Labour Market reform in Nepal

In Nepal, there is a long-standing debate on the extent to which the regulation of the labour market is a facilitating or obstructing feature of investment – investment being the source of job creation. Nepal’s labour laws are what economists would term “second best” – both the trade unions and the employer federation accede to this point – employers charge that difficulties that the law imposes on economic dismissals discourage hiring and enterprise growth, whereas the trade unions claim that, as the employers are dissatisfied with the law, evasion is widespread. The ILO will facilitate tripartite dialogue on the law’s reform. The aim will be to strike a politically and economically workable balance between flexibility allowed the Nepal entrepreneur in adjusting staffing needs to demand, and security and protection for workers. A recent ADB/DFID/ILO country diagnostic study has identified poor industrial relations and labour market regulation as one of the top three critical constraints to private investment and inclusive economic growth in Nepal. Therefore, labour market reforms are crucial in assisting to maintain peace and to reinforce good governance and the rule of law. In the short term the reforms will play a vital role in reducing labour unrest, as well as the associated disruption to employers, workers and Nepali society more broadly. In the medium and long term, it will contribute to the inclusive growth and job creation. This will be achieved by establishing a clear legal framework to promote sound industrial relations, and promote collective bargaining and peaceful dispute resolution by the parties themselves. In the context of the current economic crisis and its significant impact on employment and the labour market in Nepal, the success of these reforms is all the more critical. Substantial financial support now for this reform process could very well make ensure its rapid success, and therefore contribute significantly to the delivery of the benefits that it should bring. Major outputs * A new Labour Act and Nepal Labour Commission Act, * Unemployment Insurance Act and Social Security Administration Act, * Internal rules and regulations drafted, * Awareness-raising messages and sensitization programmes designed and implemented, * ILO training manuals translated and adapted, * A programme on workplace cooperation designed and piloted, * ILO’s assessment of the labour administration system in Nepal presented and * A procedural manual for labour inspectors developed,

Project symbol

NEP/09/02/UKM

Admin unit

CO-Kathmandu

Start date

30/09/2009

End date

30/09/2010

Total allocation

161401

Total expenditure

Status

Closed

161401

Development Partners

United Kingdom, Department for International Development

Country/Countries

Nepal

Outcomes

Employment Promotion