Leave Policy in Nepal: Rules Every Employer Must Know

Author : Hajir hr | Published On : 30 Jul 2026

Leave Policy in Nepal influences the way workers take their rest and recuperate and how they manage their personal life and work. These rules should be well understood by all the employers in Nepal.

A simple and easy to understand guide of Leave Policy in Nepal. It also outlines the benefits of using modern HR software for compliance in expanding companies.

Leave rules impact payroll, staffing, and legal risk all at once so HR teams can't take leave rules lightly. This article will talk you through all the different types of leaves, encashment rules, eligibility requirements and the common mistakes that employers make when applying the Leave Policy in Nepal.

Understanding the Leave Policy in Nepal

Leave Policy in Nepal originates from the Labour Act, 2074 (2017), along with the Labour Rules, 2075. These laws apply to most formal-sector employers.

Who the Leave Policy in Nepal Applies To

Private companies, banks, hotels, and schools
Registered industries and factories
Corporate offices with formal employment contracts
Foreign employees working under valid work permits

Why Company Policies Vary

Employers may include additional benefits above and beyond the minimum requirements. For example, some multinational companies provide extra days off to celebrate a festival or wellness days to recruit. Therefore, though leave policy is legally the same for all the organizations, there is a slight variation in Leave Policy among them in Nepal.

Staff should use their contract to check against the statutory minimums at all times. An agreement that provides less than the law's minimum requires does not meet the legal minimum and is automatically replaced by the law.

Legal Framework Behind the Leave Policy in Nepal

The Leave Policy in Nepal is directly addressed in Chapter 9 of the Labour Act, from Section 40 to 51. Further, the procedural details are added in these sections in the Labour Rules, 2075.

Labour Act, 2074 specifies all the types of leave and qualification criterion.
Labour Rules, 2075: Establishes documentation and accrual formula.
The registered employer may use the Social Security Fund (SSF) to fund the maternity leave.

All three need to be read, before drafting an internal policy, by employers. Otherwise, they and their business may find themselves in trouble if a labour inspector visits their premises.

Types of Leave Under the Leave Policy in Nepal

Leave Policy in Nepal allows a number of different types of leave. Each one has a specific function and is used for various reasons by employees and employers, so there is no need to consider leave as a single pool of leave.

The following is an overview of the different types of leaves, their respective durations and the conditions of their Leave Policy in Nepal.

Annual Leave

1 day leave for every 20 days worked.
This equals approximately 18-21 days a year after 1 year of service.
Leave pay is at least 50% day's basic pay per day.

Sick Leave

Twelve paid sick days per year.
After 7 consecutive days of sickness, a medical certificate is required.
Any unused sick leaves can be carried over until the maximum statutory limit

Casual Leave

Staff members are entitled to 12 casual days of leave a year.
This leave is for a short notice personal leave.
It requires no advance planning for the employees.

Festival Leave

Staff are given up to 3 flexible festival days.
They can match these days to their religious and/or cultural events.
There is no restriction on this leave under the Leave Policy of Nepal.

Maternity Leave

Women employees get 98 days maternity leave altogether
The first 60-days are fully paid for by the employer.
If the family is unable to cover the remaining days, they will receive the remaining amount from the Social Security Fund.
The employees shall be absent for not less than 2 weeks prior to the delivery.
Staff to be absent for a minimum of 6 weeks following delivery
For complications, doctors can recommend another month of treatment.

The Nepal government is planning to increase paid maternity leave from 98 days to six months for working women. If implemented, this would give mothers more time to recover and care for their newborns. The change is currently a proposal and has not yet become law.

Paternity Leave

Fathers get Paternity Leave with paid days around the birth of the child.
If the mother dies within 60 days of the child's birth, the father has the right to claim the rest of the mother's maternity benefits.

Bereavement Leave

Employers provide approximately 13 fully paid days of leave for the employee.
This leave is for the death of a spouse, parent, child or parent-in-law.

Unpaid Leave

When the statutory categories of unpaid leave are exhausted, employees may apply for unpaid leave.
This leave is usually given at the discretion of the employer.

Who Qualifies Under the Leave Policy in Nepal

The Leave Policy in Nepal is intended for most of the permanent and full-time employees. Rates are different for probationary, contractual and part-time employees.

Eligibility by Employment Type

Full-time staff: Take leave from day one; have access to most of it after 12 months on the job.
The core protections and sick leave provisions also continue to apply to probationary employees.
Contract staff & fixed term employees: are treated the same as permanent staff under the statute.
Non-standard work: Leave will be provided on a pro-rata basis, according to hours worked
Minority workers: Are entitled to the same benefits as majority workers.

If employers classify employees as non-exempt, they could face penalties and back-pay lawsuits. So, it is best for multinational companies to have a one leave policy for the entire staff.

Benefits of Following the Leave Policy in Nepal

An effective Leave Policy in Nepal provides added benefits above and beyond just legal requirements. When an employer closely adheres to it, they may notice better retention and morale rates throughout their organization.

