What is included in a final settlement when you quit a job in Nepal?

Your final-settlement cheque from the employer covers unpaid salary up to your last working day, encashment of accumulated home and sick leave, and any accrued profit bonus you have earned. Retrenchment compensation (one month's basic per year of service) applies only if the employer lays you off, not when you resign voluntarily. Your PF, SSF, gratuity, and CIT balances are separate — they sit in those funds and follow their own withdrawal or transfer rules.

How long does an employer have to pay final dues after you resign in Nepal?

Within 15 days of separation, the employer must clear all remuneration and entitlements owed, whatever the reason for leaving. If they fail to settle within 15 days, the law requires them to keep paying your remuneration as if you were still employed until the dues are cleared. That clock is your leverage if HR drags its feet.

How is leave encashment calculated when you leave a job in Nepal?

Under the Labour Act 2074, home (annual) leave accrues at one day for every 20 days worked and accumulates up to 90 days; sick leave accrues at 12 days a year and accumulates up to 45 days. On separation, your accumulated home and sick leave are paid as a lump sum calculated on your last basic salary — not gross pay. So 90 accumulated days on a Rs 40,000 basic is roughly Rs 1,20,000.

How much notice do I have to give before resigning in Nepal?

Notice scales with tenure under Section 144 of the Labour Act 2074: at least 1 day if you have worked under 4 weeks, at least 7 days for 4 weeks to a year, and at least 30 days (one month) once you have worked over a year. Skip the notice and the employer can deduct the equivalent from your dues; the obligation runs both ways.

Is gratuity or a PF lump sum taxed when you leave a job in Nepal?

For payments from an approved retirement fund, the higher of Rs 5,00,000 or 50% of the total payment is tax-free, and the remainder is taxed at 5% as final TDS. Unapproved funds are taxed less favourably. These thresholds sit in the Income Tax Act 2058 but can be revised by the annual Finance Act, so confirm the current FY 2082/83 figures with your HR or the IRD before counting on a number.

Do I get retrenchment compensation if I resign?

No. Retrenchment compensation — one month's basic salary per year of service under Section 145 — is only payable when the employer initiates the separation through a layoff. If you resign voluntarily, you still get your unpaid salary, leave encashment, accrued bonus, and your fund balances, but not retrenchment compensation. The provision also does not apply to enterprises with 10 or fewer employees.

Final settlement Nepal: PF, gratuity, leave on quitting

A reader messaged me the week she resigned. HR had said, breezily, "we'll process your final settlement." She nodded in the meeting and then realised she had no idea what that sentence meant. How much was coming? When? Was her gratuity in it? Could they just... not?

Most Nepali employees leave a job without ever checking the math on the cheque they are owed. The number is rarely huge, but it is rarely trivial either, and a chunk of it gets quietly skipped if you do not ask. Here is exactly what your employer owes when you walk out, and how to make sure all of it lands.

Two different pots of money

The first thing to untangle: "final settlement" is two separate things, and people conflate them.

Pot 1 — the employer's cheque. Money your employer holds and must hand over: salary you have earned but not been paid, your accumulated leave converted to cash, and any bonus you have a right to. This is what the 15-day clock covers.

Pot 2 — your fund balances. PF (or SSF), gratuity, and CIT sit in dedicated funds, not in the employer's bank account. When you leave, these follow portability and withdrawal rules, not the final-settlement timeline. The switching-jobs guide covers what happens to each balance on resignation day; the short version is that they are yours, but the access rules differ by fund.

Mixing these up is how people end up thinking their settlement is smaller than it is, or expecting a gratuity lump sum in a cheque that no longer works that way.

What goes in the cheque (Pot 1)

Unpaid salary

Everything earned up to your last working day, including the part-month if you leave mid-cycle. On a Rs 60,000 gross, ten working days into the month is roughly Rs 20,000. Obvious, but it is the line most often "rounded" against you, so check the day count.

Leave encashment

This is the line people forget they are owed. Under the Labour Act 2074:

Leave type	Accrual	Accumulation cap
Home (annual) leave	1 day per 20 days worked (~18/year)	90 days
Sick leave	12 days/year	45 days

On separation, Section 49 says your accumulated home and sick leave are paid as a lump sum "by the last basic remuneration being drawn." Two things to hold on to: it is basic salary, not gross, and it is last basic, so a recent raise works in your favour.

A worked example. Basic Rs 40,000, so daily basic is about Rs 1,333. You have banked 60 days of home leave and 30 of sick leave:

Accumulated leave:   60 home + 30 sick = 90 days
Daily basic:         Rs 40,000 ÷ 30    = Rs 1,333
Encashment:          90 × 1,333        ≈ Rs 1,20,000

That is three months of basic salary you would simply forfeit if you never asked. Track your leave balance before you resign, not after.

