Fringe Benefit :

Compensation in addition to direct wages or salaries, such as company car, house allowance, medical insurance,
paid holidays, pension schemes, subsidized meals. Some fringe benefits are regarded part of a taxable income.
A fringe benefit is a form of pay for the performance of services. Any fringe benefit you provide is
taxable and must be included in the recipient's pay, unless the law specifically excludes it. Fringe
benefits tax (FBT) law includes various categories of fringe benefits and specific valuation rules for
each category.

Car fringe benefits

Car parking fringe benefits

Entertainment and fringe benefits

Expense payment fringe benefits

Loan fringe benefits

Debt waiver fringe benefits

Housing fringe benefits

Board fringe benefits

Living away from home allowance fringe benefits

Definition of statutory
of or relating to formal laws or statutes
controlled or determined by a law or rule
Some of our voluntary benefit options include healthcare cafeteria plans, life insurance and policies for
cancer, accident, disability, hospital confinement, critical illness, and disability coverage above and beyond
what is offered by a standard benefit package.

What Makes Employee Benefits Mandatory / Statutory?

Well, it means that the federal or state government requires employers to provide these types of benefits. Basically,
there are currently four mandatory employee benefits in effect:
Social Security tax and withholding: also known as a payroll tax, not an income tax. The employer deducts half of
the tax from the employees paycheck and contributes the other half of the tax itself. Both contributions are sent to
the IRS and are reflected on paychecks and W2 forms. It is possible to reach a maximum limit on these
contributions during the year. Check on that amount with the Social Security Administration (ssa.gov).
Medicare tax and withholding: again, also known as a payroll tax, not an income tax. It works the same as the
Social Security tax except there is no maximum withholding.
For those of you following politics, payroll taxes have been cut in recent years to battle a struggling economy.
Since these taxes are taken out before you get paid, you may not have even noticed that additional money in your

paycheck. So, when you hear politicians discussing payroll tax cut, they mean how much you and your employer
contribute to Social Security and Medicare.
Unemployment fund contribution: Employers contribute to a federal/state fund that is used to finance
unemployment claims in that state. Depending on the state, employees may contribute to that fund as well.
Workers compensation: Workers compensation is financial protection for medical treatment and lost wages due
to an injury or illness sustained in the workplace. These programs vary by state. Most involve the standards set by
the state. Employers then purchase insurance to cover those standards or face some financial punishment.
Under current law, minimum medical insurance will become a mandatory benefit starting in 2014. This benefit
generates a lot of disagreement and passion on the political front. Stay tuned on this one!

What Things Are Considered Voluntary Employee Benefits?

Voluntary employee benefits really have no limitation. The list below is a high-level view of voluntary employee
benefits. You will find more detail on each in separate sections under Terms by Topic.
Healthcare-Related Insurance
These employee benefits include things like medical, prescription, dental, and vision insurance.
Life or Disability Insurance
These employee benefits include things like life, short term disability, long term disability, and long term care
insurance.
Retirement
These employee benefits include things like pension, 401(k), and all other defined contribution or defined benefit
plans.
Paid Leave
These employee benefits include things like vacation, personal, parental, sick, bereavement, military, jury duty, and
family leave.
Work Schedule
These employee benefits include things like flexible schedule, flexible days, work from home, remote workers, etc.
Health Promotion
These employee benefits include things like wellness programs, fitness centers, and employee assistance programs
(EAP).
Career-Related Assistance
These employee benefits include things like tuition assistance, stock options, subsidies for housing, transportation,
and parking, as well as office perks like free coffee.
Family-Related Assistance
These employee benefits include things like adoption assistance, child care assistance/onsite daycare, and elder
care assistance.

Social security in NEpal:

The social security/ protection system in Nepal is fragile as far as the schemes/contingencies
mentioned in the vertical dimensions are concerned. The Government of Nepal has, in the current

budget, approved three social security schemes: workplace accident, maternity protection, and
health insurance (MOF, 2011).
The concept of social security is still new in Nepal. ... It can be considered as an inseparable part
of social justice. Social security is an extended form of social protection which is being provided by
various concerned authorities of the country to reduce the risks as well as assuring compensation
in times of needs.

