The short version
- Employer package means recurring employer cost, not the amount deposited into the employee’s bank.
- Basic/Allowance allocation is contract-specific; 60/40 is a planning default, not a Labour Act rule.
- Employer SSF belongs inside package cost when the package is stated as all-inclusive.
- Employee SSF, employee CIT/PF and TDS reduce cash take-home but are not added again to employer cost.
Define the package before solving it
The phrase “monthly package” is used inconsistently. Before calculating anything, determine whether the quoted amount includes only cash salary, cash salary plus employer SSF, or wider costs such as insurance and bonuses. Nepal Toolkit’s package workflow defines recurring package as Basic salary plus regular Allowance plus the selected employer retirement or social-security contribution.
Festival allowance, overtime, a one-time bonus and optional employer insurance remain outside that recurring figure unless the employer expressly included them. Stating this boundary avoids a calculation that appears precise but answers the wrong question.
Why SSF requires an equation
If employer SSF equals 20% of Basic and Basic is a percentage of cash remuneration, the package cannot simply be split 60/40 before SSF. The employer contribution is already inside the total. Cash remuneration must first be solved from the package.
With a 60% Basic planning assumption, cash remuneration equals Package ÷ (1 + 60% × 20%). Basic is then 60% of cash remuneration, Allowance is the remainder and employer SSF is 20% of Basic. The four amounts reconcile without double counting.
Calculate take-home separately
The employee’s normal monthly take-home begins with Basic plus regular cash Allowance. Employee SSF at 11% of Basic, employee-funded additional CIT/PF, salary TDS and other payroll deductions are then subtracted. Employer SSF is not subtracted from cash a second time.
Annual salary tax still depends on annual remuneration, deductions and the applicable fiscal-year bands. A monthly package solver should feed its Basic, Allowance and employer contribution into the same tax engine used for direct salary entry. Two equivalent sets of facts should produce the same annual tax.
When to override the default split
Use the agreed Basic salary or agreed Allowance from the employment contract whenever it is available. The 60/40 split is useful for an initial estimate but it is not a legal substitute for the contract, payroll policy or minimum-remuneration requirements.
An impossible combination—such as a Basic salary plus employer contribution exceeding the entire package—should be rejected visibly. The calculator should never silently turn a negative Allowance into zero and continue as if the package reconciled.
Additional employer benefits
Labour Act Section 54 generally shares the medical-insurance premium between employer and worker, while Section 55 places the accident-insurance premium on the employer. These costs can be shown in an all-in employer-cost view without automatically treating the premium as taxable cash remuneration.
Where a benefit itself has a taxable value under income-tax rules, that taxable value belongs in assessable remuneration separately. Employer cost and taxable value are related concepts, but they are not automatically the same number.
Where to check the details
For an important payroll, filing or financial decision, open the source itself and check whether anything has changed since this guide was updated.
- Labour Act 2074 — Nepal Law Commission
Sections 52–57.
- Social Security Fund
Official scheme authority.
- Income Tax Act — IRD
Remuneration and retirement-fund baseline.