How to Handle Contract vs Permanent Employees in Nepal – Legal Differences
As the number of employees grows every year it becomes more difficult to manage Contract vs Permanent Employees in Nepal. All new employees have new legal responsibilities. Some staff are hired to work on one project, some to work for an extended period of time. These groups are treated differently in several crucial aspects under the Labour Act, 2074. Each individual must be monitored by the employer regarding appointment letters, working hours, leave, tax and social security. This is something that can be done on paper or in a bunch of disjointed spreadsheets and it’s easy to make a mistake. When the leave balance is missed or the wrong leave is deducted it can easily be a labour dispute.
Even small mistakes can hurt the relationship between management and employees. Hence, a lot of business houses in Nepal are now adoptingHR Software in Nepal to maintain accurate records. Attendance tracking, leave management, payroll and reports are all combined in a single tool like Hajir HR. The focus of this article is to discuss the legal distinctions between the two types of employees. You will also experience how a cloud-based system can leverage those differences each day. The tips are applicable to schools, hospitals, hotels, banks, and NGOs. Always make final legal decisions with a qualified labour lawyer.
Why Contract vs Permanent Employees Need Different Handling
A permanent employee works on an ongoing basis and will not have a definite end date. A contract employee is someone who works for a definite time or a specific job. The one distinction has implications for the rules, benefits, and exit.
Often, employers accidentally combine the two groups. A contract worker can wind up with an incorrect leave balance. The permanent worker may be paid while not deducted from taxes. These problems can be avoided if there are clear categories and they are applied by a reliable system.
How the Labour Act 2074 Classifies Employees
There are two labels but not all of them are used in Nepal. According to theLabour Act 2074, workers can be divided into regular, work based, time bound, casual and part time employees. Regular staff are most similar to what is commonly known as “permanent” staff. Work-based employees complete a particular task or project. Time bounded employees: They are employees who work on a specific time period. Casual workers do some work for brief periods of time. Part-Time workers do less than the standard weekly hours of work.
So, a person who is comparing Contract vs Permanent Employees is actually comparing regular employees with employees who have a time limit or are based on work. The first legal step is the correct naming of the right category in the appointment letter.
Legal Differences Between Contract vs Permanent Employees in Nepal
Appointment Letter and Employee Records
Employers must provide every staff member with a written appointment letter. The letter should include the work location, salary, benefits, working hours, and employment duration. Additionally, employers can place regular employees on probation for up to six months.
Hajir HR stores appointment letters within each employee profile and its document management module. As a result, HR teams can manage onboarding and offboarding from one place.
Moreover, HR teams can connect each appointment letter with the relevant employee and employment category. This approach keeps employee records organized and makes document management more efficient.
Attendance, Working Hours, and Overtime
The working day is 8 hours and the week is 48 hours. Overtime is to be paid at a higher rate, and it must be voluntary. These rules are applicable for Contract and Permanent employees.
Employers should be able to rely on accurate attendance records for compliance purposes. Hajir allows check-ins via WiFi, QR codes, remote marking, geo-fencing and biometric integration. Attendance policies, overtime and adjustments can be customized in the system. Activity tracking using GPS can track field teams.
Leave and Holiday Entitlements
The most complete leave rights are granted to regular employees. They include weekly holidays, public holidays, home leave, sick leave, maternity leave and paternity leave. Some benefits may build-up to maximum limits provided for by the Act. Contract, part-time and casual staff may be entitled to proportional leave or limited leave, as applicable.
That’s where leave management software can save real effort. Hajir supports leave rules and master leave policies by category. Carry forward of leave, half-day leave, substitute leave and holiday calendars are all accommodated. Leave may be automatically applied to paid and unpaid leave, minimizing manual mistakes.
Payroll, TDS, SSF, PF and CIT.
Payroll remains one of the areas where errors can create significant costs. Therefore, employers must process payroll accurately and pay employees on time. Employers must also calculate income tax, provident fund, and Social Security Fund deductions according to applicable laws.
