What is a Salary Slip in Nepal? | Complete Guide to Payslips and Pay Stubs

A salary slip—also known as a payslip or pay stub—is a critical document for salaried employees, providing a detailed summary of monthly earnings, tax deductions, and other contributions. For employers, providing salary slips is not just about transparency; it’s also a legal and regulatory requirement in many countries, including Nepal. A well-structured salary slip helps both employers and employees keep track of payroll information, ensuring clear communication about wages, deductions, and taxes.

By using the My Salary Slip Free Salary Slip Generator tool, employers can easily create accurate, professional, and legally compliant salary slips in just a few clicks, reducing time spent on manual payroll processing.

Whether you’re a small business owner or part of a large HR team, creating salary slips using an online tool can streamline your payroll process, ensure compliance, and provide employees with the essential documentation they need.

And mind you, whether you're working in the private sector or government jobs in Nepal, understanding your salary slip is crucial for managing your finances.

If you're asking, "What does a salary slip contain?" or "How to read a salary slip in Nepal?", this comprehensive guide will walk you through everything from basic salary components to tax deductions and employee provident fund contributions.

How can you generate Salary Slip with this Free Online Payslip Generator? 

Using our free payslip generator, you can easily create and distribute payslips for all your employees in just a few simple steps. This tool is designed to streamline the process of generating accurate, professional payslips. Follow these four easy steps to get started:

Step 1: Enter Company Information

Fill in your company's details, including the company name, logo, and address. This information will appear on the payslip, giving it a professional and personalized look.

Step 2: Add Employee Details

Next, enter your employee’s essential information, such as their name, employee ID number, designation, PAN, and bank account number. Accurate employee details ensure compliance and proper payroll management.

Step 3: Input Earnings and Deductions

Provide the income details for the employee, including the pay period, earnings (such as basic salary, allowances, Employer’s contribution to SSF etc.), and any deductions (such as taxes, SSF contributions, or loans/advances etc.).

Step 4: Generate and Download Payslip

Once all the information is entered, simply click "Generate Payslip". You can then download and preview the employee’s payslip, ready for distribution. You may also print the payslip and then affix company seal/stamp and signature of the HR Manager before sending it to the concerned employee.  

By following these steps, you’ll have successfully generated a professional payslip for your employee in no time!

Key Components of a Salary Slip in Nepal

To make things clearer, let's break down the components of a typical salary slip in Nepal using examples.

1. Employee Information

Your salary slip starts with basic employee information, which includes:

• Full name: Example: Kailash Panday
• Employee ID: Example: NEP001234
• Designation: Example: Accountant
• Department: Example: Finance Department

This section helps the employer and the employee identify the salary slip as a valid document for the correct employee. Therefore, these details must be correctly recorded to ensure the payslip is attributed to the correct employee.

2. Earnings Breakdown

The earnings section displays your gross salary, which includes multiple components:

• Basic Salary: This is the fixed, regular part of your salary. In Nepal, basic salary usually constitutes around 60% of the total salary.
  • Example: If Kailash’s total salary is NPR 100,000, his basic salary might be NPR 60,000.
• Dearness Allowance (DA): Dearness Allowance (DA) is a key component of salary in Nepal, typically added to the basic salary to help employees cope with inflation. DA may be adjusted periodically based on the Consumer Price Index (CPI), ensuring that wages keep pace with rising living costs. For example, if an employee's gross salary is NPR 100,000, then 60% of the gross salary will be basic salary i.e. NPR 60,000 and the remaining part will be DA and other benefits. So, if there are no other benefits, then the balance NPR 40,000 would be the DA. Employers can easily include DA using a salary slip generator, ensuring accurate payroll processing and compliance with legal requirements.
• Other Allowance: Allowances are the financial benefit provided by the employer to their employees on top of the basic salary. So, in addition to the dearness allowance, employers may pay other allowances like conveyance allowance, house rent allowance, etc. In Nepal, it’s a general practice to only have Basic Salary + DA (explained above) as a part of the salary. 
• Employers Contribution to SSF: The Contribution Based Social Security Act of 2018 (2075) governs matters pertaining to the Social Security Fund (SSF), which is basically a retirement saving scheme. Every business or employer is required by the Act to register their names and employees with the , which is required under rule 5.3 of the Labor Rules where the Employer is obliged to transfer the amount of provident fund and gratuity of the Employees to SSF. Employer’s SSF contribution includes Provident fund which is 10% of the Basic Salary, Gratuity which is 8.83% (as provided under rule 5 of labor rules, 2075 and sec 53 of the Labor Act, 2074) of the Basic Salary and other SSF contribution which is 1.67% of the Basic Salary.