Accrued bonus

Under the Bonus Act 2030, a profit-making enterprise sets aside 10% of net profit as employee bonus. If you worked at least half the fiscal year, you qualify, and leaving does not erase a bonus you have already earned for the qualifying period. It forms part of your dues. Bonus is normally paid within eight months of the fiscal year-end, so depending on when you leave, this piece may arrive later than the rest of the settlement.

The 15-day rule is your leverage

The single most useful fact here: the employer must clear all dues within 15 days of separation, regardless of why you left. And if they miss it, the penalty has teeth — they must keep paying your remuneration as though you were still on payroll until the settlement is done.

So "we'll process it whenever" is not a thing. If a settlement stalls past 15 days, you are legally still accruing salary. Putting that politely in an email tends to speed things up.

Notice, both directions

Resigning cleanly protects the cheque. Notice scales with how long you have been there, under Section 144:

Length of service	Minimum notice
Under 4 weeks	1 day
4 weeks to 1 year	7 days
Over 1 year	30 days

If you skip notice, the employer can deduct the equivalent pay from your dues. The rule cuts both ways: if they end your employment without notice, they owe you the notice-period pay. One more detail worth knowing: if the employer sits on your resignation letter, the standard reading by Nepali employment lawyers is that it is treated as accepted once 15 days pass with no response. That rests on practice rather than an explicit statutory clause, but the upshot is you are not easily trapped in a job by an unanswered resignation.

Pot 2: what happens to PF, gratuity, SSF, CIT

These are not in the cheque, but they are yours, so here is the quick map. The switching-jobs post has the full detail.

Gratuity. Under the Labour Act 2074, gratuity is now pre-funded monthly at 8.33% of basic into the SSF, and it is eligible from day one with no minimum service. It is no longer the old lump-sum-on-exit formula. The gratuity explainer covers the pre/post-2078 cutoff.
PF (non-SSF workplaces). The classic 10% from you, 10% matched by the employer, sitting in the EPF. Withdraw on leaving, or leave it to earn.
SSF. Total contribution is 11% employee + 20% employer = 31% of basic, funding retirement plus medical, accident, and dependent schemes. It behaves like a pension — your history follows your SSF number rather than paying out as cash on every resignation.
CIT. Voluntary, and leaving employment is a qualifying event to withdraw. Whether to take it or carry it is the CIT-vs-PF-vs-SSF question.

The tax bite on the lump sum

When fund balances do pay out as a lump sum, tax applies, and it is gentler than your salary TDS. For an approved retirement fund, the higher of Rs 5,00,000 or 50% of the payment is tax-free, and only the remainder is taxed at 5% as final TDS. So a Rs 8 lakh approved payout shields Rs 5 lakh, and the remaining Rs 3 lakh is taxed at 5%, a Rs 15,000 hit.

Unapproved funds are treated worse: an unapproved contributory payment is taxed at 5% on the gain, and a purely employer-funded one at 15% on the whole amount. The unpaid-salary portion of your settlement, meanwhile, is ordinary employment income and taxed at your normal slab, the same mechanics as your regular salary TDS.

Resign vs laid off: one big difference

Almost everything above is identical whether you quit or get let go. The one divergence is retrenchment compensation. Under Section 145, an employee laid off by the employer (with at least a year of service) gets one month's basic salary per year of service. Resign voluntarily and that line is zero. The provision also exempts enterprises with 10 or fewer employees.

This matters in negotiations. If your exit is really an employer-driven separation dressed up as a "mutual resignation," you may be signing away a month-per-year payout. Know which one you are actually in before you sign anything.

A checklist before you sign the exit papers

Pull your leave balance in writing. Home plus sick, up to the 90 and 45 caps. This is the most-skipped line.
Confirm the part-month salary day count.
Ask about accrued bonus for the fiscal year, and when it pays.
Decide PF/CIT: withdraw or carry. Don't close accounts reflexively just because you are moving.
Get the 15-day commitment in an email. It is the law; having it in writing speeds it up.
Check whether your exit is a resignation or a retrenchment. The difference is a month-per-year of basic.

What you actually need to know

The cheque is salary + leave encashment + bonus. Leave encashment alone can be two or three months of basic. Ask for it.
15 days is a hard deadline, and missing it means the employer keeps paying you. Use that.
Fund balances are a separate question with their own rules, and lump sums from approved funds are lightly taxed (Rs 5 lakh free, then 5%).

Quitting well is partly an emotional thing and partly an arithmetic one. Get the arithmetic right and the cheque is usually bigger than HR's first number. Park the proceeds somewhere sensible while you job-hunt — this is exactly the moment a real emergency fund earns its keep. Specific situation you want sanity-checked? Email parjanya57@gmail.com.

This post is part of the Nepal Money Basics guide — the retirement and social-security section.