Social Security in Nepal

Accident Indemnity
As a part of Social Security in Nepal this scheme was introduced in February 1995. Under this scheme a lump
sum amount of Rs.1,00,000 in case of death or permanent disability and Rs. 10,000 to 25,000 in case of
partial disability due to an accident is paid to the members or their legal heir or nominee. The EPF has created
special reserve funds out of its own earning to finance this scheme.
Funeral Grant
This scheme was another move in the Social Security in Nepal, introduced in Magh, 2048. Under this scheme
the EPF provides a sum of Rs.25000 as funeral grant to the legal heir or the nominal of the deceased member,
who has died with in the service period. The EPF has created special reserve funds out of its own earning to
finance this scheme.
Insurance
As one of the social security schemes in Nepal it was initiated by the Government of Nepal in the year 1979
and is implemented through the EPF. Under this scheme the EPF provides a sum of Rs. 40,000 to 1,50,000.
Medical Assistance
This scheme was started by Employees Provident Fund in the year 2070 BS.Under this scheme certain
portion of the expenses carried out for medical treatment is reimbursed to the contributors by Employees
Provident Fund from its own fund.

3.3.1 Schemes for civil servants, public, organized and informal

sector workers
Social Health Protection (SHP)
The Government of Nepal has, in the current budget, approved three social
security schemes: workplace accident, maternity protection, and health insurance
(MOF, 2011). The budget does not describe in detail the nature and types of
benefits under the schemes creating inconsistencies. A key challenge is to increase
the number of people covered, ensure minimum benefit to protected persons, and
devise the conditions and period of entitlement to benefits. Another problem is
that the recently announced SSF programme primarily benefits those who are
already benefiting. This will blur the distinction between the non-contributory
schemes and the contributory schemes that are meant only for workers and
employees in the public and the private formal sectors. Therefore, a clear
definition of benefit terminologies is important. For example, in relation to
medical benefits, there are various terminologies used in different legislations in
Nepal such as Ausadhi Upachar (medical treatment), Upachar Kharcha (treatment

expenses), Ausadhi Upachar Kharcha (medical treatment expenses), Ausadhi

Upachar Subidha (medical treatment benefit), Upachar ko Byabastha (provision of
treatment), Swastha & Upachar (health &treatment), Swasthopachar (Health
treatment), (Badal, 2009). These terminologies used in different laws, rules and
regulations mean the same thing, i.e., medical benefits. However, the difference in
terminologies creates confusion in understanding the models, options, coverage,
benefit packages etc. to be offered to the beneficiaries.

The following schemes are available under the SHP:

Sick leave
Employees in public or in private sector are entitled to paid, half-paid and unpaid
sick leaves. Civil servants and other public sector employees are entitled to 12
days paid sick leave per annum, private sector employees get 15 days half-paid
leave per annum. Workers in the formal sector get up to 15 days sick leave with
half pay. In enterprises with less than 10 workers, there is a provision for 15 days
leave with half pay, according to the Ministry of Labour. However, the coverage
of the sick leave benefits is limited; it is not available to workers in the informal
economy. Contractual workers can enjoy such benefits only if there is a special
provision in the contract. Non-eligibility of paid leave is a clear indication of job
insecurity and hence a good indicator for identifying informal jobs (Raveendran et
al., 2006).Sick leave is granted to the workers without any extra benefits including
sick leave accumulation. A similar provision is found in Tea Estate Labour Law,
Working Journalist Regulation and the Additional Post Office Regulation. The
Child Labour Rule also has no provision for sick leave accumulation unlike that in
civil service, the security agencies and public schools where sick leave
accumulation is a right.
In the private sector, a majority of the establishments is not willing to provide any
kind of health benefit to the workers. The 1974 Bonus Act requires the private
sector enterprises to provide basic medical benefits to employees and their
dependents. Similarly, the 1993 Labor Code requires private sector employers to
pay 50 per cent wages for sick leave up to 15 days a year, provided the employee
has been continuously employed by the same employer for at least a year. Even in
the public sector, the state does not provide such benefits to the daily-wage
employees although the employees are in the job for many years. Employers in
the private sector like to avoid permanent employees as far as possible in order to
escape from the perceived additional burden of social security expenditure. They
would rather opt for either daily wage workers or contract workers for whom they
are not required by law to provide any kind of social security coverage. Some
business houses, nevertheless, provide nominal social security benefits in order to
avoid frequent turnover of employees and to retain loyalty. Even the state is

reluctant to provide permanent status to the employees in order to avoid

social security expenditure.

