Payroll Management Services in Nepal

Payroll management services in Nepal include major functions like salary distribution for employees, benefit distributions, tax deductions, and salary estimates. Every function conducted for payroll processing by payroll management service providers in Nepal is done strictly under the labor laws of the country. You can also benefit from the common and essential duties they include in their service, like keeping records, withholding taxes, and producing reports for businesses and workers.

As of the current day and age, payroll management services in Nepal have gained major popularity and for the right reasons. The service providers have made the operations as well as profit profit-making process of business owners and companies simpler than ever. In addition to this, the professional help you get from these service providers ensures nothing but quality, affordability, and trustworthiness in each step. Hence, hiring a payroll processing service in Nepal has become all the more advantageous than carrying out similar duties through an in-house team. 

Why Do Businesses Need Payroll Management Services in Nepal? 

Business owners in Nepal have been smarter than ever. Businesses are growing more than ever in the present time. Furthermore, you will feel a sense of competitiveness among every other business or company owner in the country. To gain a competitive edge while being able to focus on their core business objectives, businesses must rely on a payment management service in Nepal. 

Some of the major reasons why you should consider hiring a service provider are as follows: 

• Law Compliance: The payroll management services in Nepal tend to follow the government-set labor laws and tax regulations. This not only makes the whole process simple but also legal.   
• Time Saving: You can assign payroll management duties to a third-party agency and focus on the core objectives of your organization. This way, one can save lots of time that would otherwise be spent managing payroll, which is very time-consuming. 
• Accuracy: Payroll management service providers in Nepal perform each step in every payroll processing duty accurately because of their expertise, as well as their need to cater to the customers. 
• Affordability: Payroll management service in Nepal is very affordable. You can worry less about having to pay the in-house employees for the payroll duties each month, and you need not pay for employee benefits either. 
• Professional Help: Hiring through a payroll management service provider also means that you will get help from an expert. This also means that you don’t have to spend too much time and resources on training an in-house employee. 
• Use of Latest Technology: When you hire a payroll management service in Nepal, you can get the benefit of the latest technology that they use and update just to manage the payrolls and provide an overall top-notch service.  
• Confidentiality: Companies should not have to worry about their data and information being leaked. You will be given a note of assurance through a contract before your work with the service providers begins. 

What are the components of payroll Management?

The main components within payroll management include the following: 

• Salary Calculation: Calculations of basic pay, benefits, and deductions.
• Tax Deductions: Figuring out and deducting income tax under Nepali tax regulations.
• Social Security Fund (SSF) Payments: Coordinating employer and employee SSF contributions.
• Provident Fund: Calculating and monitoring Provident Fund contributions.
• Absence Management: Keeping track of employee leave and making the necessary payroll adjustments. 
• Overtime Calculation: Calculating overtime compensation by labor rules in Nepal.
• Bonus Distribution: Overseeing performance-based incentives and festival bonuses.
• Loan or advance Payments and Management: Managing loan repayments and salary increases.
• Generation of Payslips: Preparing thorough paychecks for staff members.
• Report Management: Producing reports for government officials, auditors, and management.

What are the legal requirements for payroll in Nepal?

The following are the legal requirements for payroll in Nepal: 

1. Labor Act 2074 (2017): Manages terms of employment, working conditions, vacation time, and other labor-related issues.
2. Income Tax Act 2058 (2002): Controls the calculation and deduction of income taxes.
3. Social Security Act 2074 (2017): Requires payments to be made to the Social Security Fund.
4. Bonus Act 2030 (1974): Describes the guidelines for giving staff bonuses.
5. Provident Fund Act 2019 (1962): Controls Provident Fund contributions.
6. Minimum Wage regulations: Ensures adherence to the government’s minimum wage regulations.
7. Electronic Transaction Act 2063 (2006): Oversees digital signatures and electronic transactions in payroll processing.

What documents are needed for payroll processing?

The following are the major documents needed for payroll processing: 

• Personal information forms for employees
• Contracts of employment
• Records of attendance
• Forms for requesting leave
• Forms for tax declaration (PAN cards)
• Details of a bank account
• Registration documentation for the Social Security Fund
• Registration paperwork for Provident Funds
• Forms for overtime approval
• Calculation sheets for bonuses
• Forms for loan and advance requests
• Letters of pay increases 
• Performance evaluation reports

How often does Nepal handle payroll management?

According to the policies set by a majority of companies and even as per the standard regulations of the government, Nepal handles payroll every month. A company hiring daily wage laborers can pay them on a weekly or bi-weekly basis as well. As per The Labor Act 2074 (2017), it is mandatory to pay wages within the first 7 days of the end of a working month. Therefore, companies tend to distribute payments by the end of or by the first week of the next working month. 

What are the costs for services related to payroll management?

The cost of payroll management service in Nepal varies and relies on several factors, such as: 

• Number of employees: Larger the number of payroll processing, the higher the cost will be. 
• Payroll frequency: If the frequency of payroll processing is higher than the standard time, then the cost will also be higher.  
• Payroll difficulty: The more difficult the process of payroll management, the costlier the service. 
• Extra services: If a company is seeking any additional service outside the standard payroll management service package, then the cost will increase. 
• Software employed: The more advanced the payroll management software, the higher the cost will be for payroll management. 
• Reputation and experience of the service provider: Relying on a reputable service provider can be more beneficial for your company than you may think. However, this will also increase the total cost of the payroll processing service. 

