The government is in the process of promulgating an ordinance to amend the Labour Act 2048 (BS) with a view to attracting more foreign direct investment (FDI), by giving employers more powers to hire and fire employees. Indeed, Nepali businessmen, too, have long wanted to have more employer-friendly changes in labour law. A high-powered bill drafting committeee, consisting of ministers, secretaries and experts, has put its stamp of approval to the draft Labour Act Second Amendment Ordinance 2062 BS, which it had received from the Council of Ministers for further consideration. Now the document is awaiting the final approval of the cabinet and royal seal to become law.

The draft provides firms with FDI to appoint non-Nepalis as managers, executive directors and experts, not exceeding 15 per cent of total employee size. It also empowers employers to hire people on contract or piece-rate basis, and such employment will automatically terminate after the job is done. According to the existing law, employees are put on a one-year probation. In yet another departure, the ordinance envisages an ‘independent’ committee, instead of the government, for fixing minimum wages. It also gives the management the option, under certain conditions, of shutting down businesses and laying off workers by merely notifying the government three months in advance. On their part, employees would retain the right to strike, but such a decision would have to be backed by a two-thirds majority of the employees and communicated to the management 30 days beforehand.

Predictably, trade unions have protested. There are two extremes — while employers want to have as much power as possible in matters of recruitment, dismissals and layoffs, most workers would want to have a job fully secure irrespective of the difficulties of their employers. Any law that seeks to promote both investment and equity should therefore aim for a balance between the two. Employers should not be burdened with workers if they do not really need or cannot afford to keep them, but there should be some sound criteria for governing these decisions, otherwise labour exploitation would increase further, particularly in Nepal where laws are violated from time to time with impunity. An important test for any labour law is how far it can protect the legitimate interests of employees, because without them no investment can yield a return. At the same time, given the unstoppable trend of liberalisation and globalisation, Nepal cannot hope to lure FDI sufficiently if it does not move with the times.