As the festive season approaches in Nepal, many employees are looking forward to celebrating Dashain, Tihar, and other major festivals. With these festivals comes a key employee benefit—the festival allowance, often called the Dashain Bonus. But did you know the Dashain Bonus is not technically a bonus, but rather a mandatory payment under Nepal’s Labour Act?

In this guide, we'll explain what the festival allowance really is, how it works, and how you can ensure you’re receiving the correct amount as per Nepal's labor laws.

What Is the Festival Allowance?

The festival allowance, commonly referred to as the Dashain Bonus, is a mandatory payment that employers must provide to employees. This payment is meant to help employees celebrate a major festival of their choice, based on their religion, culture, or tradition.

According to Nepal’s Labour Act, the festival allowance is a legal right of every employee, not a goodwill gesture from the employer. It is not dependent on the company’s profits like a bonus would be, which makes it a guaranteed part of your salary package.

When Is the Festival Allowance Paid?

Although it’s commonly paid during Dashain, the festival allowance can be requested by employees for other major festivals. According to the Labour Act of Nepal, employees are allowed to request this allowance once per financial year for any festival that aligns with their religion or culture.

For example:

• A Christian employee may request the allowance for Christmas.
• A Muslim employee may request it before Eid.

If no request is made, the employer must pay it during Dashain by default.

How Much Festival Allowance Are You Entitled To?

The festival allowance is equivalent to one month’s basic salary for employees who have worked for at least one year with their employer. If you’ve worked for less than a year, the payment will be proportionate to the number of months you’ve worked.

Calculation Example:

Festival Allowance=(Basic Salary X Number of months worked)/12

For instance, if you’ve worked for 6 months and your basic salary is Rs. 60,000, your allowance will be calculated as:

(60,000 X 6)/12=30,000

If you have worked for less than a year at a new company, your previous employer must pay you the festival allowance for the months you worked with them before you left.

What Happens if You Switch Jobs Mid-Year?

If you change jobs during the year, you are entitled to the festival allowance from both your previous and current employers. When you leave a job, your former employer must include the festival allowance in your final settlement for the months you worked with them.

For example:

• You worked with ABC & Co. until Jestha 2081 and received the Dashain bonus in Asoj 2080.
• ABC & Co. should pay you the allowance for the 7 months you worked until Jestha as part of your final settlement.
• Your new employer will pay you the allowance for the months you work with them up to Asoj 2081.

What Is Basic Salary, and Why Is It Important?

The basic salary is the key component for calculating your festival allowance. It represents the core portion of your salary and is not the same as your gross salary. According to Nepal’s Labour Act, your basic salary should be at least 60% of your gross salary.

Here’s a typical breakdown:

• Basic Salary: Rs. 60,000 (60% of gross salary)
• Dearness Allowance: Rs. 28,000
• Employer’s SSF Contribution: Rs. 12,000
• Gross Salary: Rs. 1,00,000

The festival allowance is based solely on your basic salary, which makes it crucial for calculating not just your allowance, but also other benefits like Social Security Fund contributions and gratuity.

Why Shouldn’t It Be Called a Bonus?

Unlike a bonus, which is typically linked to the company’s profits, the festival allowance is mandatory regardless of the company’s financial performance. A bonus is optional if the company does not make a profit, but the festival allowance must be paid as per the law.

Therefore, calling it a “festival bonus” could give your employer an excuse not to pay it if they are not profitable. To avoid any confusion, always refer to it as the festival allowance.

What If Your Employer Doesn’t Pay the Festival Allowance?

If your employer fails to pay the festival allowance, you have the legal right to request it in writing. According to the law, employees can make this request once per financial year for the festival of their choice.

Know Your Rights to Festival Allowance in Nepal

In Nepal, the festival allowance is a legal right under the Labour Act and is meant to ensure that employees can enjoy their major festivals without financial strain. Whether you receive it during Dashain or another major festival, it’s important to understand your entitlement and how to calculate it.

Remember:

• You are entitled to one month’s basic salary as festival allowance if you’ve worked for one year.
• Even if you switch jobs, you should receive a proportionate allowance from both employers.
• The festival allowance is not a bonus—it’s a mandatory payment. Also bonus payment is mandatory on an yearly basis if the company is in profit. 

And to understand more about your salary and other benefits like festival allowance, bonus, etc. as per the laws of Nepal, check the Salary Calculator by My Salary Slip. It helps accurately calculate your salary tax as well as your take home salary.