Maternity health protection

ILO has adopted Conventions No. 3, 103 and 183 for the purpose of maternity
protection, which is a basic human right and a serious issue under integrated
social system. The Convention No. 183covers more categories of women workers,
including women employed in atypical forms of dependent work who, until now,
often received no protection. The length of maternity leave is extended from 12 to
14 weeks. Health protection is specifically addressed for the first time by
providing that a pregnant or breastfeeding woman is not obliged to perform work
that is prejudicial or establishes a significant risk to the mother and her childs
health. Protection from dismissal, although no longer absolute, now applies not
only during maternity leave but also during the entire pregnancy and a certain
period of time after return to work. Women are also protected from discrimination
in the workplace relating to maternity and are entitled to a daily reduction of hours
of work for breastfeeding without losing any pay. The current years budget has
announced reproductive health as one of the basic social security schemes for
contributory workers, but it is not clear whether it is a step to follow the ILO
convention related to maternity health. It is expected that the concerns of the
convention will be specifically and categorically addressed by the Social Security
Act.

Health protection
There is no provision in Nepal, other than maternity leave, to protect the health of
a pregnant or breastfeeding woman and her child. Civil Service Act, 1992, allows
60 days paid leave for a maximum of two times during the service period.
Similarly, the Labour Law requires that all private sector employees, whether
permanent or temporary, be allowed 52 days paid leave for up to two times during
service period. The same for tea state workers, as mentioned in Tea Plantation
Labour Rule, is only 45 days. But these leaves are very short compared to the 14
weeks of paid leave including six weeks of compulsory leave after childbirth as
specified by the ILO Convention No. 183. INGOs, multilateral and other
diplomatic agencies, however, provide 90 days paid leave. Establishments with
less than 10 employees do not provide maternity leave to their workers, forcing a
pregnant woman to quit her job. In case of personal acquaintance or links,
she may be reinstated in her job, but this is very rare. The entire informal sector
workers are excluded from maternity leave benefits. Similarly, contract workers in
the civil service are also excluded from maternity leave.

Maternity leave
Maternity leave can be extended for a period longer than the leave facility if there
is evidence of hardship. The Civil Service Act allows pregnant employees to avail
additional maternity leave of up to six months without pay. This provision does
not exist in any other legislation. Similarly, leave in case of miscarriage is also not
mentioned. Labour Act, however, allows another maternity leave if one of the two
children dies and the mother is pregnant again.Paternity leave is not popular in
Nepal. The provision was introduced for the first time in the Tribhuvan University
(TU) Teachers and Employees Service Rule 2050, which allows seven days paid
leave for a single time. A later amendment in the Civil Service Rule allows 15
days of paternity leave for a maximum of two times with full pay. A similar
provision has also been added in the recent amendment of Remuneration, Terms
and Service of Judges of District Court and Appellate Court. There are no
paternity leave provisions for private sector employees. The Convention No. 183
requires that maternity benefits in cash, enough to ensure a proper and healthy
condition of a woman and her child, have to be provided during maternity. In
addition, medical benefits need to be provided. However in Nepal, only the
Civil Service Act, 1992, and the Prison Rule, 2019, allow for maternity benefit,
but not in the way as spelled out in the convention. It is rather provided as a child
care benefit of Rs. 5000 and Rs. 1000 respectively.In Nepal, no specific provision
for employment protection and non-discrimination exist, although termination of
employment during maternity leave is not common. The Labor Act allows women
workers time to take care of their children. Legal provisions require that an
establishment with more than 50 workers has to set up a childcare room, but this
is practiced only in a few organizations. There is no such provision for breast
feeding in any other legislation.

