economic or operational reasons (retrenchment)
• Breach of contract
• Serious misconduct

Documentation and Notice

• The employer must provide a written termination letter to the employee, stating the reason for termination and the effective termination date.
• The termination letter must also include information about any outstanding salary, and benefits the employee is entitled to.

Contesting Termination

An employee who believes their termination was unfair or unjustified can file a complaint with the Labour Office within 45 days of termination. The Labour Office will investigate and attempt to resolve the dispute through conciliation. If unsuccessful, the employee may file a case with the Labour Court.