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The Labour Act 2017 came into force from September 4, 2017. Recently the Labour Rule 2018 has been adopted by the Government of Nepal. The Act and the Rule aims to change the dimensions of labour and employment in Nepal by introducing various provisions. However, its effective implementation is yet to be seen. Among various new provisions and procedures introduced by the Act and the Rule, provisions regarding employment of foreign national or expatriates is important to take into consideration. It is self-evident that foreign organisation, INGOs, foreign investment companies have been contributing for the social and economic progress of the company. Creating favourable legal environment and retaining them therefore is one of the major challenges for the government. However, observing the present scenario in all level of governmental institution, the laws and policies framed and administrative hurdles are discouraging and demotivating to pull foreign capital in Nepal. Among various factors, stringent laws and procedure related to foreign nationals hiring as skilled worker is one of them as remarked by investors and lawyers. In this connection, this interview with Advocate Saroj K Ghimire, Supreme Court of Nepal and Managing Partner of Himalayan Lawyers & Associates, who is also one of the quality practitioner of law in Nepal analyses the legal mechanism and procedures of hiring expatriates in Nepal along with immigration matters.
Could you highlight major provisions introduced by new labour law and rules in Nepal? How far they are progressive?
The Labour Act 2017 (2074) was authenticated by the President of Nepal on September 4, 2017 and came into force immediately. Recently the Government of Nepal adopted Labour Rule 2018 (2075) by explaining provisions and procedures for effective implementation of the Act. The Labour Act and the Rule has come up with various new provisions and has broadened the scope of their applicability. The Act confirms its applicability to any company, private firm, partnership firm, co-operatives or association or other organizations established, incorporated, registered or constituted pursuant to the prevailing laws for the purpose of operating any industry, profession or service with or without the motive of profit. The Act shall have the application to all enterprises regardless of number of workers including domestic workers. It is also applicable to representatives or workers hired by a foreign enterprise which is registered in a foreign country and is undertaking promotion of sales and market activities in Nepal. The Act and the Rule has provisioned about the licensing for outsourcing entities.
The Labour Act also confirms minimum standard to be provided with regard to the work and has classified various types of employees including regular, work-based, time-based, casual, part-timer, interns and apprentice. The Act has made employment agreement as mandatory and workers may be hired from outsourcing agencies by defining responsibility of employer and out sourcing agencies. The festival bonus and additional one day leave for women workers on International Women’s Day are note-worthy. Substitute leave, paternity leave of Fifteen days full pay, maternity leave of Fourteen weeks pre and post-delivery with full pay for Sixty days and Thirty minutes additional break time for feeding children below 3 years at work place and child care facilities in an organisation having more than 50 workers has encouraged female employees by giving regard to reproductive rights too. Compulsory insurance for accidental and medical insurance is another important provisions introduced. Apart from this, detail provisions regarding hiring of foreign national, annual labour audit, social security including provident fund and gratuity benefit from the date of joining to the employer, detail provisions regarding safety and security, termination on the ground of sexual harassment, collective bargaining and transfer of employee are additional qualities of the Act and Rule that aims to make employment environment more progressive and protective..
As you mentioned that foreign national could be employed, can all entity employ foreign national as its workers or employee?
Although the exact data of foreigners working in Nepal is not available, the Department of Labour estimates that there are around 550,000 non Nepali citizens working in Nepal, of which 500,000 are from India. However in reality only few thousands of foreign national have obtained work permit from the Labour Department. Thus the Labour Act and Rule has come up with detail provisions and procedures of hiring foreign national by an employer in Nepal. The Act and Rule accepts that hiring of expatriates is not a general rule but an exception. It means that all entity may not employ foreign national as they employ Nepali citizen. The Act mentions that employer shall not employ non- Nepali citizen without obtaining prior permission from the Labour Department. As this provision is newly introduced by the Labour Rule, if an employer finds necessary that non Nepali citizen requires to be employed due to lack of skilled Nepali citizen, the employer should first obtain permission from the Labour Department stating the grounds for the necessity of hiring skilled non Nepali citizen. Nevertheless the employer may employ skilled or highly skilled non Nepali citizen subject to unavailability of human resources in Nepal after publication of advertisement in national level daily newspaper.
As you said the permission from the Labour Department is necessary for hiring foreign national, could you explain about this in brief?
The Labour Act and the Rule has introduced new provision regarding obtaining of labour permission by the employer from the Labour Department before hiring foreign national. As the Labour Department is the governing body for employment matters, any employer which finds necessary to hire skilled foreign national as expatriate employee shall have to obtain labour permission from the Labour Department by submitting an application containing copy of advertisement consisting required position, number, major works to be executed by the employee, minimum education achieved, experience and trainings, selection procedure framed by the employer, and any other documents required by the Labour Department. The Rule also prescribes that the advertisement should be published in national daily and shall be kept in Employment Portal of Ministry of Labour, Employment and Social Security. The application should also contain notarised copy of Passport with Sixty days valid visa, Bio data of expatriates, tax clearance certificate of the employer, details of application submitted by Nepali citizens if any along with selection procedure, work plan to be substituted by Nepal in place of expatriates and work approval if required from Ministry of Home Affairs. Upon satisfying the documents submitted the Labour Department grants permission for hiring skilled foreign national.