Occupational safety and health

Labour Act and Regulations have provisions for health and safety. Only a few acts
and rules mention occupational health safety standards that need to be maintained
by various establishments. However, depending upon their nature, scale and
resources, organizations attempt to maintain minimum health and hygiene
standards. But this does not apply to informal workers. Generally workers in small
and medium enterprises such as garment, carpet, and pashmina factory are obliged
to work in unhygienic conditions. Similarly, safety of employees/workers in
majority of larger manufacturing entities is often neglected by the manufacturers.
Labour regulations require that adequate health and hygiene standards have to be
maintained in the work place, including the supply of drinking water and

availability of sanitation facilities. Similarly, measures have to be taken to protect

the eyes in places where workers deal with materials like glass, lead, or mercury.
Furthermore, arrangements need to be made to protect workers against fire and
hazardous substances. In case of informal workers, for example in trekking,
plantation, construction and rafting, employers should provide safety equipment.

Medical expenses
Labour laws in Nepal have some provisions that require compensation of medical
expenses due to workplace accident or accident while on duty. They may be provided
for general circumstances as well. In case of work related accidents, Labour Rule,
1993, requires the employer to pay for the whole expenses incurred for the treatment
of the worker. The worker is also required to be paid the full remuneration for the
period he or she is in a hospital. Treatment at home, however, will require the
payment of only half the workers remuneration. In case the treatment goes on for
over a year, the employer is not required to pay remuneration. Only the Labour Law
mentions accident as a separate case for medical coverage. Other legislations include
workplace accidents within the broad category of medical expenses. The medical
expenses in other legislations include both workplace accident and accident off duty.
Expenses incurred during treatment are reimbursed to the civil servants, security
personnel, TU employees, public school teachers, and health workers. However, there
are some limitations. For example, Tea Estate Labour Rule, 1993, stipulates that the
maximum amount that can be reimbursed as medical expenses is equal to two months
salary for the entire service period. However, for other employees/workers the
reimbursement can range from 12-21 months salary depending on the position, grade
and years of service (See Box 3.1).Contractual workers in the civil service
are excluded from the medical expenses. Medical benefit is also provided through
direct free treatment facility to security personnel in their own respective hospitals.
Similarly, a Civil Servant Hospital, built with Chinese assistance, is in operation since
2009. The hospital provides 40 per cent concession to the gazette officers while
government pensioners, non-gazetted officers and their families receive 50 per cent
discount. Some trade unions were eager to open a hospital for private sector
employees/workers including informal workers. Informal workers in risky and
hazardous jobs are more likely to sustain serious injuries and accidents. They
expressed their serious concern about informal workers dying because they could not
receive proper treatment. The representatives proposed this scheme as a part of
Integrated Social Security.

Disability compensation

Labour Law requires that a lump sum equal to five years of remuneration calculated at
the rate of remuneration being drawn at the time (just before) disability should be paid
in cases of physical disability. The rule requires that in cases of death, a lump sum
compensation equal to three years remuneration calculated at the workers rate of
remuneration just before the death should be paid to the immediate kin. However,
such compensation is not provided if the injury or disability occurs at a time when
the worker is not performing an official duty.

Provision on occupational diseases

There is no provision for medical expenses and compensation for occupational
diseases in any legislation.

Termination on health ground

Most legislation requires that the employee leave the job if he or she has an accident
during duty period and then is unable to perform his or her duties. However, Nepalese
legislations do not mention anything about workers who cannot perform their duty
due to prolonged illness or accident that is not work related. As such, employers have
to terminate the job of such workers on disciplinary grounds.

Universal old age pension

2000 per month above 70 years, 60 years for dalits given 3 times in a year per 4 month.

Profit sharing
Profit sharing is an incentive plan that distributes a portion of an organization's profits to its
employees. The company contributes a portion of its pre-tax profits to a pool that will be distributed
among eligible employees. The amount distributed to each employee may be weighted by the
employee's base salary so that employees with higher base salaries receive a slightly higher
amount of the shared pool of profits. Generally this is done on an annual basis.

