Retirement Age Increased to 60 in Nepal: 2025 Law Update

In a significant policy shift aimed at managing the pension burden and utilizing experienced human resources, the Government of Nepal has raised the mandatory retirement age.

The Ordinance to Amend Acts for Public Service Delivery (January 2025) has brought immediate changes to the Labour Act 2074 and set the path for the Civil Service Act.

1. Private Sector & Labour Act: Immediate Effect

For workers governed by the Labour Act 2074 (which covers most private companies, factories, and NGOs):

• New Retirement Age: 60 Years (previously 58).
• Legal Reference: The Ordinance amends Section 147 of the Labour Act 2074.
• Implementation: This means if you are currently working in a private firm, your compulsory retirement is now pushed back by two years.
• Employee Rights: Workers have the right to work until 60 unless they choose to resign voluntarily. Forced retirement at 58 is now illegal.

2. Civil Servants: The Phased Approach

For government employees (Nijamati Karmachari), the transition is slightly different to prevent a sudden block in new hiring. The Federal Civil Service Bill 2025 outlines a phased rollout:

• Year 1: Retirement age remains 58.
• Year 2: Increases to 59.
• Year 3 Onwards: Settles at 60.
• Why? This prevents an administrative vacuum and allows the Public Service Commission (Lok Sewa Aayog) to adjust its recruitment calendar.

3. Why the Change?

Two main factors drove this decision:

1. Rising Life Expectancy: The average life expectancy in Nepal has crossed 71 years. Retiring at 58 was seen as premature, wasting productive years of skilled professionals.
2. Pension Burden: The state burden for pension payouts has skyrocketed. Delaying retirement by 2 years defers pension payouts, giving the Social Security Fund (SSF) and Pension Fund more time to accumulate interest and stabilize.

4. Updates to Social Security & Identity

Along with the age hike, the 2025 Ordinance links services:

• National ID (NID) Mandatory: To claim old-age allowance or pension, a National Identity Card is now compulsory.
• Pension Fund Integration: Teachers and Police personnel are being further integrated into the contribution-based pension scheme, moving away from the old state-funded model.

Legal Guidance for Employers

• Update Contracts: HR departments must update employment contracts to reflect the 60-year retirement clause.
• Gratuity Calculation: The payout calculation for gratuity will now extend to the 60th year.
• Performance Reviews: With longer tenure, companies are advised to strengthen performance review mechanisms to ensure productivity in senior years.