PF, Gratuity & SSF in Nepal: Rates and Calculation Examples

Gratuity (Nepali: उपदान, upadan) is a payment your employer sets aside every month for you: 8.33% of your basic salary, which works out to about one month's basic pay for every year you work. PF (provident fund) (Nepali: सञ्चय कोष, sanchaya kosh) is retirement savings of 10% of basic from you plus 10% from your employer. Under the Labour Act 2074, both must be deposited in the Social Security Fund (SSF, सामाजिक सुरक्षा कोष), where the total contribution is 31% of basic salary: 11% from the employee and 20% from the employer.

Gratuity meaning in Nepali

Old vs new gratuity. Many people still think gratuity is paid only after 5 years of service. That was the old tenure-based system. Under s.53 of the Labour Act 2074, the employer must deposit 8.33% of basic every month from the first day of work, with no minimum service period. If the employer cannot deposit it, the employer must pay the 8.33% directly to the worker (s.53(6)). Workers entitled to a pension under another scheme, such as civil servants, do not get this gratuity (s.53(7)).

PF in Nepal: meaning and rules

• Rate: the employer deducts 10% of basic from your pay, adds an equal 10%, and deposits the 20% (s.52(1)).
• Where: in the SSF, in your name, from the day you start work (s.52(2)).
• Before SSF applies to your employer: the amount is deposited "as prescribed", for example in an approved retirement fund (s.52(3)). Balances in older funds must be transferred to SSF (s.52(5)).
• If it cannot be deposited: the employer must pay you an extra 10% of basic directly (s.52(6)).

SSF contribution rates (31% of basic)

The employee's 11% is deducted from salary. The employer's 20% is on top of salary and is part of the cost to company. Contributions are due monthly; the commonly cited deadline is within 15 days of the end of the month.

How to calculate gratuity in Nepal

Formula:

Monthly gratuity = Basic salary × 8.33% Total gratuity = Monthly gratuity × months worked

Because 8.33% ≈ 1/12, total gratuity ≈ one month's basic salary for each year worked.

Example 1. Basic Rs 25,000, worked 3 years (36 months):

• Monthly gratuity = 25,000 × 8.33% = Rs 2,082.50
• Total = 2,082.50 × 36 = Rs 74,970 (plus any return credited by the fund)

Example 2. Minimum-wage worker (basic Rs 12,170), worked 18 months:

• Monthly = 12,170 × 8.33% = Rs 1,013.76
• Total = 1,013.76 × 18 = Rs 18,247.68

Example 3. Basic salary changes. Gratuity is calculated on the basic salary of each month. If basic was Rs 30,000 for 12 months and then Rs 33,000 for 12 months: (30,000 + 33,000) × 8.33% × 12 = Rs 62,975.

SSF calculator: what your salary contributes each month

Example: gross Rs 40,000, basic Rs 25,000

Take-home before income tax = 40,000 − 2,750 = Rs 37,250. Cost to company = 40,000 + 5,000 = Rs 45,000.

Quick SSF calculator (any salary):

• Employee deduction = basic × 0.11
• Employer contribution = basic × 0.20
• Total SSF = basic × 0.31

For a full payslip with tax, use the salary calculator or the salary slip generator.

Is SSF compulsory in Nepal?

For formal-sector employers and employees under the Labour Act: yes.

• The Labour Act 2074 requires PF (s.52) and gratuity (s.53) to be deposited in the Social Security Fund in each worker's name.
• Under the Contribution-Based Social Security Act 2074, employers must register with SSF and enlist each employee, with new hires enlisted within about three months of joining.
• An employer who pays into SSF under that Act does not have to make separate PF, gratuity or insurance arrangements under Chapter 10 of the Labour Act, to the extent SSF covers them (s.57).
• Exempt: civil servants, Nepal Army, Nepal Police and Armed Police (pension-entitled), and independent consultants.
• Voluntary or separate schemes: informal-sector workers, self-employed people and workers in foreign employment can join through their own SSF schemes.
• Penalties: if an employer fails to deposit PF or gratuity, the Labour Office can order the amount plus compensation of up to twice that amount (Labour Act s.163(2)(d)). SSF can also recover late contributions with interest.

Step-by-step registration: Nepal's SSF: Registration, Contribution & Benefits Explained.

Does SSF cover parents?

Medical cover: no. Death benefits: yes, in some cases.

• Medical, health and maternity scheme: covers the contributor, their spouse, and (since the 2082 procedure amendment) children under 18. Parents are not included in the medical scheme. Details: SSF now covers children.
• Dependent family protection scheme: the Act's definition of "dependent family" includes the contributor's father, mother and parents-in-law living with them. If a contributor dies, dependent parents can receive benefits, including a pension where there is no spouse or child, and funeral expenses. 

When can you get your PF and gratuity from SSF?

• Pension: at age 60 with at least 180 months (15 years) of contributions; otherwise a lump sum.
• On leaving a job: contributions stay in your SSF account and continue with your next SSF-registered employer. Withdrawal rules for the retirement amount on termination are set by the SSF Operating Procedure.
• Going abroad permanently (giving up citizenship): the retirement amount can be withdrawn as a lump sum.

More on withdrawal myths: SSF now covers children: new SSF updates.

Mandatory insurance (if your employer is not fully covered by SSF)

• Medical insurance: at least Rs 100,000 per worker per year; premium shared (s.54)
• Accident insurance: at least Rs 700,000 per worker; premium fully paid by the employer (s.55)
• If the employer fails to insure, it must pay the equivalent amount itself (s.56)

FAQ

What is the meaning of gratuity in Nepali? Gratuity is उपदान (upadan): an employer-funded amount equal to 8.33% of basic salary every month, about one month's basic per year of service.

How do I calculate gratuity in Nepal? Basic salary × 8.33% × number of months worked. For example, Rs 25,000 basic for 36 months = Rs 74,970.

What is PF in Nepal? PF (provident fund, सञ्चय कोष) is retirement savings: 10% of basic deducted from the employee plus 10% from the employer, deposited monthly in SSF.

Is SSF compulsory in Nepal? Yes for formal-sector employers and employees covered by the Labour Act. PF and gratuity must go into SSF, and employers must enlist staff within about three months of hiring. Pension-entitled government staff are exempt.

Does SSF cover parents? Not for medical treatment, which covers the contributor, spouse and children under 18. Dependent parents living with the contributor can receive dependent-family benefits if the contributor dies.

How much is deducted for SSF from my salary? 11% of your basic salary. Your employer adds a further 20% of basic.