Festival Allowance in Nepal under Labor Law

Festivals and Nepal

Nepal is a great land of festivals. No matter the time, you’ll be certain to encounter at least one of the country’s many festivals. Although people don’t have holidays for all the festivals, enthusiastic Nepalese still attach great importance to them. Dashain and Tihar being the main festival among many – is celebrated widely by most Nepalese across all religions and traditions.

Festivals in Nepal mainly follow Lunar Calendar so the calendar date is not always fixed for the festivals. Dashain is the biggest and longest annual festival in Nepal. Lasting for 15 days, people would go back home for family reunions. You’ll see colorful kites flying in the blue sky and kids playing on the swings. Tihar is famous for the colorful festive lights, it falls between late October and early November, lasting for five days. During this festival, people worship animals, like crows, dogs, cows and bullocks. It’s also called the Festival of Lights. Holi, Maghe Sangrati, Bisket Jatra, Indra Jatra, Shivaratri, Losar, Christmas and many other festivals are also celebrated with similar enthusiasm.

Festival Allowance under Labor Law

Section 37 of the Labor Act, 2074 entitles an employee to receive festival allowance. Employees can make a written request to the employer to have the festival allowance received during the time of the festival that is celebrated according to his religion, culture or tradition. Where such written requests are not made by the employees to their employer – employers will release the festival allowance at the time of the famous Dashain Festival of Nepal.

The minimum amount of the festival allowance prescribed under Section 37 of the Act is equal to the basic remuneration of one month. However, this does not limit employers from providing festival allowance in excess to that amount.

An employee who has worked for less than one year till the date of the disbursement of the festival allowance shall be entitled to receive the festival allowance on a pro-rata basis. Example: Let’s assume an employee has entered into employment in the beginning of Baisakh month and Dashain Festival falls in the beginning of Ashoj Month. At the time of the disbursement of the Festival Allowances – he had worked for 5 months. So he is entitled to:
A month’s basic remuneration × 5 / 12 as festival allowance.

From Labor Act, 2074

English Text

Section 37: Entitlement to festival expense:
37(1): Each labor shall be entitled to an amount equal to the basic remuneration of one month as the festival expense each year for the festival to be celebrated according to his or her religion, culture and tradition.
37(2): A labor may make a written request to the employer for the payment of the festival expense referred to in Section 37(1) at one time in one fiscal year on the occasion of the main festival to be celebrated according to his or her religion, culture and tradition. In the case absent such a request, the festival expense shall be provided at the time of Dashain festival every year.
37(3): A labor who has not completed one year of service period on or before the day of payment of the festival expense shall be entitled to such expense in proportion to the period of service he or she has completed.

Nepali Text

दफा ३७: चार्डपर्व खर्च पाउने
३७(१): आफ्नो धर्म, संस्कृति तथा परम्परा अनुसार मनाइने चाडपर्वको लागि प्रत्येक श्रमिकले खाईपाई आएको एक महिनाको आधारभूत पारिश्रमिक बराबरको रकम प्रत्येक वर्ष चाडपर्व खर्चको रूपमा पाउनेछ ।
३७(२): उपदफा (१) बमोजिमको चाडपर्व खर्च श्रमिकले एक आर्थिक वर्षमा एकपटक आफ्नो धर्म, संस्कृति, परम्परा अनुसार मनाइने मुख्य चाडपर्वको अवसरमा भुक्तानी लिन रोजगारदाता समक्ष लिखित अनुरोध गर्न सक्नेछ । त्यस्तो अनुरोध नगरेको अवस्थामा प्रत्येक वर्षको बडादशैंमा चाडपर्व खर्च भुक्तानी दिनु पर्नेछ ।
३७(३): चाडपर्व खर्च भुक्तानी दिइने दिनसम्ममा एक वर्ष सेवा अवधि पूरा नभएको श्रमिकले निजले गरेको सेवा अवधिको अनुपातमा चाडपर्व खर्च पाउनेछ ।

Provisions in Previous Labor Laws

Factory and Factory Workers Act, 2016 and Labor Act, 2048 (replaced by the Labor Act, 2074) had no specific provision for festival allowance. Previously such allowances were given as a practice and they were given at the time of the Dashian festival – so they were also known as Dashain Allowance. Now Nepal is a secular country and has more than just a few religions and festivals. The Labor Act, 2074 has specifically provided under Section 37 of the Act the provision regarding the festival allowance. Naturally the celebrations during these holidays and festivals require additional expenses and this allowance is expected to relieve such immediate financial burden of festivals to employees.

