Nepal Labour Act 2017 – Labour Outsourcing and Deemed Employment
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Chapter 11 of the Labour Act regulates arrangements in which a licensed labour supplier provides workers to a main employer. Labour may only be supplied for prescribed work or services and through a licensed supplier. The labour supplier is generally responsible for employing and paying the supplied workers, while the main employer has statutory obligations concerning lawful engagement, workplace treatment, occupational safety and compliance monitoring. Most importantly, workers may be deemed employees of the main employer where they are obtained through an unlicensed supplier or are supplied in violation of the Act. This prevents organisations from using unlawful outsourcing structures to avoid direct employment obligations.
1. Regulated Labour-Supply Structure
The Labour Act defines a labour supplier as a person or body licensed under Chapter 11 to supply labour.
A labour supplier may supply workers to a main employer for prescribed work or services. The Act restricts labour supply to activities permitted under the statutory outsourcing framework.
The supplier must obtain and maintain the required licence. Separate licensing requirements may apply according to the nature or geographical scope of the supplied services.
Toelichting
A company cannot lawfully operate a labour-supply business merely by describing itself as a consultancy, contractor or digital intermediary. If its real activity is supplying people to work for another organisation, Nepal’s labour-supply rules may apply.
2. Responsibilities of the Labour Supplier
The labour supplier is responsible for concluding employment contracts with supplied workers and providing the remuneration and benefits required by law.
The supplier must not charge supplied workers fees or commissions for obtaining their work. It must maintain the required records and comply with its licensing and reporting obligations.
A supplier cannot avoid its statutory responsibilities merely because the worker performs daily activities at the main employer’s workplace.
Toelichting
The intermediary is not simply a payment channel. A licensed labour supplier is the employing entity and must provide the workers with the legally required employment conditions. Workers should not have to pay the supplier for access to assignments.
3. Obligations of the Main Employer
The main employer must obtain supplied workers from a licensed labour supplier and employ them consistently with the agreement concluded with that supplier.
The main employer must ensure that the supplier provides the workers with the legally required remuneration and facilities. If the supplier fails to do so after being requested, the main employer must notify the Labour Office or Department.
The main employer also has responsibilities concerning occupational health and safety and must not unlawfully discriminate against outsourced workers in workplace services or facilities.
Toelichting
The company receiving the workers cannot simply transfer all responsibility to the intermediary. It must check that the supplier is licensed and that the workers receive the protections required by law.
4. Unlawful Outsourcing and Deemed Employment
Where a main employer obtains workers through a person or company without the required labour-supplier licence, the workers may be deemed employees of the main employer.
The same consequence may apply where supplied workers are engaged contrary to the statutory restrictions governing outsourced work.
The Labour Office can investigate non-compliance and issue appropriate orders. Additional penalties may apply to unlawful labour-supply activities.
Toelichting
An organisation that uses an unlawful intermediary can become the workers’ direct employer by operation of law. The intermediary structure therefore does not necessarily protect the client from employment responsibility.
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