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Employment Relations Amid Coronavirus 

With the slow progression of COVID-19 across the country, employers are facing immediate pressure in multiple areas of the workplace. Considering the potential impact of COVID-19 on the labour market, employers have started to review and re-evaluate their current policies of leaves, occupational health and safety, lay-off and retrenchment.

In order to address the immediate risk of virus exposure in the workplace, employees have to use the measures available under the laws of Nepal to ensure relief to employers and guarantee minimal benefits to employees. In addition, the Government’s intervention in the employer- employee relation vide the lockdown and relief package announced through Gazette Notice dated March 22, 2020 and dated March 29, 2020 has vested additional obligations on the employers.

Government Response to COVID-19 in the Employment Sector
The Government of Nepal has imposed lockdown throughout the country and has ordered employers in the private sector to make necessary arrangements for providing leave to the employees, other than those involved in essential services such as production of medicine, foods, drinking water and fuel.

Likewise, the Government has declared relief package to people affected by the lockdown whereby employers of the formal sector are required to provide salary to employees on their own.

Prevention of Contagious Diseases in the Workplace

As per the government’s orders, employers are mandated to make necessary arrangements for prevention and control of contagious diseases in the work place through Occupational Health and Safety policies. Specifically for entities involved in providing essential goods and services, the government has mandated that the employers maintain social distancing, use masks, sanitisers and disinfectants.

Further, employers have an obligation to prevent the employees from the workplace if s/he has been diagnosed with contagious diseases such as COVID-19 and grant them sick leaves during the term of treatment.

However, the employee may have to take unpaid leave if the statutory sick leave is insufficient for the treatment of disease.

Suspension of Work

As per government’s orders, entities that are not engaged in providing essential goods and services have been forced to suspend operations of workplace. However, employers are still required to provide employees with their salary for one month. It is pertinent to note that although the employment laws of Nepal do not address “work from home” practice and a long-term paid leave in situation like the spread of COVID-19, the employer and employee may mutually upon consultation agree on such arrangement.
Since there is uncertainty in the timeframe for lockdown and the extent of the COVID 19 outbreak, there is no clarity as to how long the employer provides salaries to the employees, while work is under suspension.

Understandably, this has created a financial burden on the entities involved in all sectors, specially tourism, hospitality, aviation and manufacturing business as they have been facing financial difficulties due to the disruption of business operations.

The current situation has created an escalating challenge in workplace operation and thus are looking for various alternative options to manage their workforce. Many entities are currently assessing the option of lay-off or retrenchment as provided by the employment laws of Nepal to cut-off the workforce either temporary or permanently under certain circumstances.

Temporary Cut off or Lay off

The Labour Act 2017 has provisions for temporarily suspending or laying off employees under special circumstances. The special circumstance covers, among other things, lack of funds or inability to reach the workplace or carry out the work or operate the workstation arising out of situations beyond control. Employees who are laid off are entitled to half of their remuneration for the period of lay off. Unlike retrenchment, there is no requirement for approval or consultation with the Trade Union or Labour Relation Committee to lay off the employees up to 15 days.

However, if the lay off period exceeds 15 days, consultation with Trade Union or Labour Relation Committee is required.

Permanent Cut off or Retrenchment

The Labour Act 2017 also permits the termination of service of the employees by way of retrenchment which may be invoked in defined situations. These situations include financial difficulty, or any reasons due to which the entity is fully or partially closed.

The implementation of retrenchment requires a consultation with the Trade Union or Labour Relation Committee and prior notice to the employees is required for their termination. There is also a definite order of employees for retrenchment. The employees retrenched from service are entitled to retrenchment compensation in addition to all other terminal benefits. The employees retrenched from service also get priority for the job if the organisation has vacancy within two years.

Measures Taken Around the World

Countries such as Ireland, Singapore and South Korea have made sick leave available for the self-employed, while in the UK, statutory sick pay will be provided for the eligible diagnosed or self-isolating individuals, payable from the first day instead of the fourth. Employment retention is being guaranteed in China where the government has issued a notice to ensure that the contracts of migrant workers are not terminated in the case of illness or containment measures. The coverage of unemployment benefits through Social Security Scheme has been expanded in the Philippines from 30,000 to 60,000 workers projected to lose their jobs following possible layoffs or business closures.


Government intervention has created a deadlock situation causing financial burden to employers as well as risk of losing employment to employees. With an escalating rise in unemployment and subsequent effects on the economy on a large-scale, there is a pressing need for policy intervention and coordinated measures from the employer, employee and the government to guarantee employee retention, ensure social protection, and support incomes of employees, while also balancing employee interests with those of the employer.

Prakritee Yonzon is a graduate from the London School of Economics and Political Science. Currently Prakritee works in the corporate team as well as arbitration team at Pioneer Law Associates.

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