Advantages for Employers

Increased legal protection in the event of labour audits and inspections
Reduction in payroll disputes upon employee termination
More predictable staffing patterns, as leave patterns become predictable
In a competitive job market, better employer branding.

Advantages for Employees

Ensured rest/recovery time all year long
Financial protection in sickness, during childbirth or in case of death.
Clarity on the accrual and carry forward of leave
Knowing that their statutory rights are upheld in all situations, no matter how big or small the company is.

Public Holidays and the Leave Policy in Nepal

The Government of Nepal officially declares about 13 public holidays every year. These days are in addition to the normal leave of the employees.

Key Points on Public Holidays

The most significant period of holidays, other than Christmas, usually falls during the Dashain and Tihar festivals.
Comps must be provided to employees who are required to work on a holiday or additional compensation shall be provided.
Holiday dates should be changed annually, as they align to the lunar year.

Leave Encashment and Carry-Forward Rules

Staff have the option to bank their unused leave but with limits imposed by legislation.

Carry-Forward Caps

Home leave: can be accumulated to a max of 90 days.
Sick leave: Up to 45 days.
Any surplus in excess of these caps is paid out as cash at year-end.

Final Settlement Rules

Employees who resign, retire or die have the ability to cash in all unused home and sick leave.
The calculation is based on the employee's basic pay at the end of the contract.
A lot of emphasis is placed on accuracy – both for the employer and the employee leaving.

Employer Obligations and Penalties

The Leave Policy in Nepal imposes strong responsibilities on employers, rather than employees. Failure to comply may have actual monetary and legal penalties.

What Employers Must Do

Ensure that leave documents are kept up to date for all staff.
Give statutory leave without having to give reasons for their personal leave
Automatically use up any surplus leave at the end of the year.
Take up unused leave at the time of an employee's departure.
Ensure internal policies are updated when there is a change in the Labour Act or Labour Rules.

Consequences of Non-Compliance

Fines levied on the business by the Department of Labour on the inspection.
The back-pay claims of current or former employees.
Damage to reputation (may impact future employment)
Legal-backlog issues that tie up management time and resources.

These risks are present and employers should have a clear and well-documented leave policy and review it annually.

Common Mistakes Employers Make

A great number of companies have difficulties in implementing the Leave Policy in Nepal uniformly across departments.

Frequent Compliance Errors

Throwing in the minimum required by statute rather than the optional benefits that may be offered by the company.
Not properly tracking accrual caps and making the wrong end-of-year payouts
Because of incorrect calculations, there is a split between employer and SSF in regards to maternity leave.
Being unable to maintain historical leave records because of turnover.
Having different approval processes in different locations

These errors can have tangible, financial and legal implications, which is why more companies are relying on specialized HR software.

How HR Software Strengthens the Leave Policy in Nepal

As businesses expand, manually managing leave becomes very time-intensive. As a result, HR software takes care of the entire leave cycle from setting leave policies to encashment at year-end.

Core Leave Management Features

Leave types that are configured with the precise legal minimums.
No need to manually calculate accruals (time tracking)
A rules engine that sets the carry-forward balances properly
Employee self-service for applying/balancing balances
Multiple approval workflows for managers
Say goodbye to manual payroll reconciliation.
Reporting and compliance for audit ready documentation

There is no manual updating required as everything happens automatically, saving HR time on paperwork and allowing them to focus on hiring and retention.

Simplify the Leave Policy in Nepal with Hajir HRM

Hajir HRM transforms the Leave Policy in Nepal from a time-consuming, manual affair into a true competitive advantage.

What Hajir HRM Handles for You

Sets up all statutory leaves automatically
Computes accruals correctly, without the use of spreadsheets
Automatically enforces caps on cash outs.
Allows staff to apply for leave from their phones.
Lets managers approve requests within seconds
Bookkeeping is automatically updated in real time in the background of the application.

Ready to simplify compliance for good? Get a free Hajir HRM Demo today and see how easy leave management can be for your business.

FAQs:

Does the Leave Policy in Nepal apply to every company?

It is applicable to most formal sector employers (private firms and registered organizations) but not to all. But sometimes informal or unregistered business may not be in the direct reach of enforcement.

How many annual leave days does the Leave Policy in Nepal guarantee?

The general rule is that an employee gets 1 day for every 20 days of work, and this equals 18 to 21 days after 1 year of service.

Can employees encash unused leave under the Leave Policy in Nepal?

Yes. Employees are allowed to cash out any un-used leave beyond the carry forward limits and are also paid their leave in full in the event of resignation or retirement.

Is maternity leave fully paid under the Leave Policy in Nepal?

The employer pays the first 60 days at full pay and the Social Security Fund may pay the balance.

Why should businesses use HR software to manage the Leave Policy in Nepal?

HR software eliminates manual mistakes, automates statutory adherence and saves considerable administrative time over a spreadsheet tracking.

What happens if an employer violates the Leave Policy in Nepal?

The Department of Labour may fine and affected workers can seek back-pay or unpaid encashment. An ongoing pattern of abuse also can hurt an employer's reputation and hiring power over time.