A plan may qualify under federal laws and regulations for tax deductibility even if the employer does not have
current accumulated profits, provided there is a definite formula for allocating plan contributions among
participants and their beneficiaries for a fixed period, upon the attainment of a stated age, or upon an event such as
the participant's retirement, disability, death or severance of employment. Calculations of profit vary by employer
and accounting practices.
"Profit sharing" is a type of compensation paid to employees by companies. Payment of a profit sharing bonus to
non-management employees typically takes place at the discretion of the company and does not constitute an
entitlementalthough if it is paid routinely and year after year, employees may come to count on it as part of their
compensation. Profit sharing bonuses are treated as income for tax purposes upon receipt unless made to deferred
compensation plans.

Incentive Plans :

There are incentives that go beyond compensation. The possibility of promotion or expanded responsibility can be
a strong incentive. The desire for continued employment can also be a motivator. The hope for recognition drives
some to perform.
However, in many cases, we find that incentive compensation, such as bonuses and stock options, is a wonderful
motivator for employees. Further, if you design the system well, when the employees earn large incentives, the
company has also done well. Therefore, youll have the money to pay the incentives.
We are strong proponents of incentive-compensation systems. Weve used them successfully both in companies we
have run and with our clients many times. People generally do what you incent them to do -- they will act in their
own best interest.
When setting up your system, these five tips will be helpful:

1. Make it easy to understand.

To be effective, an incentive-compensation program must be easy to understand.

2. Employees should control the outcome.

Ensure that the quality of the employees work will have a significant effect on the amount of incentive earned.

3. Align the system with company objectives.

People will do what you pay them to do, so be careful to ensure that you incent the behavior you want.

4. Bonuses have to be a good amount.

Studies show that for incentive pay systems to have a meaningful impact on performance, they have to represent at
least 10 percent of an employees compensation.

5. Incentives must be paid out frequently.

Generally, systems that reward employees frequently, say with every paycheck, are more effective motivators than
those that pay out only annually.
An incentive program is a formal scheme used to promote or encourage specific actions or behavior by a specific
group of people during a defined period of time. Incentive programs are particularly used in business management
to motivate employees and in sales to attract and retain customers. Scientific literature also refers to this concept as
pay for performance.

Labour Market:
According to data from the national censuses, the working-age population (15-59 years) increased
by 2.7 million in the 10-year period from 2001 to 2011.The average growth rate of the workingage population between 2001 and 2011 was about 2 percent and if this growth rate is assumed for
the next few years, this population is expected to reach 18.1 million in 2020 and exceed 20 million
by 2025.

To put it differently, a 2 per cent growth rate of the working-age population will mean that there
will be an additional 5 million people entering the labour market by 2025.
Reveals that the labor market in Nepal is characterized by rigid
regulations and unionization that reduce the incentives to hire workers
through formal contracts, resulting in insufficient job-creation and high levels
of unpaid work and underemployment, which drives many to migrate for work
abroad. Labor laws also provide for minimum wages with very little
differentiation across skill levels, keeping labor productivity and investments
in human capital low. Large firms are most constrained by labor regulations
and are also often subject to trade union actions. Political issues and wage
issues constitute the most common causes of such actions, and there is a fair
amount of inter-play between the two. In order to encourage employment and
labor productivity growth, ways should be explored to reduce non-wage labor
costs, to pilot flexible labor regimes in special economic zones, and to create
additional labor court branches to speed up the resolution of labor cases.
The main labour market challenges in Nepal stem from the slow pace of
economic development: almost three-quarters of workers continue to earn a
living in the agricultural sector. Thus, the vast majority of workers are
informally employed. Due to the lack of employment opportunities in the
domestic labour market, labour migration is the main option for thousands of
young Nepalis entering the labour market every year.Over the last decade,
economic growth in Nepal has been relatively low (in comparison to other lowincome countries) and highly dependent on services (Figure 1). At the same
time, volatility in agricultural output, which still represents 33.7 per cent of
GDP (2013/14), translates into variability in aggregate growth rates. From an
expenditure
perspective,
Nepals economy is dominated by private consumption (fuelled by
remittances), which averages at around 90 per cent of GDP (up to 91.1 per
cent in 2013/14).

