NepalNepal is one of the best-value engineering markets in South Asia, with a growing pool of developers who already work remotely for foreign companies and a timezone (UTC+5:45, and yes, the 45 is real) that overlaps a US-East morning. The surprise for founders is that formal employment there carries one of the heavier statutory loads in the region: a 20% employer contribution to the Social Security Fund, plus a mandatory festival bonus.
Here's what you actually need to know.
Quick facts
| Nepal | |
|---|---|
| Currency | Nepalese Rupee (NPR) |
| Standard work week | 48 hours, 6 days |
| Payroll frequency | Monthly |
| Employer statutory cost | ~20% on top of gross salary |
| Minimum wage | NPR 19,550/month |
| Probation | Up to 6 months |
| Notice period | Tiered by tenure: 1 to 30 days |
| 13th month pay | Mandatory (Dashain festival bonus, ~October) |
| Employees paid in | NPR, required by law |
First decision: contractor or employee?
Most US startups start with contractors in Nepal, and the market supports it: a meaningful share of Kathmandu's developer community already invoices foreign clients and manages its own tax affairs.
The misclassification line is the standard one. Fixed hours, exclusivity, and day-to-day management make someone an employee under Nepal's Labour Act regardless of what the agreement says, and the unpaid Social Security Fund contributions accumulate as liability that surfaces in diligence. The rough test: if you'd be uncomfortable with them taking a second client, they're probably an employee. At that point you convert them through an employer of record (EOR) or your own Nepali entity.
Paying contractors in Nepal
The compliance basics:
- Collect a W-8BEN before the first payment. It certifies the contractor is a non-US person, so you generally don't issue a 1099. Confirm with your accountant.
- Sign a real contract with scope, rate, IP assignment, and termination terms.
- Pay in USD or NPR, their choice. Contractors can invoice in either. The default alternative, an international bank wire, costs $25-45 per transfer plus an FX spread hidden in the rate, and Nepal is a corridor where those spreads run wide.
Shor pays Nepali contractors over local rails at a flat disclosed 2% FX margin, for $19/month per contractor. Contracts, W-8BEN collection, and invoicing are built in.
Hiring full-time employees
Employer-side statutory contributions on top of gross salary:
| Contribution | Rate (employer side) | Notes |
|---|---|---|
| Provident fund (via SSF) | 10% | Part of the Social Security Fund contribution |
| Gratuity (via SSF) | 8.33% | Roughly one month's salary per year of service |
| Social security insurance | 1.67% | Medical, accident, and dependent protection components |
The three lines above are collected together as the Social Security Fund (SSF) contribution: 20% employer plus 11% employee, remitted monthly. Unlike India or Pakistan, where headline rates apply to slices of salary, Nepal's SSF math is straightforward and the headline number is close to reality: budget roughly 20% on top of gross.
On top of that, the Dashain festival bonus is the market's 13th month: one month's salary, typically paid in October before the Dashain festival. Budget compensation as 13 monthly payments per year.
Employees must be paid in NPR, monthly. The minimum wage is NPR 19,550/month, well below what any professional hire earns, so it rarely binds in practice. Statutory rates change; confirm current figures with your payroll provider.
Leave and benefits
- Annual leave: 18 days
- Sick leave: 12 days at full pay
- Maternity leave: 14 weeks, with the first 60 days paid
- Paternity leave: 15 days, paid
- Public holidays: ~13 days
Beyond statute, competitive offers in Nepal commonly add private health insurance top-ups, transport, meal, and communication allowances, and performance bonuses.
Ending employment
Nepal is not at-will. Notice is tiered by tenure:
| Tenure | Notice required |
|---|---|
| Under 1 month | 1 day |
| 1 month to 1 year | 7 days |
| Over 1 year | 30 days |
Severance runs at roughly one month's salary per year of service after the first year, and it doesn't apply when someone resigns voluntarily without notice. Termination for cause needs documentation, investigation, and written notice; done carelessly, it invites disputes. The final settlement covers accrued salary, gratuity, the provident fund balance, and outstanding leave payout, with SSF contributions remitted through the last day.
Documents we'll collect from your employee at onboarding
Citizenship certificate (the standard national ID), PAN (tax number, which can be registered during onboarding if the employee lacks one), and a Nepali bank account for salary. EOR onboarding typically takes 10-16 business days, driven by SSF enrollment and tax registration.
What it costs through Shor
- Contractors: $19/month each
- Full-time employees (EOR): $299/month each, with SSF enrollment, payroll tax withholding, festival bonus administration, and filings handled
No setup fees, and the FX margin is a flat disclosed 2%. The pricing calculator shows the full Nepal math including SSF and the Dashain bonus.
Next steps, depending on where you are: the EOR pricing comparison puts published provider prices side by side, and EOR vs. your own entity has the breakeven math for when a local entity starts to win. To see Nepal against the rest of our coverage, the reference tables compare employer costs, notice periods, and public holidays across every country here. Already with another provider? Switching EOR providers covers the traps worth planning around.
FAQ
Can I pay Nepali employees in USD? No. Salary must be paid in NPR. Contractors can invoice in USD or NPR, and many prefer USD.
What is the Dashain bonus? A festival bonus of one month's salary, typically paid in October before Dashain, Nepal's biggest festival. Treat it as a mandatory 13th month when you budget an offer.
How fast can someone start? Contractors: as soon as the contract is signed and the W-8BEN is in. EOR employees: typically 10-16 business days, driven by Social Security Fund enrollment and tax registration.
What does an employer of record in Nepal cost? With Shor, $299/month per employee, plus the statutory employer contributions (roughly 20% of gross salary) that any employer pays. Deel and Remote charge $599-699/month for the same coverage.