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Nepal Termination, Notice & Gratuity 2025
Notice periods, legal vs illegal grounds for dismissal, gratuity formula, and what you are owed when your employment ends — under Labour Act 2074.
30 days
Notice (regular termination)
[S.54]
[S.54]
90 days
Notice (retrenchment)
[S.59]
[S.59]
1 month
Gratuity per year served
[S.46]
[S.46]
1 year
Min. service for gratuity
[S.46]
[S.46]
Notice Periods
| Situation | Notice Required | Note | Source |
|---|---|---|---|
| Employer terminates (regular) | 30 days | Or pay 30 days' wages in lieu of notice | Labour Act 2074, S.54 |
| Employee resigns | 30 days | Or lose 30 days' wages as notice pay | Labour Act 2074, S.54 |
| Retrenchment (business closure / downsizing) | 90 days | Plus 1 additional month's wage for each year of service | Labour Act 2074, S.59 |
| Probationary employee | 7 days | No notice needed if conduct/performance grounds during probation | Labour Act 2074, S.14 |
| Summary dismissal (misconduct) | No notice | Only for specific listed misconduct grounds — show cause process required first | Labour Act 2074, S.55 |
Notice in lieu of pay: Employer can opt to pay wages for the notice period instead of having the employee work it out. This payment must be at the full contractual rate. [Source: Labour Act 2074, Section 54]
Legal vs Illegal Grounds for Termination
✅ Legal Grounds for Dismissal
- Proven misconduct (theft, fraud, violence) after due process
- Persistent poor performance after written warnings
- Genuine business closure or retrenchment (with 90-day notice)
- Employee absent without leave for 30+ consecutive days
- Employee convicted of a criminal offence related to employment
- Genuine redundancy (role no longer exists)
❌ Illegal Grounds for Termination
- Pregnancy or maternity leave
- Filing a complaint against the employer
- Joining or forming a trade union
- Taking entitled leave (sick, home, maternity)
- Caste, sex, religion, disability, or ethnicity
- Without following the show cause + response process
⚠️ Show Cause Process is Mandatory Before terminating for misconduct or performance, employer must issue a written show cause notice giving at least 7 days to respond. The employee's response must be considered before a decision is made. Skipping this process makes the termination automatically unlawful. [Source: Labour Act 2074, Section 55]
Gratuity (कर्मचारी सेवा सुविधा)
Gratuity Formula: 1 month of basic salary × number of years of completed service. Payable when employment ends for any reason after at least 1 year of service. [Source: Labour Act 2074, Section 46]
Gratuity Calculator
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Enter salary and years to calculate gratuity
Gratuity Examples
| Basic Salary (NPR) | Years of Service | Gratuity Due (NPR) |
|---|---|---|
| 20,000 | 3 years | 60,000 |
| 30,000 | 5 years | 1,50,000 |
| 50,000 | 10 years | 5,00,000 |
| 80,000 | 20 years | 16,00,000 |
SSF vs Gratuity: Employers registered with SSF do not pay separate gratuity — the 20% employer SSF contribution covers the gratuity obligation. When you leave, you access your SSF Retirement Fund instead. [Source: Labour Act 2074, Section 46 (as modified by SSF Act 2074)]
Everything You Are Owed When Employment Ends
| Entitlement | When? | Source |
|---|---|---|
| Salary up to last working day | Always — within 7 days of last day | Labour Act 2074, S.50 |
| Accrued home leave payout (cash) | Always (up to 60-day accumulated balance) | Labour Act 2074, S.34 |
| Gratuity (or SSF Retirement Fund) | After 1 year of completed service | Labour Act 2074, S.46 |
| Notice pay | If employer didn't give full notice period | Labour Act 2074, S.54 |
| Retrenchment compensation | Business closure/downsizing — 1 extra month per year served | Labour Act 2074, S.59 |
| SSF Retirement Fund | Any age, any reason — accessible after employment ends | SSF Operating Procedure 2075 |
| Experience letter / service certificate | Always — employer cannot withhold | Labour Act 2074, S.50 |
Employer must pay within 7 days of last working day. Withholding final salary, gratuity, or leave encashment is a criminal offence subject to fine and imprisonment. [Source: Labour Act 2074, Section 63]
If You Were Illegally Terminated
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Document Immediately
Save your termination letter, employment contract, pay slips, and any communications. Write down dates and witnesses. Time-limit for claims is generally 35 days from termination.
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File at Labour Office
File within 35 days of termination. The Labour Inspector mediates; if unresolved, refers to Labour Court. You can claim reinstatement or 6 months' wages as compensation.
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Labour Court Remedy
Labour Court can order reinstatement with back-pay OR pay compensation of up to 6 months' salary for unlawful dismissal. Appeal to High Court within 35 days of Labour Court ruling.