What are Your Options to Deal With The Payment to Your Employees In This Lockdown?

WHAT ARE YOUR OPTIONS TO DEAL WITH THE PAYMENT TO YOUR EMPLOYEES IN THIS LOCKDOWN??

Section 35(1) of Labor Act, 2017 of Nepal requires employers to pay the agreed remuneration to their employees as agreed upon in the employment agreement; or as determined by the employer. Section 35(2) further stresses that payment should not be later than a month of the due date. However still, it may be agreed upon between the employer and employee regarding the date of payment of the due amount.

For special circumstances like the global pandemic of COVID-19 and shutting down of business as per government’s order, labor laws of Nepal have provided as for follows.

Option A: Pay them their regular remuneration.

Employers need to pay their regular remuneration to their employees if they are working from home. Even if they are not, employers are still obliged to pay their regular remuneration unless and as per the follows:

Section 34(3) of Labor Act, 2017 disallows an employer to slash or deduct their remuneration and benefits other than as provided for in the Labor Act or other labor laws. While section 38(1)(e) of Labor Act, 2017 allows for deduction of remuneration for the number of days employee was absent from work, the stay at home for COVID-19 does not fall under the scope of this section unless government determines it otherwise following the end of this epidemic. Section 131(2) of Labor Act, 2017 further specifies conditions where deductions can be made; which still do not cover the pandemic situation in question.

So, unless the government decides otherwise, the employer will have to pay regular remuneration to its employee; provided however that the same would be different for laid off employees. Look for details in option B.

Option B: Pay half remuneration.

If prior to closing down the business, the employer had decided and circulated among its employees as per Section 15 of Labor Act, 2017 and Rule 5 of Labor Regulations 2018, that it will be temporarily closing down its business owing to special circumstance like COVID-19 today and that the employer shall be laying off its employees for certain time (keeping the employees in reserve), then the employer shall pay only half of their designated remuneration to the employee. Provided, however that the number of such days shall not exceed 15 days. If the period is to be extended, then company must do so only in consultation with authorized trade union in the Company or with Labor Coordination Committee.

Option C: Retrenchment or Liquidation (If employer’s business suffered heavily and cannot pay its employees any further)

If employer’s business suffered heavily because of the COVID-19, one of the unforeseen circumstances, then it can either retrench its employees to save whatever is left of its business or go for liquidation and pay off its employees and creditors.

i. For Retrenchment (Permanent Lay Off): Section 145 of Labor Act, 017 provides that Employer can retrench its employees if the it faces economic difficulties. If Company opts for retrenchment, it must first notify the Labor Office and, Trade Union or Labor Coordination Committee in employer’s place of business at least thirty days before retrenchment about the reason for retrenchment, number of employees to be laid off, and the probable date of retrenchment. After notification, employer must discuss the matter with the Trade Union or Labor Coordination Committee and reach an agreement. Employer however must follow following order while laying its employees off:

1. Foreign Employees

2. Employees with bad behavior or who have faced maximum punishment 

3. Employees with Poor Performance 

4. For employees working in similar level and similar work specifications, employee with latest appointment. However, if Company does not want to let go of the employee with the latest appointment and lay off someone else instead, Company must do so with proper reasoning.

Employer must compensate such employee laid off with an amount equal to one month of basic salary multiplied by the number of years he/she has worked with the employer. If the number of years worked is less than a year, the compensation shall be calculated on a pro rata basis.

Also, Section 146 of Labor Act, 2017 prescribes that Company must prioritize in hiring the employees retrenched if the employer is to run its business as usual again.

ii. For Liquidation: If the employer’s business suffers very heavily that closing down business seems a better option than keeping it afloat, then it may opt out for liquidation. If the assets of the company are higher than its liabilities, then it should seek out voluntary liquidation and it is otherwise, then it should seek out involuntary liquidation. Consult your legal advisor for further processing.

In any case, while you choose any of these options laid out before you by law, do not forget that your employees are your assets. Times might have been difficult for you but so have been for them as well. Take this opportunity to reach out to them and share your thoughts before making any decision.