Basic Salaryआधारभूत तलब
Basic salary is the fixed core of an employee's pay, before allowances, overtime and bonuses. In Nepal it is also the base every statutory contribution is assessed on, which makes it the most consequential number in a salary structure.
Also called: basic pay, basic remuneration, adharbhut talab
Key facts
- PF assessed on
- Basic10% employee, matched by the employer.
- SSF assessed on
- Basic31% in total.
- Gratuity assessed on
- Basic8.33% accrued monthly.
- Overtime rate based on
- Basic1.5 times, per the Labour Act 2074.
Why the basic-to-allowance split is a real decision
Two employees on the same gross salary can cost the company very different amounts and take home different net pay, purely because of how their package is split between basic and allowances. Every statutory contribution in Nepal keys off basic: PF, SSF, gratuity and the overtime rate.
Set basic low and allowances high, and contributions fall, employer cost falls, and the employee's retirement balance grows more slowly. Set basic high, and the opposite happens. Neither is automatically right, but the split should be a deliberate policy rather than an accident of how offer letters were written.
What is not basic
- Dearness, transport, communication and similar allowances.
- Overtime, which is calculated from basic but is not part of it.
- Festival expense and the annual bonus, which are paid on top.
- Reimbursements, which are not remuneration at all.
The consistency rule
Whatever split a company chooses, it has to be applied consistently and stated in the offer letter and the payslip. A structure that varies employee by employee for no documented reason is difficult to defend in an inspection and impossible to reconcile at year end.
Same gross, two structures
Both employees cost the same in gross pay. The contribution base is not the same.
- Employee A: basic 60%, allowance 40% of NPR 50,000
- Basic NPR 30,000
- Employee B: basic 40%, allowance 60% of NPR 50,000
- Basic NPR 20,000
- Monthly SSF on A (31% of basic)
- NPR 9,300
- Monthly SSF on B (31% of basic)
- NPR 6,200
A difference of NPR 3,100 a month in contributions, on identical gross pay.
Basic Salary, answered
The law does not fix a percentage, but the split has real consequences: PF, SSF, gratuity and the overtime rate are all assessed on basic. Most companies set a policy ratio and apply it consistently rather than deciding per offer.
On basic. So are SSF, gratuity and the overtime rate. Allowances do not enter any of those calculations.
Usually yes in the short term, because the employee's own PF or SSF deduction rises with basic. The money is not lost: it goes into their retirement balance and reduces taxable income within the ceiling.
This page explains general practice in Nepal. It is not legal or tax advice, and statutory figures are revised from time to time. Check the current Act, rule or notice before acting on it.
Related terms
- Gross Salaryकुल तलबGross salary is an employee's total earnings for a period before any deduction: basic salary plus every allowance, overtime and taxable benefit. It is the figure most offer letters quote and the one employees compare against.
- Allowanceभत्ताAn allowance is a regular payment made on top of basic salary for a specific purpose, such as dearness, transport or communication. Allowances count as taxable earnings but are excluded from the base used for PF, SSF, gratuity and overtime.
- Provident Fund (PF)कर्मचारी सञ्चय कोषThe Provident Fund is a retirement savings deposit held at the Employees Provident Fund (Karmachari Sanchaya Kosh). The employee contributes 10% of basic salary, the employer matches it with another 10%, and the combined 20% is deposited monthly against the employee's PF number.
- Social Security Fund (SSF)सामाजिक सुरक्षा कोषThe Social Security Fund is Nepal's contributory social security scheme. Employer and employee together deposit 31% of the employee's basic salary every month (11% from the employee, 20% from the employer), and that pool pays out medical, accident, dependent-family and old-age benefits.
- Overtimeअतिरिक्त समयOvertime is time worked beyond the standard eight-hour day or forty-eight-hour week. Under Nepal's Labour Act 2074 it is paid at one and a half times basic remuneration and is capped at four hours a day and twenty-four hours a week.
- Citizen Investment Trust (CIT)नागरिक लगानी कोषThe Citizen Investment Trust is a voluntary retirement savings scheme employees can join on top of PF or SSF. An employee elects to contribute up to 33% of basic salary, and the contribution reduces taxable income within the shared retirement ceiling.
- Cost to Company (CTC)Cost to company is the total annual cost of employing someone: gross salary plus the employer's own statutory contributions, festival expense, and any benefit the company funds. It is always higher than gross, and higher again than net pay.
- Festival Expenseचाडपर्व खर्चFestival expense is a statutory payment of one month's basic remuneration, made once a year at the festival the employee celebrates. It is the Nepali equivalent of a thirteenth-month salary, and it is an entitlement under the Labour Act 2074 rather than a discretionary bonus.
- GratuityउपदानGratuity is a retirement benefit an employer funds throughout an employee's service rather than paying as a lump sum at exit. Under the Labour Act 2074 the employer deposits 8.33% of basic salary every month into the Social Security Fund or an approved retirement fund.
- Minimum Wageन्यूनतम पारिश्रमिकThe minimum wage is the lowest remuneration an employer in Nepal may lawfully pay, fixed by the Government of Nepal on the recommendation of the Minimum Remuneration Fixation Committee. It is published as a basic component plus a dearness allowance and is revised on a recurring cycle.
- Net Payखुद तलबNet pay is the amount that actually reaches an employee's bank account: gross salary minus the retirement contribution, any voluntary CIT election, monthly TDS, and any other authorised deduction such as a salary advance.
- Payslipतलब पर्चीA payslip is the statement an employer issues each pay period showing earnings, deductions and net pay. In Nepal it is the employee's proof of income and of the tax and contributions withheld on their behalf.
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