Since SSF was introduced recently and many employers in Nepal are yet to enroll for the SSF, they continue to contribute only the Provident Fund i.e. 10% of the Basic Salary. The amount may be deposited by opening an account in the name of the employee at the Employee’s Provident Fund or Citizen Investment Fund or a bank. The gratuity was earlier only applicable to employees completing 5 years of employment. But the current labor laws make it mandatory from the date of joining and thus, the employers are required to make a contribution towards gratuity too. However, most employers who have not transitioned to SSF yet choose to only make the provident fund contribution and make no provision or contribution of gratuity to a separate account. Some pay gratuity directly to the employee at the time of termination.  

For Kailash’s basic salary of NPR 60,000, the Employer's contribution to the SSF would be NPR 12,000. Some employers may include this as a part of the Gross Salary and accordingly adjust against the Dearness Allowance. Some may contribute this on top of the agreed upon Gross Salary and accordingly form a part of the CTC i.e. Cost to the Company. So, if the Employer pays this on top of the Gross Salary, then Kailash’s Gross Salary=NPR 100,000 and his CTC would be NPR 112,000 (i.e. Gross Salary + Employer’s Contribution to SSF). The CTC may have other components too including bonus, festival allowance and variable pay. So, all these aspects would depend on how you negotiate your salary with the employer.

3. Deductions

Deductions play a major role in determining the net salary you take home. For employers in Nepal, accurately calculating deductions is essential to comply with labor and tax laws. And in Nepal, common deductions include:

• Social Security Tax (SST): 1% Social Security Tax is applicable up to the minimum limit of annual taxable income i.e. up to NPR 500,000 for single individuals and up to NPR 600,000 for married individuals. However, there is no SST, if the employer and the employee contribute to the contribution based Social Security Fund. For example: If the annual taxable income of Kailash is NPR 450,000 and if he does not contribute to SSF, then he will have to pay Rs. 4,500 in SST. However, if he contributes to SSF, then he will pay NPR 0 in income tax. 
• Income Tax (TDS - Tax Deducted at Source): In Nepal, income tax is levied progressively based on salary brackets. For instance, individuals earning between NPR 1 to NPR 500,000 annually and NPR 1 to NPR 600,000 (in case of married individuals) there is no income tax. However, if they do not contribute to a contribution based Social Security Fund, then there is a SST at a rate of 1%. People earning more than this fall into higher brackets.
  • Example: If Kailash’s annual salary falls into the NPR 500,000 to NPR 700,000 bracket (assuming Kailash is not married), he will be taxed at 10% on that portion of income. So, if his monthly income is NPR 100,000, he might see a NPR Rs. 6000 deduction towards personal income tax. This is also known as salary TDS and is deducted by the employer and paid to the Nepal Government. 
• Employee’s Contribution to SSF: Employee’s contribution to SSF includes the 10% (of Basic Salary) Provident Fund (PF) to match the Employer’s contribution as outlined above. An additional 1% of the Basic Salary is also deducted and contributed to the other various schemes of SSF like health, accident and maternity benefits. 
  • Example: From Kailash’s basic salary of NPR 60,000, NPR 6,600 will be deducted for the provident fund.
• Insurance Deductions: If the employee already contributes to the SSF, then there are no further requirements for contributing to insurances. However, if there is no contribution to SSF, then the employers are required to offer health insurance and life insurance coverage. And half of the premium towards health insurance shall be deducted from the employee’s salary.

These deductions ensure that Kailash is left with his net salary or take-home pay. In this case, after all deductions, Kailash’s take-home salary might be around NPR 87,400. These deductions need to be accurately reflected on the salary slip to avoid disputes or compliance issues. With a salary slip generator tool, you can automate these calculations, ensuring precise results every time.

4. Net Salary (Take-Home Pay)

The net salary, or take-home pay, is the amount the employee receives after all deductions have been made from their gross salary. As an employer, it's crucial to ensure this figure is accurate and clearly displayed on the salary slip. Net salary is what remains after all the deductions. This is the amount that gets credited to your bank account.

