Payroll, Social Security Fund and Labour Audit Compliance in Nepal

Payroll Should Start From Basic Remuneration

SSF contribution is based on the worker's basic remuneration, rather than automatically on every allowance included in gross salary.

SSF's published guidance defines contribution-eligible income by reference to basic remuneration before tax deduction.

This distinction also matters for:

• overtime;

• annual grade;

• festival expense;

• gratuity/PF history;

• certain termination calculations.

Employer and Worker Registration

The formal-sector SSF process requires: Employer registration → Contributor/worker registration → SSF ID / account activation → Monthly contribution filing/payment

SSF's live system provides separate Employer Registration, Employer Portal and Contributor Portal functions.

The official employer/worker listing procedure remains separately published by SSF.

Monthly Contribution Deadline

Contribution amounts must generally be deposited within: 25 days after the end of the month in which contribution-eligible remuneration became payable.

Section 4(4) of the Contribution-based Social Security Act requires the contribution to reach the Fund within 25 days after the month in which contribution-eligible income becomes payable, subject to an applicable official extension. Section 7 concerns determining contribution rates.

Example

Salary/contribution for Shrawan:

SSF contribution ordinarily should be deposited within 25 days after the end of Shrawan, subject to any official extension notice.

SSF can issue exceptional extensions—as it has done for particular contribution months—but those should not be treated as the permanent rule.

Late SSF Contribution

Section 9 of the Contribution-based Social Security Act allows overdue contributions to be recovered with 10% interest. Its extraordinary-circumstances relief requires the statutory application and Fund decision; it is not an automatic waiver.

The 2082-added section 9(6) also requires the listed employer to provide the specified benefit-equivalent amount where a worker has an accident or dies during the unpaid contribution period after the statutory deadline. Late remittance therefore creates exposure beyond an unmatched payroll deduction. Record each employee contribution and reconcile it to the Fund statement promptly.

Labour Act PF and Gratuity Framework

The Labour Act separately provides the underlying employment-benefit framework, including:

Provident fund

10% deduction from basic remuneration plus an equal 10% employer amount.

Gratuity

Employer contribution equal to: 8.33% of basic remuneration from commencement of employment.

Where the worker is covered under the contribution-based SSF scheme, payroll should apply the integrated SSF framework correctly rather than treating every legacy component as a separate duplicate payment.

Salary TDS

Payroll must also calculate employment-income tax.

For FY 2083/84, employment tax should be determined using the current annual tax computation, with eligible deductions and SSF treatment considered before allocating TDS through monthly payroll.

Payroll therefore needs to reconcile: Gross employment income

1. − applicable deductions
2. annual taxable income
3. annual tax
4. monthly TDS.

SSF contribution and salary TDS are separate obligations.

Minimum Remuneration

Use the responsible Ministry or Department minimum-remuneration notice for the actual pay period and worker category. The published general notice identifies the regime effective 1 Shrawan 2082 and excludes tea-estate workers, whose notice is separate. Keep the operative rate table with the payroll working.

Minimum remuneration does not replace other statutory benefits. Check the prescribed basic component, allowances, grade, festival expense, contributions, leave and overtime separately. Do not treat a minimum monthly wage as the employer's complete employment cost.

Annual Grade

After completing one year of service, a worker is entitled to an annual grade increase equal to at least: one-half day's basic remuneration per month under Section 36.

This should be incorporated into payroll prospectively when the service milestone is reached.

Festival Expense

Every worker is generally entitled each year to festival expense equal to: one month's basic remuneration for the principal festival selected under the statutory framework.

A worker with less than one year of service receives the amount proportionately.

This is distinct from a discretionary performance bonus.

Leave and Overtime

Payroll must also capture:

• 1 home-leave day per 20 days worked;

• 12 sick-leave days annually;

• maternity/paternity benefits;

• accumulated-leave encashment;

• overtime at 1.5× basic remuneration rate;

• compensatory leave.

These items affect both current payroll and termination settlement.

Payroll Master Data

For each worker, maintain:

• employee ID;

• PAN;

• SSF ID;

• employment category;

• joining date;

• basic remuneration;

• allowances;

• grade;

• festival expense;

• overtime;

• leave;

• SSF;

• salary TDS;

• bank account;

• termination date where applicable.