The employment challenge and issues to be addressed

The employment challenge in a developing country like Nepal may manifest itself in several forms.
First, there is a quantitative dimension in that employment growth may fall short of labour force
growth - giving rise to open unemployment. But in a developing country like Nepal, this may not be a
major issue because when poverty is acute and unemployment benefits are absent, very few can afford
to remain without employment. Even in the absence of proper employment, one generally tries to find
some work to eke out a living. Of course, an estimate of the quantitative dimension of the
employment challenge should be the first step in an exercise on understanding the employment
challenge.Second, and perhaps more important, is low productivity and earnings associated with a
sizeable segment of the employed population. An associated phenomenon is predominance of
employment in the informal segments of the economy where productivity and earnings are low and
conditions of work are poor. This, in turn, is manifested in large numbers being employed and yet
poor - the so-called working poor. And an important part of the employment challenge is to raise the
productivity and earnings of workers through a change in the structure of employment towards sectors
with high productivity and raising productivity of workers in sectors characterized by low

productivity. The above brings one to the third dimension of the employment challenge, viz., attaining
a shift in the sector composition of employment. The experience of the present day developed
countries (e.g., U.K., USA, France, Germany, etc.) as well as that of some of the late developers who
have been successful in their development effort (e.g., Republic of Korea, Malaysia, Taiwan, China)
shows a common pattern of structural change in their economies - the share of agriculture in both
GDP and total employment declining and that of non-agricultural sectors increasing. Within nonagriculture, the share of manufacturing increased first and then the share of service sector rose at a
later stage of development. Such a pattern of structural change enabled the labour force to move from
agriculture (where labour productivity is usually lower than in industry and services) to sectors with
higher productivity. Alongside such moves, productivity in agriculture also increased, due both to
decline in numbers remaining there and to the adoption of productivity enhancing technology and
inputs. The challenge before Nepal (like other developing countries) is to engender such a process of
economic growth where not only output in non-agricultural sectors but also productivity and
employment would grow.
The point mentioned above about the need for a shift in the sector composition of output and
employment should not be taken to imply that agriculture can be neglected in development efforts of a
country. In fact, in low income countries (like Nepal) where poverty continues to remain a problem
and large proportions of the poor are engaged in agriculture, high growth of that sector along with
improvements in productivity and earnings (including real wage rates of workers) is a precondition for
pro-poor and inclusive growth. Raising the productivity of workers thus emerges as a major issue in
addressing the challenge of employment. And that brings one to two major issues. First, if output
growth is obtained only (or mostly) through productivity growth, employment growth would be low
even when output grows at a high rate - a phenomenon dubbed as jobless growth, which has been
observed widely in the development experience of the 1990s and the 2000s. Second, and a point that
is often made in development literature, is the possibility of a trade-off between growth of
employment and labour productivity. These two points are inter-related and need to be addressed
together. Although there is a theoretical possibility of a trade-off between employment and
productivity growth, in reality the situation may vary, depending upon the kind of development
strategy pursued and the pattern of growth. One way of avoiding the trade-off between employment
and productivity growth is to pursue a sectoral pattern of growth where those sectors that are more
employment-intensive in nature grow at faster rates. It is on the basis of this premise that the present
exercise on employment promotion through a sectoral focus is being undertaken. The specific sectors
that have been selected for analysis in the present report are agriculture, manufacturing (with attention
to sub-sectors within manufacturing), infrastructure, and tourism.The present study starts by
recognizing that the relationship between employment and output is not invariant and that there can be
different combinations of output and employment growth in an economy. From the point of view of
boosting growth of productive employment, it would be important to attain growth of output and
employment simultaneously rather than of employment alone ignoring the growth of output.