Which software is frequently used to process payroll?

Some of the most common software used to process payroll are as follows: 

• Rigo: Payroll software designed for Nepal includes regional tax rules and regulations.
• Tally ERP 9: Accounting software with Nepal-specific payroll components.
• QuickBooks: Software that provides payroll features that are adaptable to the needs of Nepal.
• SAP: Payroll modules in enterprise-level software, which are used by bigger businesses.
• Odoo: Open-source ERP system with customizable payroll features for Nepal.
• Nimble Infosys: A cloud-based payroll system made especially for companies in Nepal.
• PeopleSoft: Software made especially for multinational companies operating in Nepal. 
• Xero: Payroll capabilities in cloud-based accounting software that can be customized for Nepal.

How are taxes handled in payroll management?

Taxes are handled in the following ways during payroll processing in Nepal: 

• Tax slab identification: Using the employee’s annual salary to determine the correct tax slab.
• Calculation of taxable income: This step involves taking into account several deductions and allowances.
• Tax liability calculation: Using the yearly tax prediction to determine the monthly tax liability.
• Tax deduction: Withholding the computed tax amount from an employee’s pay.
• Tax deposit: Giving the Inland Revenue Department (IRD) the deducted tax within the specified period.
• Tax Deducted at Source (TDS) returns: Submit TDS returns to the IRD every three months.
• Annual tax reconciliation: Completing year-end tax calculation and modifications
• Tax certificates: Giving employees yearly tax certificates (Form 21).

What are the benefits of outsourcing payroll management?

The following are the benefits of outsourcing payroll management: 

• Assurance for compliance: You will be given assurance for law compliance when you’re signing a contract with the outsourcing payroll management service in Nepal.  
• Affordability: Unlike having to pay excessively for a certain job position holder, you need to pay a small sum for the outsourcing payroll processing. And, you only pay for what you seek service for. 
• Time efficiency: You will not only be able to save lots of time taken for payroll processing, but your outsourcing agency will also deliver timely service, making the whole collaboration time efficient.  
• Fewer to no chances of errors: There will be zero to least chances of errors when you are relying on an outsourcing payroll management service in Nepal because of their expertise and dedication.  
• Use of latest technology: While it can be impossible to hire or purchase the latest technology every time it launches, you can enjoy the benefits of such latest launches through your service provider.  
• Easy scalability: If there are seasonal fluctuations in the market or if your business does not need immediate services, then the payroll management service in Nepal adapts accordingly. 
• Quality and dependable report management: The report that is submitted to your company at the end of the month is always of high quality and very dependable.

How is employee data protected in payroll management?

The following is how employee data is protected in payroll processing through a payroll management service in Nepal: 

• Data encryption: Storing and transmitting data using cutting-edge encryption methods.
• Control access: Puts strict procedures in place for user permission and authentication.
• Non-disclosure agreements: The agreements that bind payroll service providers are known as confidentiality agreements.
• Secure Data Centers: Data storage in safe, frequently off-site places with physical security measures.
• Frequent audits: Finding and fixing weaknesses through recurring security audits.
• Data backup: To avoid data loss, keep safe backups.
• Limited data sharing: Giving only key individuals access to data.
• Employee consent: Getting workers’ express consent before processing their data.
• Law Compliance: Following worldwide best practices and Nepal’s data protection laws.
• Secure Transmission: Using encrypted channels to transmit data. 

Which reports are generated throughout the payroll management process?

The following are the reports that can be expected to be generated throughout the payroll management process: 

• Salary sheets: an in-depth analysis of each employee’s salary.
• Bank transfer reports: Lists of wage transfers for bank processing. 
• Tax deduction reports: Summaries of the taxes that employees have had deducted.
• Reports on deductions to the Social Security Fund: Information about payments to the SSF.
• Reports on provident funds: An overview of contributions and deductions.
• Reports on leave balances: Accruals and balances for each employee.
• Reports on overtime: Information on the number of hours worked and the compensation received.
• Loan and advance reports: Employee loan and advance summaries.
• Payroll Reconciliation Reports: Reports that compare the current and prior payroll periods.
• Summaries of annual taxes: Annual tax returns for every worker.
• Reports on cost center allocation: The distribution of payroll expenses among various projects.
• Statutory compliance reports: Reports that must be submitted to the government.

How are bonuses and overtime calculated in payroll?

The following are the ways bonuses and overtime are calculated in payroll: 

• Bonus Calculation: The Bonus Act 2030 (1974) has made it mandatory to provide an annual bonus to employees at least once a year. Likewise, at least 10% of the company’s profit should be separated as an employee bonus per year. The most an employee can expect from the company as a bonus would be up to six months’ salary. If you’re operating a company from Nepal, then you will be given a month’s salary as a bonus during Dashain (a major festival in Nepal). 
• Overtime Calculation: If an employee works overtime, then the Labor Act 2074 (2017) favors 1.5 times the regular hourly rate for them. An employee should be allowed to work overtime over 8 hours a day or 48 hours a week, with the maximum overtime period being 4 hours per day and 24 hours per week. 

Connect With Us Today

To know more about payroll management services in Nepal, be sure to get in touch with us at Kantipur Management Private Limited (KMPL) and book our service today!