Gratuity & Severance Pay Estimator Nepal

Section 53 of the Nepal Labor Act 2074 mandates that every employer must allocate an amount equal to 8.33% of the employee's basic monthly salary each month towards gratuity starting from the employee's first day of service. This equates to exactly one month's basic salary per completed year of service.

No. Under the repealed Labor Act 2048, an employee had to complete 3 years of service to qualify for gratuity. Under the current Labor Act 2074, gratuity accrues from Day 1 of employment, with no minimum tenure restriction.

For enterprises enrolled in the Social Security Fund (SSF), the 8.33% gratuity allocation is included inside the employer's 20% contribution (specifically in the Old Age Pension & Gratuity scheme). The fund pays the accumulated gratuity directly upon retirement or separation.

If an employer retrenches employees due to financial distress or business contraction under Section 145, the employer must pay a lump-sum severance compensation of one month's basic salary for every year of completed service, in addition to all accrued gratuity and leave balances.

Under Section 144: (1) Service under 4 weeks: 1 day notice, (2) Service 4 weeks to 1 year: 7 days notice, (3) Service exceeding 1 year: 30 days notice. In lieu of notice, payment equivalent to the salary of the notice period must be provided.