Compliance
Onboarding a new employee in Nepal: the compliance steps
A mid-year joiner is not simply a smaller version of a full-year employee — their tax projection, leave accrual and contribution start date all need setting deliberately.
Updated August 2026
Onboarding has a compliance half that is easy to leave until the first payroll run, at which point it becomes urgent. Doing it in order avoids retrospective corrections.
What to collect before the first payroll run
- Personal Permanent Account Number, so withheld tax is credited to the right taxpayer.
- Bank account details for salary payment.
- Confirmation of retirement fund enrolment status and any existing fund membership.
- Declarations for CIT, life insurance and health insurance, with supporting documents.
- Taxpayer circumstances relevant to the rebate and the wider exemption band.
- Signed contract recording grade, gross salary, basic component and leave entitlement.
Setting the salary structure
- 1Record gross salary and the basic component separately — basic drives every statutory contribution.
- 2Apply the organisation’s basic policy for the grade rather than deriving basic from a take-home target.
- 3Confirm retirement scheme enrolment, which determines both the contribution rate and whether the 1% first-band tax is waived.
- 4Record the festival bonus entitlement, since it belongs in the annual income projection from the first run.
The part-year tax projection
A mid-year joiner has fewer months of income in the current fiscal year than a full-year employee on the same monthly salary. Their projected annual income is correspondingly lower, which can place them in a lower band.
Projecting their income as though they had worked the whole year over-withholds. Projecting only the months remaining, plus any bonus they will actually receive, gives the correct figure.
If the employee had prior employment in the same fiscal year, income and tax already withheld by the previous employer affect their overall position — this is settled through their annual return rather than by the new employer.
Leave from a mid-year start
Accrual-based leave should start accruing from the joining date, not be granted as a full annual balance. Entitlement-based leave may be available from the start. Getting this backwards either over-credits a new joiner or denies them leave they are entitled to.
What to retain
| Record | Purpose |
|---|---|
| Signed contract | Evidence of agreed salary, structure and entitlements |
| PAN record | Correct crediting of withheld tax |
| Fund enrolment confirmation | Evidence of contribution obligation and start date |
| Deduction declarations | Support for relief claimed against salary income |
| Identity and qualification documents | Standard employment record |
Frequently asked questions
How is tax calculated for an employee who joins mid-year?
Project only the income they will actually receive in the remaining months of the fiscal year, plus any bonus due, and apply the bands to that. Projecting a full year of income for a part-year employee over-withholds.
Does a new employee get full annual leave from day one?
It depends on the leave type. Accrual-based leave such as home leave builds in proportion to time worked, so a new joiner starts near zero. Entitlement-based leave may be available immediately. Configure each type separately.