Foreign Workers and Labour Permits in Nepal

Labour Permit vs Visa

These are separate requirements.

A foreign person may require:

Immigration status / visa

under immigration law and

Labour permit / labour approval

under the Labour Act.

Therefore:

Having a business/work visa does not automatically establish Labour Act compliance.

Likewise, obtaining labour approval does not itself create immigration status.

The two processes should be coordinated.

Preference for Nepali Workers

Section 22 allows foreign skilled workers principally where the necessary skilled worker cannot be obtained from among Nepali citizens.

Before employing the foreign worker, the employer generally must seek the required skilled Nepali worker through: advertisement in a national-level daily newspaper

and demonstrate that:

• no suitable Nepali applications were received; or

• no suitable Nepali worker could be selected.

The advertisement evidence forms part of the labour-permit file.

Advertisement Exception

The Labour Act contains an exception to the newspaper-advertisement requirement for specified foreign technical/experts coming to Nepal under investment agreements involving:

• Government ministries/departments;

• Investment Board;

• wholly/partly Government-owned entities;

• other specified official bodies,

where the relevant Government/ministerial approval exists.

Do not apply this exception merely because the employer has foreign investment.

Labour Permit Application

Rule 7 and Schedule 1 prescribe the employer’s labour-permit application. The Rule requires the relevant advertisement, a certified passport copy with at least six months validity, the worker’s background, employer tax-clearance evidence, recruitment-selection evidence, a Nepali skills-transfer/replacement plan and Home Ministry consent where required.

These are the statutory starting points. Before filing, confirm the Department’s current submission method and any case-specific document request. The requirements for a particular exemption or extension depend on the route used.

Typical Supporting Documents

The exact current file should be checked against the Department's current directive and application system.

Typical documents can include:

• employer registration;

• PAN;

• sector/business licence;

• proposed employment agreement;

• foreign worker passport;

• CV/qualification;

• technical experience;

• newspaper advertisement;

• evidence of Nepali recruitment attempt;

• Government/sector recommendation where applicable;

• visa/immigration information;

• photographs;

• prescribed application.

Do not rely on an old checklist without checking the current Department requirements.

Foreign Worker Also Requires Labour Approval

Section 23 separately provides that the foreign worker must obtain the prescribed labour approval to work in Nepal except where an exemption arises from:

• diplomatic immunity; or

• treaty/agreement with Government of Nepal

under the statutory conditions.

Employer-side and worker-side requirements should therefore be reconciled.

Foreign-invested Enterprises

Section 24 contains special record/permit treatment for certain foreign citizens working in:

• foreign-invested establishments;

• foreign-aid projects;

• other specified organisations,

including executive heads and the prescribed number/category of workers.

This should be coordinated with:

• Department of Industry;

• foreign-investment approval;

• business visa;

• immigration;

• NRB;

• tax/PAN.

Keep investment approval, labour permission, immigration status and payroll records together, while checking each requirement separately.

Knowledge Transfer / Nepali Replacement

An employer permitted to employ a foreign worker is required to make arrangements to:

develop skilled Nepali workers and progressively replace the foreign worker with Nepali workers.

This obligation is expressly contained in Section 22(5).

Employers should therefore maintain:

• counterpart/training plan;

• skills-transfer evidence;

• Nepali employee development records.

Employment Terms

Foreign workers cannot be given remuneration/service conditions below the Labour Act/Rules minimums.

Section 27 requires the:

• remuneration;

• service conditions; and

• benefits

to be at least the statutory minimum and otherwise follow the employment contract.

Employment Contract Period

Section 27 provides that the agreed employment-contract term applies; if no term is specified, the contract lasts three years. This contract rule does not itself fix the labour-permit duration.

Under Rule 11, the ordinary initial maximum is five years for a specialised skilled technical foreign worker and three years for another foreign worker, subject to the Home Ministry consent period where applicable. The exceptional Rule 11(3) route allows up to two further years with the required Ministry approval.

The first amendment, published on 25 Shrawan 2080, added Rule 11(4). Where a suitable Nepali replacement still cannot immediately be obtained and continued foreign employment is necessary, the Department may grant further extensions with the related Ministry’s recommendation and Ministry approval: up to three years first, then up to two years, with five years as the combined maximum under that additional route.

Apply under Rule 12 at least thirty days before expiry. An application relying on Rule 11(4) must include the related Ministry’s recommendation. These are conditional powers, not automatic renewal entitlements.

Tax

The foreign employee also requires income-tax analysis.

Questions include:

• Nepal tax residence?

• days in Nepal?

• Nepal-source employment income?

• salary TDS?

• tax treaty?

• PAN?

• foreign tax credit?

Employment permission and income-tax residence are separate concepts.

Work Without Permit — Penalty Risk

The Labour Act permits penalty where an employer employs a foreign citizen without the required labour permit.

The statutory enforcement provision permits a fine of up to: NPR 200,000

based on the number of foreign workers and an additional: NPR 5,000 per person per month

where the foreign worker continues to be employed after the initial penalty.

This makes pre-employment compliance important.

Foreign Worker Compliance Sequence

Need foreign expertise → Attempt Nepali recruitment where required → Document advertisement/search → Prepare foreign-worker employment agreement → Obtain regulator/FDI recommendation where applicable → Apply to Department of Labour → Obtain labour permit/approval → Coordinate immigration visa → Obtain PAN/payroll compliance → Maintain knowledge-transfer programme → Renew permits as required.

Foreign Worker Checklist

• Confirm foreign worker is genuinely required

• Check whether Nepali recruitment advertisement is required

• Publish advertisement where required

• retain recruitment evidence

• Verify qualifications/experience

• Prepare employment contract

• Obtain sector recommendation

• Obtain foreign-investment documentation where relevant

• Complete labour-permit application

• Pay prescribed fee

• Obtain permit

• Coordinate visa

• Obtain PAN

• Calculate payroll/TDS

• Maintain knowledge-transfer records

• Monitor permit expiry

• Renew before expiry

Common Errors

Treating business visa as substitute for labour approval

Hiring the foreign person first and applying later

Skipping Nepali recruitment advertisement without qualifying for an exception

Ignoring skills-transfer obligation

Assuming a three-year employment contract automatically means a three-year labour permit

Ignoring Nepal salary-tax obligations

Further guidance and practical checks

Foreign-worker compliance requires coordination among Labour, Immigration, foreign-investment authorities and IRD. These processes should be planned before the employee enters payroll.