Labour Audit in Nepal (2026): Compliance Guide
1. Background
The Department of Labour and Occupational Safety (“Department”) published a notice on 18 July 2025 making the submission of the Labour Audit (“Labour Audit”) mandatory for all eligible enterprises in Nepal. This article outlines the key matters relating to its preparation and submission of the Labour Audit.
2. Purpose of the Labour Audit
The Labour Audit is prepared to ensure effective implementation of existing labour laws and to maintain healthy industrial relations across enterprises. It safeguards the rights and interests of workers while contributing to overall production and productivity growth. Additionally, it aims to increase compliance with labour-related policies, reduce worker complaints, build employee loyalty, and lessen the burden of government monitoring and inspection. Ultimately, the audit holds enterprises accountable for implementing labour policies and legal provisions.
3. Governing Laws
The Labour Audit in Nepal is governed by following instruments:
a) Labor Act, 2017 (2074) (“Labor Act”)
b) Labor Rules, 2018 (2075) (“Labor Rules”)
c) Labor Audit Standard, 2018 (2075) (“Labor Audit Standard”)
4. Concerned Authority
The Department of Labour and Occupational Safety is the regulatory body responsible for overseeing the Labour Audit process in Nepal.
5. Enterprises Required to Submit the Labour Audit
All companies, private firms, partnership firms, cooperative organizations, and associations registered under prevailing laws for the purpose of carrying out business activities, whether profit-oriented or not.
However, the Audit is not required to be submitted by the Nepal Army, Nepal Police, Armed Police Force Nepal, National Investigation Department, and civil service.
6. Labour Auditor
An enterprise may conduct its Labour Audit through either an internal or external auditor.
a. Internal Auditor:
An internal auditor is a managerial level employee already working within the enterprise.
b. External Auditor:
Any person or organization outside the enterprises must be conducted by a person or organization with the following qualifications.
Labour Auditor: Individual
i.Must be a Nepalese citizen
ii. Must have completed at least a Bachelor’s degree.
iii. Must have a minimum of two years of managerial experience in any industrial or organizational establishment.
Labour Auditor: Entity
i. Registered pursuant to the existing laws;
ii. Entity whose objectives and Working Area includes the matters relating to Labor;
ii. The individual deployed by the Entity to conduct Labor Audit must meet the qualification and eligibility of Individual Labor Auditor (as mentioned above).
7. Responsibilities of the Labour Auditor
The Labor Audit Standard has set out the responsibilities of Labor Auditor. The Labor Auditor is responsible towards the followings:
a. Preparing the Labour Audit Report based on true and accurate facts of the enterprise and submitting it to the enterprise;
b. Completing the audit within the stipulated time without being influenced by any external factors or undue pressure; and
c. Maintaining confidentiality and not disclosing any information obtained during the audit to any third party.
8. Responsibilities of the Enterprise
Pursuant to the Labour Audit Standard, it is the primary responsibility of the enterprise to conduct the Labour Audit and submit the Audit Report to the concerned authority. Furthermore, the enterprise is required to fulfil the following responsibilities:
a. Provide true and accurate information and details relating to the activities of the enterprise to the Labour Auditor;
b. Provide remuneration and other benefits to the Labour Auditor,
c. Provide any other assistance as required while conducting Labor Audit; and
d. Provide one copy each of Labor Audit Report at concerned Department, Labor Relations Committee, Labor Inspector and the concerned regulating authority as mentioned below:
i. Banks and Financial Institutions-Nepal Rastra Bank (“NRB”)
ii. Insurance Companies-Nepal Insurance Authority
iii.Non-Government Organizations-Concerned District Administration Office
iv. Other Enterprises- Concerned approving or regulating authority
9. Submission Deadline
Every enterprise must complete and submit its Labour Audit annually by the end of Poush, which falls around mid-January each year.
10. Penalty for Non-Compliance
Under Rule 56 of the Labour Rules and Section 163(2)(b) of the Labour Act, the Department has the authority to impose a fine of up to NPR 20,000 on the individual who provided the false information, as well as on the management of the enterprise responsible for conducting the audit.