The employment situation and challenge in Nepal

During 1998/99-2008, the labour force has grown at an annual rate of 2.6 per cent while employment
has grown at the rate of 2.22 per cent per annum. As a result, open unemployment has gone up from
1.8 per cent in 1998/99 to 2.1 per cent in 2008. While the overall unemployment rate is not high (as
explained above), urban unemployment rate was 7.5 per cent in 2008, indicating that open
unemployment is basically an urban phenomenon. Given the growth of labour force mentioned above,
over 300,000 (400,000 according to another estimate) people enter the labour force every year. This

figure indicates the quantitative dimension of the employment challenge in Nepal and the additional
need of creating jobs for those who are currently employed but may seek jobs with higher productivity
and earnings. One ILO study puts the requirement as one of generating 500,000 productive
employment per year during 2009-15.The importance of the qualitative aspect of employment is also
indicated by those engaged in what may be termed as vulnerable employment (defined as the total
of own account workers and unpaid family workers). In 2008, over 80 per cent of those employed
were in this category. A large proportion of them must be in low productivity jobs requiring better jobs
with higher incomes.
As for the third dimension of the employment challenge, that of sector composition, there
appears to have been shift in the structure of the economy in that the share of agriculture in GDP has
declined substantially over time - from 47.08 per cent in 1985/86 to 36.7 per cent in 2008/09.
However, this has not been associated with a commensurate increase in the share of manufacturing; it
remained virtually unchanged (6.07 per cent in 1985/86 and 6.19 per cent in 2009/10). Thus, whatever
structural transformation has taken place in the economy of Nepal, it has been from agriculture
towards services - which is not the sequence expected in an economy like that of Nepal.
The magnitude of the change in the structure of employment has been even less. The share of
agriculture (including forestry and fishery) in total employment declined from 78 per cent in 1998/99
to about 74 per cent in 2008. The share of manufacturing increased marginally from 5.84 per cent to
6.56 per cent during that period. The trend towards a service sector oriented change is thus noticeable
from the employment figures also. Moreover, it is clear that productivity of employment in
manufacturing has declined (even if slightly) because the share in employment increased (albeit
slightly) without an increase in the share of output.
Industrial relationship is about the relationship between an employee and management. This page carries
information about Industrial relations and its concept through definition and description of industrial relation.
Industrial relations has become one of the most delicate and complex problems of modern industrial society.
Industrial progress is impossible without cooperation of labors and harmonious relationships. Therefore, it is in the
interest of all to create and maintain good relations between employees (labor) and employers (management).

Definition of Industrial Relations

Industrial relation is defined as relation of Individual or group of employee and employer for engaging themselves
in a way to maximize the productive activities.
In the words of Lester, Industrial relations involve attempts at arriving at solutions between the conflicting
objectives and values; between the profit motive and social gain; between discipline and freedom, between
authority and industrial democracy; between bargaining and co-operation; and between conflicting interests of the
individual, the group and the community.
In fact, industrial relation encompasses all such factors that influence behaviour of people at work. A few such
important factors are below:
Characters
It aims to study the role of workers unions and employers federations officials, shop stewards, industrial
relations officers/ manager, mediator/conciliators / arbitrator, judges of labor court, tribunal etc.

Institution
It includes government, employers, trade unions, union federations or associations, government bodies, labor
courts, tribunals and other organizations which have direct or indirect impact on the industrial relations systems.

Methods
Methods focus on collective bargaining, workers participation in the industrial relations schemes, discipline
procedure, grievance redressal machinery, dispute settlements machinery working of closed shops, union
reorganization, organizations of protests through methods like revisions of existing rules, regulations, policies,
procedures, hearing of labor courts, tribunals etc.

Contents
It includes matter pertaining to employment conditions like pay, hours of works, leave with wages, health, and
safety disciplinary actions, lay-off, dismissals retirements etc., laws relating to such activities, regulations
governing labor welfare, social security, industrial relations, issues concerning with workers participation in
management, collective bargaining, etc.
Concept of Industrial Relations
The term Industrial Relations comprises of two terms: Industry and Relations. Industry refers to any
productive activity in which an individual (or a group of individuals) is (are) engaged. By relations we
mean the relationships that exist within the industry between the employer and his workmen. The term
industrial relations explains the relationship between employees and management which stems directly
or indirectly from union-employer relationship.
Industrial relations are the relationships between employees and employers within the organizational
settings. The field of industrial relations looks at the relationship between management and workers,
particularly groups of workers represented by a union. Industrial relations are basically the interactions
between employers, employees and the government, and the institutions and associations through
which such interactions are mediated.
The term industrial relations has a broad as well as narrow outlook. Originally, industrial relations was
broadly defined to include the relationships and interactions between employers and employees. From
this perspective, industrial relations covers all aspects of the employment relationship, including human
resource management, employee relations, and union-management (or labor) relations. Now its
meaning has become more specific and restricted. Accordingly, industrial relations pertains to the study
and practice of collective bargaining, trade unionism, and labor-management relations, while human
resource management is a separate, largely distinct field that deals with nonunion employment
relationships and the personnel practices and policies of employers.
The relationships which arise at and out of the workplace generally include the relationships between
individual workers, the relationships between workers and their employer and the relationships between

