Overtime, allowances and the Labour Act: what legally counts toward your pay in Nepal

A friend at a trading firm worked until 9pm through the whole import season and never saw an extra rupee for it. When he asked, his manager said the salary was "all-inclusive." It is one of the most common lines in Nepali workplaces, and it is mostly wrong. The Labour Act 2074 is specific about what counts as your pay, what overtime is worth, and how many extra hours an employer can even ask for.

The confusion runs the other way too. An offer arrives padded with allowances that make the gross look generous, while the basic, the number that actually drives your retirement and your Dashain bonus, stays small. Understanding which parts of a pay packet are load-bearing is the difference between a good offer and one that just looks good.

What the law counts as "remuneration"

Before the overtime math, the definitions. The Act's Section 2 sets two terms that the rest of your pay hangs off:

• Remuneration is basic remuneration plus allowances. This is your gross.
• Basic remuneration is the base wage plus any annual increment you earn after completing a year of service.

The increment matters over time: a raise that lifts your basic compounds into your SSF, gratuity and bonus, while a raise dressed up as a new allowance does not. The negotiation lever this creates is covered in how to ask for an increment. For now, hold the distinction: basic is the engine, allowances are the trim.

The allowances on your slip, and which ones actually count

Allowances are where pay packets get padded. The common ones in Nepal, and how each is treated:

Allowance	Typical purpose	Taxable?	Part of basic?
Dearness (महँगी भत्ता)	Cost-of-living top-up	Yes	No
House rent (HRA)	Housing	Yes (no break, unlike India)	No
Transport / fuel	Commute	Usually yes	No
Communication	Phone, data	Usually yes	No
Festival expense	Annual Dashain payment	Yes	Calculated on basic

The pattern is the point. Almost every allowance is fully taxable, so it inflates the income your TDS is calculated on, yet none of it counts toward the basic base that drives your retirement and bonus. The dearness allowance is the clearest case: in the minimum wage it is Rs 7,380 of the Rs 19,550 package, real cash in hand, but excluded from the basic that your SSF and gratuity run on.

So a job offering Rs 50,000 split 60/40 basic-to-allowance is worth more in retirement terms than one splitting it 40/60, even though both pay the same on the first of the month. Read the split, not the total.

Overtime: 1.5x basic, and the hour caps

Section 31 is unambiguous: an employer "shall pay the labour remuneration at a rate of 1.5 times the basic remuneration receivable during regular work hours" for overtime. Note the base again. The multiplier applies to basic, not gross, so the allowance-heavy packet that already shortchanged your SSF also shrinks your overtime rate.

A worked figure, scaling the gazette's own monthly-to-hourly ratio (it sets a full-time hourly basic of Rs 63 against a monthly basic of Rs 12,170, roughly 193 hours a month):

Monthly basic:        Rs 30,000
Regular hourly basic: 30,000 ÷ 193   ≈ Rs 155
Overtime rate (1.5x): 155 × 1.5      ≈ Rs 233/hour
10 hours of overtime: 233 × 10       ≈ Rs 2,330

That overtime figure is a calculation; the exact hourly divisor shifts with the working days in a given month. The legal rate, 1.5 times basic, does not.

There is a ceiling on how much overtime can even be worked. Section 30 caps it at 4 hours a day and 24 hours a week, up from 20 hours a week under the old 1992 Act. Hours beyond that cap are not legitimate overtime, whatever a manager calls them.

Hours and the weekly day off

Overtime only exists relative to a standard week. Section 28 fixes that at 8 hours a day and 48 hours a week, with a half-hour rest break after five continuous hours of work. Anything past the daily or weekly figure is overtime territory.

You are also owed a paid weekly day off, conventionally Saturday, at full remuneration (Section 40). The statutory wording of that section is awkwardly drafted and reads ambiguously, but the operative rule applied across workplaces and legal summaries is one paid day off per week. Work scheduled on that day, like work past the daily cap, is extra and compensable rather than free.

Can your employer force overtime?

Not without limit. The Act splits the question across two sections. Section 29 prohibits an employer from compelling a worker to do overtime, the one narrow exception being a genuine emergency that threatens life, safety or health, or risks serious loss, and even then the Section 30 caps still apply. Section 30 lets the employer "cause" overtime, but only inside the 4-hour-daily, 24-hour-weekly caps. So the honest reading is neither "overtime is purely optional" nor "the boss can keep you as late as the work demands." It can be asked for and it is bounded, and it must be paid at 1.5 times basic when it happens.

The "all-inclusive salary" line my friend heard tries to collapse all of this into one number. The law does not let it. Overtime is a separate, capped, premium-rate entitlement that a flat monthly figure cannot quietly absorb.

When the pay doesn't add up

Unpaid overtime, sub-floor wages and unlawful deductions run through the same remedy as any other Labour Act breach. Under Section 163, the Labour Office can order the employer to pay the shortfall plus compensation of up to twice the amount withheld.

The weak point in an overtime claim is almost always proof. An employer with no record, or a convenient one, can simply deny the hours. Keep your own log of start and end times, ideally something timestamped, because the final-settlement math and any overtime dispute both come down to what you can show. Then file at the local Labour Office, which opens negotiation and can issue a binding decision.

What you actually need to know

• Overtime is 1.5 times basic, capped at 4 hours a day and 24 a week. The multiplier is on basic, not gross, and Section 29 bars an employer from forcing it. An "all-inclusive salary" cannot legally swallow uncapped extra hours.
• Allowances are taxable but don't build your entitlements. Dearness, house rent and transport allowances inflate your taxable pay while sitting outside the basic base that drives SSF, gratuity and festival expense. In any offer, read the basic-to-allowance split, not just the gross.
• The standard week is 8 hours a day, 48 a week, with a paid weekly day off. Work past those limits is compensable. If overtime or floor pay goes unpaid, Section 163 lets the Labour Office order the shortfall plus up to double it, but only if you can prove the hours.

If an offer is heavy on allowances or your overtime keeps going unpaid and you want a second read on the numbers, email parjanya57@gmail.com with the basic, the allowance lines, and the hours.

This post is part of the Nepal Money Basics guide — the understand-your-money section.