Like in many developing nations around the world, the process of industrialization in Nepal has been evolving with time. According to Central Bureau of Statistics, the country has about 11.7 million work force, of which 1.8 million are in the formal sector and around 3.5 million are in foreign jobs. Although, comparatively the formalized labor force covers a small chunk, an economy seeking growth cannot ignore this segment. And thus, the Labor Act, Trade Union Act, Industrial Enterprise Act, National Labor Policy were enacted, many of which were meant to protect employees and these provisions in totality can be termed Employment Protection Legislation (EPL).
As with most labor market regulations, employment protection legislation (EPL) was first introduced with the aim of enhancing workers’ welfare and improving employment conditions. It includes employees’ protection against dismissals, limitations on the use of temporary forms of employment, regulation of working hours, but in a broader sense also health and safety, protection of employees in less favorable conditions
In our case, perhaps, the existent hire and fire policy which makes it easier to hire employees but poses many restrictions on the firm’s ability to fire workers, fulfills its stated purpose, namely protecting existing jobs. But this has come at a price as it has led to many employers opting to have temporary contracts with employees and thus, less or no investment in employees’ skill development programs. Since the hire and fire policies come with added burden to the employees—legal and other transnational costs— many say this has been the reason behind the slow pace of growth. Employers, at large, shy away from hiring people on permanent basis and given the costs that come with firing employees affiliated to unions strongly backed by political parties; this has cut down incidences of hiring people.
Many employers in Nepal who have had to face permanent shut-downs and heavy financial losses have asserted that Nepal’s labor legislation is pro-workers and biased against the employers. According to them, it affects the market place dynamics and deters them from investing more in permanent employees. Perhaps, the consequences have been more dire than expected and about time we look at the laws more critically, right?
To understand more on what I actually mean, check out the following video. The second point on government regulations explains how hire and fire policies which make it difficult to fire employees have dire consequences on intended growth.