Minimum nominal wage increased to Rs 17,300

The Ministry of Labour Employment and Social Security on August 17 increased the monthly minimum nominal wage of workers effective from August 25. 

Following Section 106 of the Labour Act, 2017 which allows the Ministry “to fix the minimum remuneration of labours in every two years”,  the new minimum nominal wage has been fixed at Rs 17,300 per month.

The daily wage has been fixed at Rs 668; and hourly at Rs 89 for full-time and Rs 95 for part-time workers. 

As per the provisions in the Act, the Ministry had formed the Minimum Remuneration Fixation Committee led by Joint Secretary Dandu Raj Ghimire to review the previous wage of Rs 15,000 and recommend a new one, consulting with stakeholders, in view of inflation in the country.

The committee included representatives from the All Nepal Federation of Trade Unions (ANFTU), the Federation of Nepalese Chambers of Commerce and Industry (FNCCI), the Confederation of Nepalese Industries (CNI), the Nepal Rastra Bank, and the Ministry of Industry, Commerce and Supplies.

Simultaneously, trade unions demanded the government increase the minimum wage to Rs 25,000 per month. Earlier, workers would receive at least Rs 15,000 wage per month since FY 2021/22, and at least Rs 13,450 since FY 2018/19.

When compared to the minimum wage which was Rs 2,394 in 2005/06, the newly fixed wage represents an annualised average increment of 4.8% in the span of last 18 years. Even this average approximation doesn't capture the actual increment since wages were revised at an interval of either two or three years (see chart below) — in total, only eight times in the last 18 years.

In contrast, prices go up on yearly basis. Considering that the inflation during this period remained mostly above 6% — the real wage earnings have badly failed at keeping up with the inflation.

The private sector, however, opposed the trade unions' demand citing that businesses had just begun recovering from the implications of the pandemic and the Russia-Ukraine conflict, and higher wages would increase costs for the business community which is already operating in a high-cost environment.

The chart below represents the minimum nominal wage in Nepal from as early as 2005/06.