Industrial relations refer to the relationship between employers, employees, and the government, focusing on how they interact to manage work conditions, wages, and labor rights. It aims to ensure fair treatment, resolve conflicts, and create a productive work environment for both workers and businesses.
Major Issues of the Industrial Relations System in Nepal
Nepal’s industrial relations system, which governs interactions between employers, employees, and the government, faces multiple challenges that hinder economic growth and worker welfare. These issues stem from legal, social, political, and economic factors, creating a complex environment for labor relations.
1. Outdated and Weak Legal Framework
Nepal’s labor laws, such as the Labor Act (2017) and Trade Union Act (1992), are often criticized for being outdated and fragmented. While reforms have been attempted, weak enforcement and gaps in coverage persist. Laws fail to address modern issues like gig economy workers, occupational safety in emerging industries, and gender-specific protections. Non-compliance is common, especially in small and informal sectors, leaving workers vulnerable to exploitation.
2. Political Influence on Trade Unions
Trade unions in Nepal are highly politicized, with affiliations to major political parties. This politicization diverts unions from focusing on workers’ rights to advancing political agendas. Fragmentation among unions (over 15,000 registered) leads to internal conflicts, weakening collective bargaining power. Frequent strikes and protests, driven by political motives rather than genuine labor issues, disrupt productivity and deter investment.
3. Large Informal Sector
Nearly 60% of Nepal’s workforce is in the informal sector, lacking legal protection, social security, and fair wages. Informal workers, including daily wage laborers and domestic workers, face exploitation, unsafe conditions, and no job security. The exclusion of this sector from labor laws exacerbates inequality and limits efforts to improve industrial relations.
4. Ineffective Dispute Resolution
Nepal’s dispute resolution mechanisms, such as labor courts and mediation committees, are slow and inefficient. Cases often linger for years, forcing workers to rely on strikes or protests. Employers sometimes use lockouts as retaliation, escalating tensions. The lack of trust in formal institutions undermines conflict resolution and discourages foreign investment.
5. Poor Working Conditions and Low Wages
Despite minimum wage laws, many workers, especially in agriculture and informal sectors, earn less than the stipulated wage. Factories often ignore safety standards, leading to accidents and health risks. Women and marginalized groups face discrimination, harassment, and unequal pay, further widening social gaps.
6. Gender Inequality
Women constitute a significant portion of the workforce in sectors like agriculture and textiles but face systemic barriers. Limited maternity benefits, wage gaps, and cultural biases restrict their participation and advancement. Sexual harassment remains underreported due to fear of job loss and social stigma.
7. Skill Gaps and Low Productivity
Nepal’s education system fails to equip workers with technical and vocational skills needed by industries. Employers hesitate to invest in training, leading to low productivity and frustration among workers. This mismatch between skills and market demands fuels unemployment and labor disputes.
8. Political Instability and Corruption
Frequent changes in government and policy inconsistency create uncertainty for businesses. Corruption in labor administration, such as bribery for permits or ignoring violations, erodes trust in institutions. Political instability discourages long-term investments, limiting job creation.
9. Impact of Globalization and Migration
Globalization has introduced foreign companies with differing labor practices, often clashing with local norms. Meanwhile, mass migration of skilled workers abroad (over 4 million Nepalis work overseas) has led to labor shortages in critical sectors, increasing reliance on informal and child labor.
10. Natural Disasters
Events like the 2015 earthquake disrupted industries, displacing workers and damaging infrastructure. Slow recovery efforts have prolonged unemployment and strained employer-employee relations in affected regions.
By tackling these challenges, Nepal can foster a fairer, more productive industrial relations system, promoting sustainable economic growth and social justice.