How much does an employee actually cost per month in Nepal?
An employee on NPR 1,00,000 a month in the Social Security Fund costs NPR 1,12,000 a month, because the employer adds 20% of basic salary on top of the gross. The same salary with no approved fund costs the gross itself; with a Provident Fund it costs NPR 1,06,000.
| Monthly gross | Tax withheld | Employee SSF | Employer SSF | Monthly cost |
|---|---|---|---|---|
| NPR 30,000 | NPR 0 | NPR 1,980 | NPR 3,600 | NPR 33,600 |
| NPR 50,000 | NPR 0 | NPR 3,300 | NPR 6,000 | NPR 56,000 |
| NPR 75,000 | NPR 0 | NPR 4,950 | NPR 9,000 | NPR 84,000 |
| NPR 1,00,000 | NPR 1,007 | NPR 6,600 | NPR 12,000 | NPR 1,12,000 |
| NPR 1,50,000 | NPR 7,187 | NPR 9,900 | NPR 18,000 | NPR 1,68,000 |
| NPR 2,00,000 | NPR 16,527 | NPR 13,200 | NPR 24,000 | NPR 2,24,000 |
Monthly cost is gross pay plus the employer contribution — the tax and the employee contribution come out of the gross, so they change what the employee receives without changing what the company pays. Budget from the last column; explain the payslip from the middle three.
Basic is an assumption here, not a rule
What goes into a payroll calculation in Nepal?
Gross pay, taxable allowances and any one-off payment; the employee retirement contribution withheld from it; the employer contribution added on top; the income tax to deduct at source; and any CIT or insurance deduction the employee has asked for. Everything except the tax is a rate on basic salary. The tax is a slice of the whole year.
- Gross pay— salary and every cash allowance that is taxable in the employee’s hands.
- Basic salary — the contribution base, and the number a payroll most often gets wrong.
- The employee contribution, withheld from the payslip and paid to the fund in the employee’s name.
- The employer contribution, added on top — and counted as the employee’s income for tax, which is the step that catches people out.
- Income tax at source, one month’s share of the year’s assessed bill. See the TDS calculator for what that instalment is and why it moves.
- Voluntary deductions — a CIT contribution or an insurance premium the employee has asked payroll to route, each of which reduces their tax against its own ceiling.
What are the PF and SSF contribution rates in Nepal?
Provident Fund is 10% from the employee and 10% from the employer, both on basic salary. The Social Security Fund is 11% from the employee and 20% from the employer, again on basic — 31% in total.
| Provident Fund — employeeWithheld from the payslip | 10% |
|---|---|
| Provident Fund — employerAdded on top; taxable in the employee's hands | 10% |
| Social Security Fund — employeeWithheld from the payslip | 11% |
| Social Security Fund — employerAdded on top; taxable in the employee's hands | 20% |
| Combined PF, SSF and CIT relief ceilingOne ceiling shared by all three | NPR 5,00,000 a year |
| SSF monthly ceiling on the contribution baseBasic above this does not raise the contribution | NPR 3,50,000 |
Both employer contributions are taxable benefits in the employee’s hands, so a payroll that adds them without adding them to assessable income under-withholds all year and leaves the employee with a shortfall at the end of it. The calculator above does it in the right order.
Should payroll run on PF or SSF?
Neither is free, and they are not the same money. SSF costs the employer 20% of basic against the Provident Fund's 10%, but SSF membership waives the 1% Social Security Tax band for the employee, so the same gross salary carries a lower deduction. Which fund an employer uses is a policy decision, not a payroll one.
| Scheme | Tax withheld | Employee fund | Employer fund | Monthly cost |
|---|---|---|---|---|
| No approved fund | NPR 2,500 | NPR 0 | NPR 0 | NPR 1,00,000 |
| Provident Fund | NPR 1,900 | NPR 6,000 | NPR 6,000 | NPR 1,06,000 |
| Social Security Fund | NPR 1,007 | NPR 6,600 | NPR 12,000 | NPR 1,12,000 |
Read the two ends together. The Social Security Fund is the most expensive column for the company and, on the same gross, the cheapest for the employee — the waived 1% band and the employer’s 20% are both money moving in their direction. An offer letter that quotes gross alone hides all of it, which is why comparing two offers has to price the funds and not just the salary.
How do I run monthly payroll in Nepal?
Fix each employee's gross and basic for the month, apply the contribution rates to basic, compute the year's income tax and take one month of it as the deduction, then file and deposit the withholding per PAN and the fund contribution with the fund. The order matters: the employer contribution is itself taxable income, so it has to be settled before the tax is worked out.
Fix gross and basic for each employee
Basic salary is the base every contribution is charged on, and it is not the same as gross. Settle it first, because a wrong basic makes both fund lines and the taxable benefit wrong together.
Apply the contribution rates to basic
Provident Fund: 10% withheld and 10% added. Social Security Fund: 11% withheld and 20% added, up to the Fund's monthly ceiling on the contribution base.
Work out the year, then take one month of it
Assessable income is pay plus the employer contribution. Reliefs come off, the bands run on the remainder, and the resulting annual tax divided by the months paid is the TDS for this payslip.
Deduct, deposit and file
The withholding goes to the Inland Revenue Department against each employee's PAN through the taxpayer portal; the fund contribution goes to the fund. Both are per employee, and both need the identifiers to be right or the credit lands nowhere.
Reconcile at the year end
Twelve deductions should add up to the year's assessed tax. Where they do not — a late bonus, an unclaimed insurance premium, a raise recovered unevenly — the difference is settled in the last payslips and stated on the employee's TDS certificate.
Deadlines for the withholding statement, the deposit and the fund filing are set by the Income Tax Act as amended and by the Social Security Fund’s own rules, and both publish the schedule for the current year. Take the dates from them rather than from a blog post — including this one.
What do Nepali payrolls most often get wrong?
Leaving the employer contribution out of assessable income; charging PF or SSF on gross instead of basic; treating the festival bonus as taxable only in the month it is paid; splitting one year across two employers without combining them; and re-spreading the year evenly after a mid-year raise instead of recovering the difference over the months that remain.
- Contributions charged on gross. PF and SSF are charged on basic. On a salary where basic is 60% of gross, charging gross overstates every contribution by two thirds again.
- The employer contribution left out of income. It is a taxable benefit. Omitting it under-withholds every month of the year.
- The festival bonus taxed in one month. Tax is assessed on the year, so a Dashain bonus lifts the withholding across the whole year — how the bonus is taxed.
- A mid-year joiner treated as a full year. Fewer months of income means less tax, and the instalments spread over fewer payslips.
- Two employers in one year handled separately. The Act assesses the person, not the job, so where neither payroll knows about the other the employee is left owing the difference at the end of the year.
Doing this for a whole team
This page prices one employee at a time. A payroll of thirty needs the same arithmetic thirty times over, every month, with contribution filings and a per-PAN withholding return behind it — which is software rather than a calculator.
Two honest options. The free JSON APIis this exact engine over HTTP, with no account and no key, if you are building payroll of your own and want the tax calculation to be someone else’s tested code. Or NepalHRM — payroll, attendance and hr software built for nepal — which is the product this calculator came out of and runs the filings as well as the maths.
Sources
- Income Tax Act 2058
Assessable income, the relief ceilings, and withholding on employment income.
- Social Security Fund
Contribution rates, the contribution base and the monthly filing.
- Inland Revenue Department
The taxpayer portal the withholding return is filed through.