employees. The relationships employers and workers have with the organizations are formed to promote
their respective interests, and the relations between those organizations, at all levels. Industrial relations
also includes the processes through which these relationships are expressed (such as, collective
bargaining, workers participation in decision-making, and grievance and dispute settlement), and the
management of conflict between employers, workers and trade unions, when it arises.

Productivity:
Productivity is an average measure of the efficiency of production. It can be expressed as the ratio of
output to inputs used in the production process, i.e. output per unit of input. When all outputs and inputs
are included in the productivity measure it is called total productivity. Outputs and inputs are defined in
the total productivity measure as their economic values. The value of outputs minus the value of inputs
is a measure of the income generated in a production process. It is a measure of total efficiency of a
production process and as such the objective to be maximized in production process.
Productivity measures that use one or more inputs or factors, but not all factors, are called partial
productivities. A common example in economics is labor productivity, usually expressed as output per
hour. At the company level, typical partial productivity measures are such things as worker hours,
materials or energy per unit of production.
Labor productivity is a measure of economic growth within a country. Labor productivity measures
the amount of goods and services produced by one hour of labor; specifically, labor productivity
measures the amount of real gross domestic product (GDP) produced by an hour of labor.
Labor productivity is a measure of economic performance that compares the amount of goods and
services produced (output) with the number of hours worked to produce those goods and services.
What is 'Labor Productivity'
Labor productivity is a measure of economic growth within a country. Labor productivity measures the
amount of goods and services produced by one hour of labor; specifically, labor productivity measures
the amount of real gross domestic product (GDP) produced by an hour of labor. Growth in labor
productivity depends on three main factors: investment and saving in physical capital, new technology,
and human capital.
BREAKING DOWN 'Labor Productivity'
Labor productivity is defined as real economic output per labor hour. Growth in labor productivity is
measured by the change in economic output per labor hour over a defined period of time.
The Importance of Measuring Labor Productivity
Labor productivity is directly linked to improved standards of living in the form of higher consumption. As
an economy's labor productivity grows, it produces more goods and services for the same amount of
relative work. This increase in output makes it possible to consume more of the goods and services for
an increasingly reasonable price.
Growth in labor productivity is directly attributable to fluctuations in physical capital, new technology and
human capital. If labor productivity is growing, it can be traced back to growth in one of these three
areas. Physical capital is the amount of money that people have in savings and investments. New

technologies are technological advancements, such as robots or assembly lines. Human capital
represents the increase in education and specialization of the workforce. Measuring labor productivity
allows an economy to understand these underlying trends.
Labor productivity is also an important measure of the short-term and cyclical changes in an economy.
High-level labor productivity is a combination of total output and labor hours. Measuring labor
productivity each quarter allows an economy to measure the change in its output in relation to the
change in its labor hours.
If output is increasing while labor hours remains static, it could be a sign that the economy is advancing
technologically and should continue to do so. Conversely, if labor hours increases in relation to flat
output, it may be a sign that the economy needs to invest in education to increase its human capital.

Objectives of the Privatization Programs:

The basic objectives of the program as incorporated in the preamble of the Privatization Act are as
follows:
To increases the productivity through the enhancement of the efficiency of the state-owned
enterprises
To mitigate the financial and administrative burden to the government, and
To achieve the all round economic development of the country by promoting wider participation of
the private sector in the operation of such enterprises