Termination of employment as per Labor Laws of Nepal   


  • As per chapter 21 of labor law, 2074, there is provision of termination of employment based on different aspects and misconducts.

Governing Laws

  • Labor Act, 2017 (2074) of Nepal.
  • Labor Rules, 2075 of Nepal.

 In what ways employment can be terminated in Nepal upon Labor Laws?

Generally, employment can be terminated on the following basis;

1. Termination upon expiry of the term:

a. time-based employment

b. work-based employment

c. Casual employment

2. Other grounds of termination:

a.Termination upon ground of incompetence

b. Termination upon misconduct

c.  Termination upon ground of health

d. Voluntary termination by employee

e. Termination upon compulsory retirement

f. Termination upon end of probation period

  1. Termination upon expiry of the term

i.Time-based employment
 Termination of employment after the expiry of the specified time in the employment contract.
ii.Work-based employment
 Termination of employment after the completion of the specified work in the employment contract.
iii.Casual employment
 Termination of employment at the will of the employer.

Note: In the case of a project-based employment, if the specified time period is extended or the specified work is added or the time period for the completion of such work is extended, the employment cannot be terminated until that period or until the completion of the work.

2. Other grounds of termination

a. Termination upon ground of incompetence

  • If the work performance of the employee is found unsatisfactory or poor for three or more than three consecutive years of performance evaluation, the employer may terminate the employment of such a labor.
  • The work performance evaluation shall be done as per the rules and bye-laws mentioned in labor act.

Note: Before termination, time period of at least seven days (7 days) shall be given for clarification for the employer of any enterprise employing ten or more employees.

 b. Termination upon misconduct

Termination of employment can be done if committed the following misconducts:

  1. If causes bodily injury, hostage of the employer, employee, or any person in the workplace
  2. Giving and taking bribe
  3. Making financial misappropriation in the workplace
  4. Causing damage to any property that belongs to the employer,
  5. Remain absent in the work for more than thirty consecutive days without having a leave sanctioned,
  6. If not maintained the secrecy of any confidential matters of the workplace with the intention of causing loss or damage to such an enterprise,
  7. Conviction by the court of any criminal offense involving moral turpitude
  8. To make and submit any fake educational certificate and other certificate for the purpose of appointment,
  9. Consuming narcotic substance or liquor during the working hours or presence in workplace upon consuming it
  10. Commission of any misconduct if the law provides for the dismissal from service in the case of commission of such misconduct.

  c. Termination upon ground of health

  • If any employee becomes unable to work as of physical, mental incapacitation or due to grievous hurt and injury or it affects the work because of a long time required for medical treatment, then, by the recommendation of a medical doctor, employment can be terminated.

No termination, if;

  1. treatment of employee in a hospital due to accident or occupational disease while;
    • performing the work specified by the employer
    • until one year from the commencement date of treatment of employee at home
  2. employee becomes unable to attend at the workplace as a result of medical treatment other than mentioned above, no termination until six months (6 months).
  • the employee who is physically incapacitated or bears grievous hurt and injury can be engaged in any work suitable to the condition of their health. They cannot be terminated on this basis.

d. Voluntary termination

  • Termination by the employee himself/herself by submitting written resignation to the employer.

Note: If the resignation is not accepted by the employer within fifteen days (15 days), such resignation shall be deemed to have been accepted from the day following the day on the expiry of the time.

Resignation may be cancelled through mutual consent between the employer and the employee and the resignation shall be cancelled if the employee continues to work in the same enterprise even after the acceptance of his/her resignation.

e. Termination upon compulsory retirement

  • After the completion of the age of fifty-eight (58) years of the employee who is in regular employment.

To be noted: Approval from the Council is to be acquired if, in case compulsory retirement is needed below the age of fifty-eight (58) years and provision so obtained to be made in the bye-law.

f. Termination upon end of probation period

  • Termination after the expiry of probation period of six months upon being unsatisfied with the work of employee during the probation period.

Notice is to be given to the employer/employee prior to the termination:

The employee/employer is informed and is given the notice before termination of employment except when employment is terminated upon action taken for misconduct as;

  1. at least one day, in case of employment for a maximum of four weeks,
  2. at least seven days, in case of employment for a period of four weeks to one year,
  3. at least thirty days, in case of employment for a period of more than one year.

Note: Where the employer terminates employment without proper notice, they need to pay the equivalent of the notice’s period remuneration to the employee. Likewise, where the employee terminates employment without proper notice, the employer can deduct the equivalent of the notice’s period remuneration from the employee’s pay.


  • Reducing the workforce or employee of a company, entities or organization due to financial problems in its operation, re-organization or changes in business needs.

How is retrenchment made

At the time of retrenchment, generally the order should be as follows;

  1. foreign labor

a.  those with more misconduct punishment,

b.  lower work performance

c. last hired for the same job

Process of retrenchment

Retrenchment procedure of employee is given below;

Labor Lawyers of Nepal
Labor Lawyers of Nepal

 Other things included in retrenchment

  1. Unless agreed with the trade union, the collective bargaining committee or authorized trade union’s leader will be last to be retrenched.
  2. At the time of retrenchment, the employer must pay compensation based on one month’s salary for each year of service, with proportional compensation for less than a year’s service.
  3. No compensation to the employee who is entitled to the unemployment allowance under social security laws.
  4. Not applicable to employers with ten or less employees when conducting employee retrenchment.

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