• Example: After deducting NPR 12,600 in taxes and other contributions, Kailash’s net salary is NPR 87,400.

5. Pay Period

Salary slips will always indicate the specific period for which the payment is being made. The general practice in Nepal is monthly based on the Nepali month as per the Bikram Sambat calendar.

• Example: Pay Period: 1st Bhadra 2081 – 31st Bhadra 2081 corresponding AD period would be 17th August 2024 to 16th September 2024.

Why is a Salary Slip Important in Nepal?

Understanding your salary slip is essential in Nepal for a number of reasons:

• Tax Filing: Salary slips are crucial documents for filing income tax returns. If you need to claim tax refunds or ensure that your taxes are paid correctly, your salary slip will be key.
• Loan Applications: Banks in Nepal often require salary slips to process loan applications. Whether you're applying for a home loan, personal loan, or a credit card, your salary slip acts as proof of income.
• Proof of Employment: If you switch jobs or need to apply for a visa, your salary slip can serve as official documentation of your employment and income history. They also serve as strong evidence in any case of employment related dispute or claim of any employment related benefits against your employer. 
• Salary Negotiation: Salary slips provide you a detailed overview about the various components of your salary and this can help you during your salary negotiations when applying for a new job or considering new job offers. 
• New Joining: Some employers may require the new joinees to provide a salary slip from their earlier employment as a part of their verification and onboarding process.  

Benefits of Using a Free Online Salary Slip Generator Tool for Employers

1. Time-Saving and Efficient

For busy employers, manually creating salary slips can be time-consuming and prone to errors. With an online salary slip generator, you can automate the process, ensuring quick and accurate salary slips every month.

2. Compliance with Labor Laws

The salary slip generator ensures that all necessary components—such as taxes, provident fund deductions, and CIT contributions—are included, helping you comply with Nepal’s labor laws.

3. Professional Appearance

The tool helps employers generate salary slips that are professional, neatly formatted, and include all necessary details, making it easier for employees to understand their pay structure.

4. Automatic Calculations

By entering basic salary details into the tool, it automatically calculates the net salary after considering all deductions and allowances, reducing the risk of human error.

5. Easily Accessible and Shareable

Once generated, salary slips can be easily downloaded in PDF format, printed, or shared with employees via email or internal systems.

Common FAQs About Salary Slips in Nepal

1. What is the difference between basic salary and gross salary?

Basic salary is the fixed portion of your income, while gross salary includes basic salary plus allowances like HRA, medical, and bonuses.

2. How is income tax calculated from a salary slip in Nepal?

Income tax is calculated based on your total annual earnings. The tax rate varies by income bracket, and Tax Deducted at Source (TDS) is shown on the slip.

3. Can I download my salary slip online in Nepal?

Many companies in Nepal provide digital salary slips via their HR portals. You can login and download your salary slip in PDF format.

4. Is Provident Fund contribution mandatory in Nepal?

Yes, in Nepal, provident fund contributions are mandatory for most employees, and both the employee and employer contribute to this fund.

5. Is it mandatory to issue a salary slip to employees in Nepal?

Yes, providing salary slips is a legal requirement for most employers in Nepal. It ensures transparency in payroll and helps employees with tax filing and financial planning.

6. How do I ensure the salary slip complies with Nepal’s labor laws?

Using a salary slip generator tool ensures all necessary deductions (like TDS and PF) and contributions are included, helping you remain compliant with regulations.

7. Can I customize the salary slip format?

Many free salary slip generators offer customizable templates, allowing you to add your company logo and tailor the layout to suit your business needs.

8. How often should I issue salary slips?

Employers should issue salary slips every month after processing payroll, providing a clear record of the employee’s earnings and deductions for that pay period.

Why You Should Keep Your Salary Slip

Salary slips are not just pieces of paper—they are an important part of your financial planning. Make sure you understand your salary slip and keep them safely, as they will be needed for everything from tax filing to loan applications.

Simplify Payroll with a Free Salary Slip Generator

Using a free salary slip generator tool is a smart move for employers looking to streamline payroll processes, ensure compliance, and provide professional, accurate salary slips to employees. By automating the generation of salary slips, you not only save time but also reduce errors, helping your business run smoothly.