A labour audit in Nepal systematically examines whether organisations comply with the country’s labour laws and regulations.

It is important for ensuring employees’ fair treatment, workplace safety, and adherence to the legal framework set by the Government of Nepal.

In Nepal, labour audits assess various aspects of employment such as working conditions, remunerations, rights, and occupational health and safety.

Its main agenda is to protect workers’ benefits, provide fair labour practices, and encourage a harmonious workplace.

They are mandatory for organisations that have ten or more employees. The audit covers safety measures, working conditions, wages, benefits, and social security compliance.

The Department of Labour and Occupational Safety (DoLOS) oversees the audit process and ensures employers meet their legal obligations.

It helps verify and correct non-compliance issues, reducing the risk of legal problems and penalties. It supports organisations in improving labour management and building a positive reputation in the business community.

Why Is a Labour Audit Mandatory in Nepal?

Labour Audit is important for every business operating in Nepal for several major reasons. Here are these major reasons:

• Employee Comfort – When a it is done regularly, employees are treated more fairly, which makes them happier and more likely to stay with the company.
• Corporate Reputation Management – According to the Labour Act 2074, a company is responsible for labour audits, which improves company image with workers, customers, and investors.
• Legal Compliance – It ensures that businesses follow Nepal’s labour laws, which helps avoid legal trouble, fines, or penalties.
• Corporate Social Responsibility – Conducting a labour audit demonstrates that a company prioritises doing the right thing and treating people well.
• Continuous Improvement – Regularly auditing helps businesses find ways to treat their workers better and manage them more effectively.

What Are the Legal Frameworks?

In Nepal, the legal framework for labour audit is primarily based on the Labour Act 2074 and its related regulations. These laws set the rules and responsibilities for employers and employees, guiding how labour audits should be conducted.

Here are the key legal frameworks:

1. Labour Act, 2074

The Labour Act 2074 is the main law governing labour relations in Nepal. The Labour Act 2074 has a provision relating to labour audit in Section 100.

In addition to this provision, the rights and duties of employers and workers must be ensured. This Act also includes provisions on mandatory labour audit requirements for organisations with ten or more employees, as outlined in Section 102.

2. Labour Rule, 2075

The rule provides detailed guidelines for the implementation of the Labour Act. Rule Number 56 mentions the labour audit. Based on this rule, key things should be known:

• Annual Labour Audit Deadline – Every employer must conduct a labour audit by the month of Poush each year, and the audit must follow the guidelines set by the Minister of Labour.
• Conduct the Audit – A managerial employee or an external labour expert can do a labour audit. If false details are found, the Department of Labour may fine the individual or the organisation’s management up to Rs. 20,000.
• Submit the Report – A copy of the labour audit report must be submitted to the Labour Relations Committee. Specific entities must also submit the report to their respective regulatory bodies, such as banks and financial institutions to the Nepal Rastra Bank, insurance companies to the Insurance Board, and non-governmental organisations to the District Administration Office.

3. Social Security Act 2074

This Act establishes the Social Security Fund, outlines contribution requirements, and details the social security benefits for employees.