Employment Contracts and Appointment Letters in Nepal

Five Types of Employment

Section 10 recognises:

Regular Employment

Employment that does not fall into the specific task, time or casual categories.

Work-based Employment

Employment to complete a specified work or service.

Time-based Employment

Employment for a specified period.

Casual Employment

Employment for: 7 days or less in one month for the specified work/service.

Part-time Employment

Employment requiring: 35 hours or less per week.

These definitions are expressly set out in Section 10.

The Contract Label Is Not Conclusive

An employer cannot avoid regular-employment obligations merely by writing:

“Temporary”

or

“Fixed term”

in the appointment letter.

Where a dispute arises over whether employment is regular, the nature of the work is relevant, and the Labour Rules permit the Labour Office to determine the actual employment category.

Example

An employee performs the same continuing accountant role for several consecutive years.

Repeatedly issuing short contracts does not automatically make the work genuinely time-based if the underlying nature of the employment is regular.

Minimum Contents of the Agreement

At minimum, the employment agreement should address:

• employer name and address;

• worker identification;

• employment category;

• job title;

• duties;

• start date;

• place of work;

• remuneration;

• allowances;

• benefits;

• working hours;

• leave;

• probation;

• social security;

• termination conditions;

• applicable internal/service regulations.

Rule 4 requires employment type, main work/position, applicable service rules and effective details to be expressly stated.

Appointment Letter vs Employment Agreement

A properly drafted appointment letter can function as the written employment agreement where it contains the legally required terms.

The practical issue is not the document title.

The question is whether the written document records the required:

• remuneration;

• benefits;

• employment category;

• conditions; and

• duties.

The official Labour Audit format specifically checks whether workers have been provided an employment agreement or appointment letter under Section 11.

Terms Cannot Be Below Statutory Minimums

An employment contract cannot lawfully reduce the worker's benefits below those provided by the Labour Act/Rules.

Section 34 requires remuneration and benefits to be at least the statutory level, while an existing worker's remuneration/benefits generally cannot be reduced except under the permitted collective-agreement mechanism.

Therefore a contract clause stating:

“No overtime payable”

does not override the Labour Act where overtime is legally payable.

Probation Period

Section 13 allows an employer to place a worker on probation for up to: 6 months.

If performance is not satisfactory during probation, employment may be terminated.

If the employment is not terminated during probation:

employment is automatically considered confirmed after completion of the probation period.

Trainees Are Different

A person genuinely engaged as a trainee can be employed for training under Section 18.

The ordinary training period should generally not exceed: 1 year unless a longer period is required under another law or the nature of the training.

A trainee must still receive at least minimum remuneration and specified labour/social-security benefits.

If the employer retains the trainee as an employee after training:

a new probation period cannot ordinarily be imposed on that trainee.

Business Transfer Does Not Automatically Terminate Workers

Where a business:

• changes ownership;

• transfers operations;

• is taken over; or

• merges,

Section 14 generally preserves the existing employment relationship.

Therefore:

sale of business ≠ automatic termination of all employees.

Employee rights must be reviewed as part of mergers/acquisitions.

Salary Payment Frequency

Where the employment agreement specifies payment timing, follow the agreement.

However, the gap between salary payments cannot ordinarily exceed: one month.

For a worker employed for less than one month, remuneration must generally be paid within 3 days after completion of work, while casual workers should be paid immediately after completion.

Employment Contract Checklist

• Identify correct employment type

• Employee identification

• Position and duties

• Start/effective date

• Place of work

• Basic remuneration

• Allowances

• Benefits

• Working hours

• Overtime rules

• Leave

• SSF/social security

• Probation

• Internal regulations

• Confidentiality/IP where appropriate

• Termination provisions

• Employer/employee signatures

• Give employee a copy

• Maintain personnel file

Common Errors

Employing workers without written agreement

Calling a continuing job “temporary” merely to avoid regular-employment rights

Using a probation period longer than six months

Contracting below statutory minimum remuneration

Assuming an appointment letter and employment agreement must always be two separate documents

Further guidance and practical checks

The employment document should accurately reflect the real employment relationship. Courts and labour authorities can look beyond the title of the contract to the nature of the work.