In Nepal, the Social Security Fund operates through contributions from both employers and employees. Both parties contribute a specific percentage of the employee’s salary. Eligible workers can receive benefits from these contributions, including provident fund and gratuity benefits. However, specific eligibility criteria and service requirements apply. Therefore, employees should contact their employers for the latest eligibility requirements and applicable rules. Employers should also review current regulations before processing Social Security Fund benefits.
Hajir’s module for payroll includes TDS,SSF, PF, CIT, and insurance. Also included are allowances, bonuses, loans and advances, and leave deduction. The same data can be used to create payslips and salary certificates. The important thing to keep in mind is that the payroll software that Nepal employers can rely on should link attendance to payroll. Hajir does this by using the auto-calculation of salary based on real-time attendance.
Termination and Exit
A contract with a certain time period will terminate after its expiration period. If the termination of employment was indeed for a valid reason, then no dismissal procedure is required. There is greater protection for regular employees. A written charge, an opportunity to explain and a fair investigation of misconduct are required.
Wrongful dismissal may result in the obligation to restore an employee to their job or compensation claims. In those situations, the employer’s records will keep them protected. Attendance logs, warning and grievance records may all be used to bolster the business. Hajir’s employee management module incorporates tools for warnings, complaints, andHR policy.
How Hajir HR Software Helps You Manage Both Groups
Hajir is acloud-based Human Resource Management platform for Nepalese businesses. It integrates employee data, attendance, leave, shifts, payroll and reports into one system. It is accessible via a web portal and Android and iOS mobile apps.
Roles and permissions enable owners to manage access to sensitive data. Staff members can access a self-service system to view their attendance, request leave and access payslips. That openness cuts down the amount of questions to the HR desk on a daily basis.
It has a quick setup and data migration is free. Support is available six days a week and 12 hours a day. Plans are suitable for organisations of all sizes, from 5 to several thousand employees. For more information about the modules and to reserve a demo visit hajirhr.com.
Reports That Support Audits and Compliance
Records are the most important when in dispute or inspection. Hajir provides over thirty reports for attendance, leave, payroll and tax. Some of the examples are employee attendance summary, Annual leave report, Tax detail report, tax calculation details, TDS projection etc. and audit reports. Leave provision calculation assists the finance team when planning liabilities. Late & early counts is a way that managers can fairly assess punctuality.
These reports help to demonstrate that contract and permanent staff were treated properly. They also support leadership in developing budgets using facts and figures.
Best Practices for Employers Using HR Software
Before posting the job, break down each job role. Match the category with the actual work type. Work should not be done “over the top” by recurrent brief renewals. This is a pattern that could lead to a claim for regularity.
Next, set up separate leave andpayroll rules for each category. Maintain all of the appointment letters as a digital record. Check the contracts quarterly for renewals and exits, and make plans well in advance. Provide policy training to train managers for applying policies fairly to both groups.
Last but not least, keep your system up to date if the law or minimum wage changes. Have templates reviewed annually by a labour law expert. It is much cheaper to settle a small dispute at the beginning than settle a big one afterwards.
The next step is to know the details of the contribution. Our next article on SSF and provident fund in Nepal will cover employer & employee rates, the deadlines of the deposits, and how you can set up your payroll for proper processing of monthly salary in Nepal.
Note: This article is not legal advice, it is for general information. The law and rates are subject to change, so please seek advice from an experienced Nepali labour lawyer.
Frequently Asked Questions (FAQ)
It means welcoming different people, treating them fairly, and making sure everyone feels genuinely included at work.
Yes. The Labour Act, 2074 requires employers to issue a written appointment letter. There should be a clear mention of terms of work.
Yes. Hajir allows you to define theleaves, payroll and attendance rules per category. This will allow you to respect the terms of each group.
Yes. The module for payroll includes TDS, SSF, PF, CIT and insurance. However, employers should always check against the authorities to ensure that current contribution rates are still being paid.
Yes. There's a reason why Hajir is built for small, medium and growing businesses. It can range from a few staff to thousands.
Hajir employs role based access and secure storage to ensure employee information is protected. Each type of data is visible to the owner alone.
The right to make an offer of employment for a contract employee at any time. If you are repeatedly renewing for ongoing work, it can also result in a claim for regular status.