Monthly Payroll Cycle

CMA recommends:

Step 1

Update employee master.

Step 2

Record attendance/leave/overtime.

Step 3

Calculate basic remuneration and allowances.

Step 4

Calculate grade/benefits.

Step 5

Calculate employee SSF contribution.

Step 6

Calculate employer SSF contribution.

Step 7

Calculate salary TDS.

Step 8

Determine net salary.

Step 9

Pay salary.

Step 10

Deposit/file salary TDS.

Step 11

Deposit SSF contribution.

Step 12

Reconcile payroll ledger, bank, IRD and SSF.

Example — SSF Contribution

Monthly basic remuneration: NPR 50,000

Worker contribution — 11%

NPR 5,500

Employer contribution — 20%

NPR 10,000

Total monthly SSF contribution

NPR 15,500

This equals 31% of basic remuneration.

The employee's net salary deduction is NPR 5,500; the employer bears its separate NPR 10,000 contribution.

Labour Audit Is Mandatory

Section 100 of the Labour Act requires every establishment to conduct a Labour Audit and prepare the prescribed report.

Rule 56 requires the Labour Audit to be completed by: Poush end each year.

The Department of Labour currently publishes the prescribed Labour Audit report form and Schedule 10 format.

Who Can Conduct the Labour Audit?

Rule 56 permits the audit to be conducted through:

• a management-level employee of the establishment; or

• another person/institution associated with the labour field,

according to the prescribed standard.

This is therefore not necessarily the same person as the statutory financial auditor.

What Does Labour Audit Cover?

Schedule 10 reviews areas including:

• employment agreements/appointment letters;

• foreign-worker permits;

• child labour;

• employment categories;

• minimum remuneration;

• remuneration/payment;

• working hours;

• overtime;

• leave;

• PF/gratuity/social security;

• occupational safety;

• labour suppliers;

• disciplinary matters;

• termination;

• other Labour Act/Rules compliance.

The official Schedule 10 begins by testing employment agreements and foreign-worker/child-labour compliance and continues through broader labour obligations.

Where Is the Labour Audit Report Kept/Sent?

The establishment must retain the Schedule 10 audit report and make it available to the labour inspector.

Rule 56 also requires copies to be provided to:

• the Labour Relations Committee; and

• the relevant regulator/licensing authority.

Examples identified by the Rules include: Banks/BFIs → Nepal Rastra Bank

Insurance → insurance regulator

NG Os → relevant District Administration Office

Other establishments → licensing/operating authority.

False Labour Audit Information

Rule 56 expressly provides for consequences where the Labour Audit contains false information, including action against the person preparing the false report and the establishment manager.

The audit should therefore not be treated as a simple annual checkbox exercise.

Employer Compliance calendar — planning guide

Monthly

• payroll

• salary payment

• salary TDS

• SSF contribution

• attendance/leave/overtime reconciliation

Annually

• minimum-wage review

• grade review

• festival expense

• leave balance/encashment

• employment-file review

• Labour Audit by Poush end

• tax/payroll reconciliation

Event-driven

• new employee

• resignation

• termination

• maternity

• foreign-worker permit

• salary revision

• business closure/restructuring

Payroll + SSF Checklist

• Employment agreement

• PAN obtained

• SSF registration

• Correct basic remuneration

• Minimum wage satisfied

• Annual grade updated

• Festival expense calculated

• Overtime calculated

• Leave balances updated

• Employee SSF 11%

• Employer SSF 20%

• Total SSF 31%

• Salary TDS calculated

• Salary paid

• TDS deposited/filed

• SSF deposited within statutory period

• Payroll reconciled to bank

• Payroll reconciled to GL

• Labour Audit completed by Poush end

• Labour Audit report retained/submitted as applicable

Common Errors

Calculating SSF on gross salary instead of the applicable basic remuneration base

Deducting employee SSF but failing to deposit it

Ignoring the employer's 20% contribution

Treating SSF and salary TDS as the same deduction

Failing to update grade after one year

Treating festival expense as optional

Failing to conduct Labour Audit by Poush end

Using the statutory financial auditor's report as a substitute for Labour Audit

Further guidance and practical checks

Payroll compliance is an integrated process involving Labour law, SSF and Income Tax. A payroll system should generate one reconciled compliance trail rather than separate disconnected calculations.