Can the foreign national become eligible to work upon obtaining labour permission by the employer?
No, foreign national cannot work by this permission only. This permission is granted to the employer for initiating hiring process. Once, the permission is granted by the Labour Department, the foreign national should make an application to the Labour Department for work permit subject to the work permission granted by the Labour Department to the employer. The foreign national may submit application with notarised copy of passport with Six months valid visa; notarised copy of educational, training certificate, experience letter; work permission letter obtained by the employer from Labour Department to employ foreign national; and work approval letter issued by Ministry of Home Affairs.
Is it necessary that foreign national has to submit work permit application by travelling to Nepal?
No, it is not necessary for foreign national to travel up to Nepal and apply for the work permit. The Labour Act and Rule has introduced that an application could be made from Nepali Embassy in abroad or Consular office of Nepal. The foreign national may also make an application for work permit via Nepal Embassy in abroad or Consular Office and the Embassy or Consular Office is obliged to send an application within 7 days of receipt to the Labour Department in Nepal.
Is there any formality the foreign national should observe in Labour Department and is there any application fee?
As the Labour Department is concerned authority for granting work permit, if the Labour Department thinks fit, it may conduct an interview to the foreign expatriates to know in detail about the work experience or may observe and conduct skill test should the Labour Department finds necessary before issuing work permit.
Regarding fee applicable for work permission against the employer and work permit against the employee, the fee depends on the number of tenure foreign national is going to be hired. As per the Labour Rule, if foreign employee is going to be hired for 6 months the government fee would be Fifteen Thousands Nepali currency which is approximately One Hundred Fifty US Dollar and if its more than 6 months the fee would be Twenty Thousands Nepali currency which is approximately Two Hundred US Dollar.
Is there any maximum tenure foreign national are allowed to work in Nepal?
Yes. Tenure of work permission or work permit generally may not exceed more than the tenure confirmed by the Ministry of Home Affairs while issuing work approval for an employee. For clarity, if foreign nationals Passport valid date is December 30, 2018 and the Ministry of Home Affair has given Work Approval until November 15, 2018 the Labour Department generally does not provide Work Permit beyond November 15, 2018. As per the Labour Act, maximum term of employment for highly skilled technical expatriates may be 5 years and for other skilled expatriates may be 3 years. Notwithstanding anything I mentioned above, maximum tenure for expatriates who has been working for education, social, science and technology, non-profit making entity, entity contributed for social benefit, national welfare and people’s welfare may be granted for 2 years additional work permit on their work permit expiry as I mentioned earlier.
The employer may apply for extension of employment tenure of expatriates. However, such application shall be submitted prior to 30 days of visa expiry with work performance standard/appraisal of expatriates, work approval if required by Ministry of Home Affairs, progress report relating to replacement of expatriates by Nepali national and any other documents as deemed necessary by Labour Department.
Is there any mandatory provision to hire maximum number of expatriates? How the Government of Nepal monitors them?
Yes, apart from any foreign investment entity or entity supported by foreign entity which has an agreement with Government of Nepal and has mentioned the number of hiring foreign national may employ foreign national to that number or entity that receives diplomatic immunities or entity which do not require work permit to obtain based on treaty may employ foreign national as per their necessity, however for other employer maximum number of employing foreign national is proportionate to 5% of total employee.
Regarding monitoring for foreign national working in Nepal the Labour Department requires an employer to maintain the Record for expatriates in its register. If an employer employees expatriates without keeping record, the Labour Department may require the employer to pay double fee against failure of keeping records by employer and may terminate employee with immediate effect.
Apart from that foreign national working in Nepal upon obtaining work permit shall be monitored by Labour Department. If it is found that foreign national have been engaged without keeping record, the Labour Department may release /terminate the foreign national form the work with immediate effect.
Can the Labour Department cancel the work permit?
Yes, the Labour Department may cancel work Permission or Work Permit in case if work approval is cancelled by Ministry of Home Affairs. The Labour Department may cancel on other grounds including the failure by expatriates in submitting tax return, any fees or fines imposed by governmental authority or fail to pay any governmental fees. If an expatriate is convicted on criminal offence or employing expatriates has threat to national security or if expatriates fails to observe duty, code of conduct and works against public decency and morality, the Labour Department may cancel the work permit.
The Labour Act and Rules appears to govern employer and employee relation, what is the mechanism of hiring consultant or self-employed?
