Monthly Payroll Process in Nepal: Step by Step Guide

A reliable monthly payroll is a routine, not a rush. If the same steps happen in the same order every Nepali month, errors fall and the owner stops chasing the accounts team on the last day. This guide gives a process you can follow with Excel today or with payroll software later.

Step 1: Fix the cut-off dates

Decide when attendance and leave for the month close. Many offices use the last day of the BS month, others close on the 25th so salary can be ready by the first week. Write the dates on a calendar for the whole fiscal year starting from Shrawan and share it with managers. Late leave applications after the cut-off roll into the next month.

Step 2: Collect inputs from departments

Payroll depends on information that lives elsewhere. Make a standard list and ask for it by a deadline:

• Attendance summary: days present, absent, paid leave, unpaid leave
• Overtime hours signed off by the department head
• New joiners, leavers and promotions with effective dates
• Allowance changes, such as a new transport or phone allowance
• Advances taken and instalments due this month
• Fines or recoveries, if your policy has them

When attendance is captured on a device or in software, this step is mostly an export. See how that works in our attendance software.

Step 3: Calculate gross pay

Start with basic salary, add fixed allowances, then variable items like overtime and incentive. For part-month employees choose one proration rule and apply it to everyone. The two common choices are actual days in the BS month and a fixed 30-day basis. Neither is automatically right; what matters is that it matches the appointment letter and is applied consistently.

Step 4: Apply deductions

Deductions normally include provident fund, CIT where the employee has opted in, social security contributions where applicable, tax on salary and staff advances. The rates, limits and who is covered depend on the current Finance Act, the Labour Act and your employment contracts, so your accountant should confirm them each fiscal year. Keep the rules in a single settings page rather than scattered across cell formulas.

Step 5: Review exceptions before approval

Do not read all rows. Review only the unusual ones. A simple exception report compares this month with last month and flags anyone whose net pay moved by more than a set percentage, anyone with a negative net, and anyone with no attendance. This catches the typical mistakes: a missing allowance, a duplicate advance recovery, a leaver who was paid again.

Step 6: Approve and lock

The finance manager prepares, a second person such as the director or HR head approves. Once approved, lock the month. In Excel this means saving a read-only copy; in software it is a lock that needs an authorised unlock and leaves a log entry.

Step 7: Pay and record

Split the sheet by payment method. Bank transfer staff go into a bank list, cash staff into a signed cash sheet, wallet payments into a separate list. After payment, record the reference or voucher. For each payment keep the date, because the same record supports bank reconciliation later.

Day of next BS month	Task	Owner
1 to 2	Attendance and inputs closed	Department heads
3 to 4	Calculate and review exceptions	Accounts
5	Approval and lock	HR head or director
6 to 7	Payment and payslips sent	Accounts and HR

This is an example schedule. Use dates that fit your own office.

Step 8: Issue payslips and file the month

Send each employee a payslip showing earnings, deductions and net pay. A PDF over WhatsApp or email is convenient, and it answers most "why is my salary different" questions before they reach HR. Then file the month: the approved sheet, the bank list, statutory summaries and any supporting approvals. When an auditor or labour officer asks for a past month, you want one folder, not a search.

Step 9: Close the loop on statutory payments

The amounts you withheld or must contribute have their own due dates and portals. Rules and deadlines are updated by the relevant authorities, so check with your accountant or the official office rather than relying on last year's habit. Software helps here by producing the monthly totals per head, but it does not file anything for you.

Where software helps most

The exception report, proration, advance recovery, locking and payslip creation are the steps where Excel fails quietly. A tool like our payroll software automates exactly these while leaving the decisions with your team. If you also keep staff files and leave balances, consider pairing it with HR management software so a new joiner entered once appears in both.

Handling common special cases

Some situations repeat every year and deserve a written rule rather than a fresh decision each time. Dashain and Tihar allowance should have a named component, a fixed month and a clear rule on who qualifies, for example staff who have completed a minimum period. Unpaid leave needs a deduction rule that matches proration, otherwise a day of absence costs a different amount from a day of joining. Salary increments usually take effect from a date, sometimes the start of Shrawan, so the sheet must pick the new basic from that date and not from the month you remembered to update it.

Arrears are another trap. If an increment is approved late, the difference for earlier months should be shown as a separate line with a note, not hidden inside the basic salary. That keeps the next audit simple and makes the payslip understandable.

Keep a month-end folder

Whatever tool you use, create one folder per BS month. It should hold the approved sheet, bank list, cash signatures, statutory summary, attendance export and any one-off approvals. Name it by year and month, for example 2083-04 Shrawan, so it sorts correctly. When a former employee asks for an experience or salary certificate, or an auditor asks about last Poush, you will find the answer in minutes.

Next step

Write your own month-end calendar today and share it with department heads. If you would like to see it running as software, message us on WhatsApp with last month's sheet and we will arrange a demo.

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