Are only the Employees under Regular Employment entitled to Festival Allowance?

Labor Act, 2074 has categorized employment into four broad categories: Regular Employment (नियमित रोजगारी), Work-based Employment (कार्यगत रोजगारी), Time-based Employment (समयगत रोजगारी), Casual Employment (आकस्मिक रोजगारी) and Part Time Employment (आंशिक रोजगारी).

But are employees under all categories entitled to receive Festival Allowance?
Looking at the provision of the provision of Section 37 of the Act – it seems any employee under any form of employment agreement is entitled to receive the festival allowance. The practice is also not so uniform. Generally if the employment term lasts more than a year and the employee is a present employee at the time of the disbursement of the festival allowance – employers in Nepal typically do provide festival allowance to the employees. Some employers do not provide festival allowance to employees under Casual or Part Time employment citing that they are not regular employees of the company. The practice is not quite uniform. But what is the spirit of the law? Generally a monthly remuneration of an employee is indicative of the amount that is able to sustain the monthly living expenses of an employee and during the festival season, obviously, Nepalese do and are expected to spend a little more during the festival season. This is exactly where the concept of festival allowance comes in – to relieve the burden of expenses during the festivities. So it is quite natural to conclude that everyone who has contributed to the company as an employee during the year should be entitled to receive the festival allowance.

However, employers do generally interpret that not all forms of employees should be entitled to the festival expenses. But there doesn’t seem to be any firm reasoning behind this other than the fact that some types of employment start and terminate within a year. But even so the proportional entitlement of the festival allowance should not be denied to the employees. 

Are past employees entitled to Accrued Festival Allowance?

Let’s take an example of an employee who joined at the beginning of the month Baisakh and ended his employment at the end of Chaitra. The festival falls at the beginning of the month of Ashoj. He received a month’s basic salary prorated to 5/12 months at the time of the festival. He worked with the company for 7 months from then until the end of Chaitra. Should he be entitled to the festival allowance at the point of termination or next year’s festival season for those 7 months on prorata basis?

Section 37 of the Labor Act clarifies only how a new joinee at the company should be allocated the festival allowance but not about the past employee who has accrued some months since the last disbursement of the festival allowance. So there may be multiple interpretations here.

Employers tend to support the view that such past employees are not eligible for Festival Allowance as they are no longer an employee of the company. But there are some flaws in this logic. Even a past employee is an employee and Section 37 although not specifically for this situation, but indicatively has provided guidance on accrued festival allowance to be received on “prorata basis”. I think it is not equitable and fair to deny such accrued festival allowance to employees. It could very well be distributed at the point of next festival season or at the point of the termination. The provision under Section 37 doesn’t limit the allowance to only present employees. It defines entitlement so everyone eligible (whether past or present employees) should be entitled to receive this amount.

Following the above example: The employee joins a new job immediately after the past employment. The next year at the place of the new employee he will be entitled to the festival allowance on a prorated basis for 5 months (assuming next festival also falls at the first of Ashoj). Clearly, under Section 37 the employee is not entitled to receive festival allowance for only 5 months from the new employer – so the past employee naturally should have the liability to compensate him for the past 7 months (from the point of disbursement of the festival allowance to Chaitra end) that he served under the last employee. It’s only fair, natural and equitable.

Interpretation of the Labor Laws

Clearly there are multiple interpretations on the issues that we discussed above. This issue has also been raised by some professionals in labor related practices.

Citing from Page 99 of Labor Law (Part 1) by Pawan Kumar Ojha and Prajwal Ojha

In the application of the labor law, there are some situations that need to be interpreted and explained. Separate rules of interpretation have not been created for this branch of law. The general rule of interpretation of the general law is used in the interpretation of the labor law. Since the purpose of the labor law is to fulfill social justice, the rights, interests, needs, health protection, and morals of the worker class in a society, interpreting labor laws in favor employee have been given a prominent place when explaining the labor law, social security laws and protection system.

When interpreting the labor law from the court of India, “The enactment regulating the employment of workers and their work in a factory as defined in the factory Act- to be construed in favor of the employees and strictly against the employers” ie regarding the employment of factory workers and their work When interpreting the labor laws made to regulate, it should be done in favor of the workers. (Link to the case Law)