Though there is no clarity about the employment of self-employed, however in practice self-employed are hired as expert or consultant. The concept of self-employed is not much discussed and many lawyers are also seen to be in dilemma that self-employed has no material difference then employee working for enterprises. However, in reality there is vast differences. A self-employed is separate type of employment not exclusively falls within the scope of Labour Act and Rule rather it is more guided by Contract Act 2000. Any person employed by enterprises to work for it on regular, work or time basis are employee. Employee are kept under payroll and the employer withholds their tax on salary and allowances. Their insurance and social security are confirmed and are given various leave and benefits including bonuses. They are given tools and equipment’s and other facilities by the employer and retires by age or other means. On the other side, self-employed may be sole proprietor, partner or person being employed self-based on his/her qualification, expertise and experience for certain period of time. Such self-employed are hired outside the scope of labor law and are guided by contract law to perform tasks as agreed. Such self-employed are regulated by separate provisions of income tax i.e. tax for consultant and are not provided any social security, benefits, leave or other facilities.
They are hired to perform some defined job based on their skill. Self-employed are responsible for paying their own tax unless employer deducts tax and submits on their behalf. Self-employed are therefore not entitled to employee benefits and work less regularly. They work as and when required depending on the terms of their contract and are paid by the hour or per project. Lawyers, engineers, accountants are self-employed and falls beyond the scope of labor law and more guided by contract law. Hence, the Labor Act and Labor Rule creates employer and employee relation and does not include self-employed, but employment of self-employed is not new and much in common.
What are the other important things that foreign national should observe while their stay in Nepal?
Immigration laws and rules also governs foreign national. The immigration law and the rules further have specified the scope of visa, privileges including consequences of violation of laws and regulation. Except to Indian national no other foreign national are allowed to enter into Nepal without valid passport and visa. Foreign national desiring to work in Nepal are granted non tourist visa. However their work is subject to work permit. Hence, either for pay or voluntary services, work permit is compulsion. Foreign national who works in an INGO or any other commercial organisation in the capacity of country representative, Director or as the expatriates with skilled technical post are granted Non tourist visa.
Is there any mechanism with the Government of Nepal to confirm that foreign national is diligent and has visited Nepal for good purposes?
Yes. The Ministry of Home affairs is the concerned authority to maintain peace and security and allow foreign nationals entry and exit from and to Nepal. As there is likely chances that foreign national may engage in various unauthorized activities, Ministry of Home Affairs always remains alert and requires foreign national to act lawful and not to engaged in disrupting harmonious relations existing between and among the people of various religions, castes, tribes or community of Nepal. It is therefore, Ministry of Home Affairs maintains records of foreign national’s behaviour, activities, actions and monitors about their work, performance and other actions during their stay in Nepal and if it is found that they are involved in unauthorized activities that may cause harm to the sovereignty, integrity and harmonious relation among Nepalese, the Ministry may require foreign national to leave the country immediately or deport them accordingly including criminal prosecution.
Can foreign national engage himself or herself in work activities without work permit?
No, the Immigration office grants various categories of visa to foreign national on their entry at the Immigration office or entry point on arrival. Visa is granted for specific objective and the foreigner holding visa on one category are not entitled to use the visa for other category. The Immigration Act strictly prohibits and restricts foreign national to work whether in consideration for remuneration or not, in any industry, business, enterprise or organization during his or her stay in Nepal. This provision is equally applicable to the spouses of foreign nationals who have entered Nepal using other categories of visa including gratis visa. Hence, the immigration law clearly stipulates that a foreigner who has obtained a visa for one purpose shall not be allowed to carry out any work other than that for which purpose he or she has obtained the visa.
Do you think the provision under various laws and regulation will help in regulating foreign national working in Nepal?
Our administration is still conventional and laws, rules and policies are stringent and conventional and do not adequately facilitates for some this to be done duly and expediently. Newly introduced provisions including permission, records, monitoring and labor audit can be appreciated, however the procedure mentioned including obtaining labour permission is seen to be more restricting then facilitating. Nepal too has skilled workers in many sectors and such provision surely opens the opportunity for Nepali citizen to work in Nepal than migrating for work in abroad. However, if the law provides an opportunity to hire foreign national, it should also make easier provision for valid requisition. In my observation, for one work permit, there requires more than thirty civil servants note/tippani in the file. This is quite lethargic leading to maximum delay. Many times it happens that the tenure of work permit already expires at the time of work permit grant. Hence, unless the existing procedure and additional procedure of obtaining work permission from the Labour Department is not made easier and shorter, malpractice and corruption may go on increasing and frustrating for all.
Advocate Ghimire can be reached at skghimire@himalayanlawyers.com
This interview was taken from nepalipatra.com. There is no any involvement of Nepal Tax Online in preparation of this interview.
