Do I Need a Local Entity to Hire in Nepal?

In Nepal, a "local entity" refers to a legally recognized presence that allows you to act as an employer. This typically means establishing a subsidiary or branch office, which is essential for fulfilling local payroll and employment obligations. Without a local entity, you can't manage payroll, register as an employer, or comply with local labor laws effectively.

For many global employers, establishing a local entity can be cumbersome and costly. An alternative is to use an Employer of Record (EOR), which allows you to hire employees in Nepal without the need for a local entity, simplifying compliance and payroll management.

What is Required to Employ Someone in Nepal?

• Local employing entity required to directly employ? Yes (a local entity is necessary for direct employment)
• Payroll registration required? Yes (must register with the Inland Revenue Department)
• Withholding/tax remittance required? Yes (employers must withhold income tax from salaries)
• Social contributions required? Yes (mandatory contributions to the Employee Provident Fund)
• Local employment agreement required? Yes (written contracts are mandatory under Nepalese law)
• Mandatory benefits to budget? Yes (includes paid leave, social security, and other statutory benefits)
• Works council/collective agreements considerations? Often (certain sectors may have collective agreements in place)

Best Options If You're Hiring in Nepal

Can I Hire Contractors Instead of Setting Up an Entity?

Yes, but it’s important to tread carefully. While you can hire contractors without establishing a local entity, Nepal has strict labor laws that protect workers. Misclassification of contractors as employees can lead to legal issues.

When hiring contractors, ensure that their work is genuinely independent. Consider these points:

• The contractor should have multiple clients and not be exclusively working for you.
• They should control their work hours and methods.
• Ensure the contract clearly defines the relationship and scope of work.

How Long Does Entity Setup Take And What Does It Cost?

Typical entity setup timeline: It often takes 4–8 weeks to set up an entity in Nepal, depending on the required registrations and documentation.

Ongoing cost categories (entity route):

• Accounting, bookkeeping, and statutory filings: Estimated NPR 15,000–30,000 per month ($113–$226)
• Payroll provider: Estimated NPR 1,500–3,000 per employee per month ($11–$22)
• Employer registrations and recurring compliance: Varies by complexity
• Corporate tax filings and annual reporting: Estimated NPR 50,000–100,000 per year ($376–$752)

EOR cost components (no-entity route):

• A per-employee EOR service fee (from $399 p/month with Playroll)
• Pass-through statutory costs (e.g., employer social security contributions)
• Any optional benefits you choose to provide beyond statutory minimums

How an Employer of Record Can Help You Hire in Nepal

Hiring in Nepal can be complex, but it doesn’t have to require setting up a local entity or taking on long-term overhead. With an Employer of Record like Playroll, you get a simple, predictable way to hire compliantly while keeping costs transparent and under control. We help you:

• Hire employees in Nepal quickly without establishing a local entity, eliminating incorporation costs, ongoing administration, and exit complexity.
• Stay fully compliant with local payroll, tax, and employment regulations with Playroll’s managed payroll services.
• Control your total employment costs, with a clear monthly EOR service fee (from $399 per employee).
• Focus on growing your business, while we manage contracts, payroll, compliance, and labor law obligations end to end.
• Scale up or exit the market easily, without the financial or legal burden of closing a local entity.