Leave entitlements under Nepal's Labour Act 2074
Home leave, sick leave, public holidays and accumulation caps under the Labour Act 2074 — and why leave balances belong in payroll.
Leave is where Nepali employment law gets specific, and where spreadsheet-based HR most reliably goes wrong. Not because the rules are complicated — they are not — but because they involve accrual, accumulation caps and a payout obligation, and spreadsheets do not track any of those on their own.
Based on the Labour Act 2074 (2017) and the Labour Rules. Statutory minimums only; your own policy or employment contracts may be more generous. Confirm against the current Act or take advice before relying on this for a specific case.
The statutory minimums
| Leave type | Entitlement | Accumulates to |
|---|---|---|
| Home (annual) leave | 1 day per 20 days worked, ~18 days/year | 90 days |
| Sick leave | 12 days/year, fully paid | 45 days |
| Public holidays | 13 days/year (14 for women) | — |
| Weekly leave | 1 day per week | — |
| Maternity leave | 14 weeks | — |
| Paternity leave | 15 days | — |
| Mourning leave | 13 days | — |
The additional public holiday for women is for Teej.
Home leave is accrued, not granted
This is the first thing systems get wrong.
Home leave is not eighteen days handed over on the first day of the year. It accrues at one day for every twenty days worked, which means an employee's entitlement on any given date depends on how long they have actually worked.
The practical consequences:
- A new joiner in Poush does not have eighteen days. They have however much they have earned. Granting a full year's allocation up front creates a liability the organization has not incurred.
- Someone on extended unpaid leave stops accruing for that period, because accrual is tied to days worked.
- A leaver's balance has to be computed to their last working day, not to the end of the year.
If your leave tracking is a sheet with "18" typed into a column each Shrawan, every one of those cases is wrong.
The accumulation caps are hard stops
Home leave accumulates to a maximum of 90 days. Once an employee reaches that ceiling, further leave does not accumulate — it is simply lost.
Sick leave accumulates to 45 days.
Two things follow. First, an employee sitting near the cap should be encouraged to take leave, because they are otherwise working for nothing in that respect. Second, the caps mean your total liability is bounded, which is worth knowing when someone asks what accrued leave is costing the organization.
A system that lets balances grow past the cap is overstating the liability. A system with no cap at all is producing a number nobody can rely on.
The payout obligation
Here is the part that turns leave from an HR record into a payroll number.
Accumulated sick leave, up to the 45-day cap, is payable at basic salary on termination. Accrued home leave is likewise settled on exit.
That makes leave balances a financial liability, not just an entitlement register — and it means the final settlement calculation needs an accurate balance on the last working day, computed from actual accrual, capped correctly, at the right basic salary.
If leave lives in a spreadsheet and payroll lives elsewhere, that number gets worked out by hand at exactly the moment when both parties are paying close attention and the relationship may already be strained. Disputes over final settlement are common in Nepal, and most of them are arithmetic rather than bad faith.
Where absence meets pay
The other interaction is monthly rather than terminal.
An absent day covered by approved leave is paid. An absent day not covered by approved leave generally is not. Determining which is which requires attendance records and approved leave records to be compared, for every employee, every month.
Done by hand, this is the single most tedious part of Nepali payroll, and the most error-prone. Done properly, it is a query: for each employee, take the days with no attendance record, subtract the days falling inside an approved leave request, and prorate the remainder against gross earnings.
That is only possible if attendance and leave are records in the same system rather than two documents someone cross-references.
A practical checklist
If you are auditing how your organization handles leave:
- Is home leave accrued or granted? If someone who joined last month shows eighteen days, it is granted, and it is wrong.
- Are the 90-day and 45-day caps enforced?
- Can you produce an accurate balance for any employee as at any date? This is the question a final settlement or a dispute will ask.
- Does the approval have a recorded decision-maker and timestamp? "It was approved" is not an answer an inspector accepts.
- Does payroll read leave, or does someone type the answer in?
- Are the additional entitlements configured — maternity, paternity, mourning, and the extra holiday for women?
Point six is worth checking specifically. International HR software frequently ships with leave types modelled on wherever it was written, and mourning leave and Teej are not on that list.
The underlying argument
None of this is difficult. It is just detailed, and detail is exactly what manual processes lose.
The Labour Act sets minimums with accrual rules, caps and a payout obligation. Those three things together mean leave is a running calculation, not a static allowance — and running calculations are what software is for.
Ace HR tracks leave requests with recorded approvals, and the payroll run derives unpaid days from real attendance less approved leave. See the leave module · How it deploys